Mike: good question. When I started working in 1980, and quite a few years after, nobody, but nobody, wanted stocks- except utility stocks, for the yield- and the prudent person wasn't interested. And lots of studies have shown that just saving more money and owning a house as a hedge against inflation gets a person to the same place.
I'm new in the market after half a life of investing in real estate instead of stocks. Stocks are like spices- too many spoils the dish, all you need is just a little bit of really good ones to make a difference. The stock market, or owning a small business, makes a lot more people wealthy than working for a big employer. People have lost sight of the "buying the business" part of the stock market, they're gambling now.
I approach it the old-fashioned way- I am buying a part of a small business that I expect to grow very large, and I am risking my money in hopes that it will make me wealthy. The folks that really make money buy in when the business is very very small. So I am picking out a handful of microcaps (companies less than $500M in market cap) that have the potential to grow large. example: FSN, only $80M market cap, is a real-estate investment trust backed by Franklin Resources, selling below book value: at 1.5 book value and 5X expansion in asset growth I have a ten-bagger down the road with a huge dividend. OTCM is filled with little microcap companies- they just fill their coffers with itty bitty dull boring companies growing at 15% a year to keep the fund owners smiling in Peter Lynch style.
Here's a couple of fund managers that really have a great approach..they are constantly looking for great values no matter what is happening to the market. Best of class I have found is roycefunds.com for microcaps and muhlenkamp.com for largecaps, they proudly show their performance during bear markets, have been managing money since the early 70s and are superb bottom-fishers. If you do nothing else just scoop up that 2000/year allowed for your IRA and hand it to them.
I think most people don't realize the power of having a kitty of money free of taxes...the main thing is to get your tax-free trading/investing kitty as large as possible, get everything you can into that tax-free category as it really does make a huge difference down the road, probably more of a difference than on what you invest it in. Taxes are icky :-( |
