Stocks and Retirement Plans (Part 2)

Stocks and Retirement Plans (Part 1)
Keeping Track of How Your Stocks Fare
Markets tend to move more rapidly than the old system of quarterly reporting is designed to monitor. Professional investors trade by the day if not by the hour. People with careers, especially if their work involves travel, cannot afford this kind of close surveillance, but it is important to set up a scanning system, which alerts investors of changes in markets that can affect valuations of their stocks. There is a popular pre-occupation with Federal interest rate changes, but most enterprises are more affected by demands for their products and services, supplies of key materials, and shortages of skilled human resources, than by their costs of borrowing.

Mutual funds are suitable for people who do not have the time and inclination to study movements of individual stocks. Bonds, though they are not easy to liquidate in a hurry, offer stable returns without need for frequent checking, especially if the promoters and sponsors have reliable systems of budgeting, and if the economy stays free of inflationary pressures. Gangs of advisers surround most Exchanges, but most of them have their own interests in view when recommending stocks to their clients. However, it is always worthwhile to consult experts who provide hard data to back their views, and who are forthcoming about conflicts of interests.

Holding on to Stocks in Bear Runs

Stock market operations are inherently volatile by nature, and many abrupt moves defy logic and rationale. It is better to enter the trading arena with prior contingency thinking in terms of when to exit from stocks, and how one should respond in crises. Individual stocks may not always follow macro trends in an Exchange, though it is difficult for any individual security to remain isolated of broad investor sentiments indefinitely. It is best to remain focused on the actual earnings delivered by stocks, and on specific management statements about business prospects, rather than to pay too much attention to general statements by unaccountable sources.

Keeping track of cumulative value changes is a key activity for anyone who chooses to deal in stocks directly. Portions of profits actually gained should be periodically diverted in to other securities and asset forms. Much grief results from greed, with investors holding on to stocks in hopes that present trends will continue indefinitely. The best companies are ones, which are dynamic in their thinking, changing forms and operations in line with changes in competitive conditions. It is ironic that most of the stars of the first decades of the stock market system are no longer the most attractive stocks on any Exchange.