3 ms·

By default, I dump money into low-cost index funds with dividends reinvested. Usually into well-established, suitably diverse indices. S&P 500, FTSE 250 (but no

By default, I dump money into low-cost index funds with dividends reinvested. Usually into well-established, suitably diverse indices. S&P 500, FTSE 250 (but not the FTSE 100 - not nearly diverse enough for my liking) and so on. I've got about three times my annual income currently invested; it's about 75% indices, and 25% individual companies, and two lumps of gold that I've lost somewhere in my house. I don't specifically go researching much in the way of individual stock picks. I don't set my criteria and then go looking for companies that meet that criteria; I keep an eye on the news and trends and so forth, and build confidence that a sector (or sometimes a specific company, but that's rare) will do well. Some examples; when the UK government made it clear that they will do anything to prop up the UK housebuilding companies (which to my mind was when they started underwriting people's mortgages with the "help to buy" scheme) I piled into UK housebuilders, and they've done very well. When I found myself noticing that the dollar seemed awfully cheap a year or so ago, I looked for reasons why (and where it might go next) and I altered my balance of index funds to buy into the US some more (which worked out pretty well). When Nokia started getting grudging good reviews for their phones, I looked into what else they were up to and bought into Nokia right before Microsoft bought their handset business. It hasn't all been good; I bought into ARM and IMG, hoping to ride the spread of mobile phones, and while ARM came in like a Viking, I made a loss on IMG (although the gains on ARM far outweighed the loss on IMG). A couple of UK retailers have been very disappointing (although still better than just cash in a bank). I rarely sell. I bought into BP some time after their big spill, anticipating that the run of bad news would slow and they'd start to recover. As it was, the run of bad news went on and on and on and it looked like they'd be dealing with it for years. Sold up, put it into a US railroad company (which came on like a viking - another pick based on the idea that as the economy recovered, there would be a renewed global interest in new railroad technology; I picked the sector first, and then went looking for good companies in that sector).

davidw 11y ago
> that a sector (or sometimes a specific company, but that's rare) will do well. There are sectors that have grown massively - such as air travel - where no individual company has done very well for long.
- EliRivers 11y ago
  By "do well" I don't mean grow. As you point out, the air travel industry can grow and grow without actually doing well. Seats on planes are a commodity item, the barrier to entry into the airline business is simply cash, and there's always someone ready to cut their prices right to the bone (and beyond) and in doing so shred any profit you might have hoped to pull in. sure, often growth is a good sign, but I'm looking for a sector that will jack up the profits. If that's through growth, great. UK house builders, for example, have a reputation of not growing as fast as they could because they want to hold up the ridiculous prices. Many (not all, of course) companies are actually quite bad at growing, especially if their core business is mature and saturated; I avoid companies that always take their profits and, instead of giving them to me, blow them on ill-considered attempts to expand beyond their ability. Sure, I miss some (and some of the ever-expanding behemoths are a perpetual mystery to me; I avoid companies whose ever-increasing stock prices are based on the hope of a shiny far-future), but on the whole it's working out. As far as I'm concerned, the default place for profits is in my pocket (and then in other companies). On average, it seems that I can invest it better in other companies than the company can reinvest it in itself.
kokey 11y ago
Funny, I bought BP after the oil spill and did quite well on it. I have found that bad news can hurt deeper and longer than anyone thinks, in that case I got it right. I tend to approach it as if I'm going to hold for ten years at least, but then I buy after bad news when I think a stock is unlikely to be overpriced. The UK home builder, Barratts, also worked out for me, I bought some when the head of the company was on radio explaining how they provided their own finance to buyers while the banks weren't lending and how they did it before during previous building recessions.

davidw 11y ago

> that a sector (or sometimes a specific company, but that's rare) will do well. There are sectors that have grown massively - such as air travel - where no individual company has done very well for long.

EliRivers 11y ago
By "do well" I don't mean grow. As you point out, the air travel industry can grow and grow without actually doing well. Seats on planes are a commodity item, the barrier to entry into the airline business is simply cash, and there's always someone ready to cut their prices right to the bone (and beyond) and in doing so shred any profit you might have hoped to pull in. sure, often growth is a good sign, but I'm looking for a sector that will jack up the profits. If that's through growth, great. UK house builders, for example, have a reputation of not growing as fast as they could because they want to hold up the ridiculous prices. Many (not all, of course) companies are actually quite bad at growing, especially if their core business is mature and saturated; I avoid companies that always take their profits and, instead of giving them to me, blow them on ill-considered attempts to expand beyond their ability. Sure, I miss some (and some of the ever-expanding behemoths are a perpetual mystery to me; I avoid companies whose ever-increasing stock prices are based on the hope of a shiny far-future), but on the whole it's working out. As far as I'm concerned, the default place for profits is in my pocket (and then in other companies). On average, it seems that I can invest it better in other companies than the company can reinvest it in itself.

kokey 11y ago

Funny, I bought BP after the oil spill and did quite well on it. I have found that bad news can hurt deeper and longer than anyone thinks, in that case I got it right. I tend to approach it as if I'm going to hold for ten years at least, but then I buy after bad news when I think a stock is unlikely to be overpriced. The UK home builder, Barratts, also worked out for me, I bought some when the head of the company was on radio explaining how they provided their own finance to buyers while the banks weren't lending and how they did it before during previous building recessions.