Each of the members contribute a certain amount of money
each month and then meet to decide what to buy or sell.
It is a nice camaraderie, but what do you know about making
money in the stock market? The members decide what services to buy to obtain
information on stocks and funds. Certain members will be designated to do
research on a particular stock and bring it to the next meeting.
The members become buried in gathering data - doing research
and forget that the end result is to make money. It is relatively rare to do
any technical analysis. They gather reports from so-called investment analysts
at the big brokerage firms. Recently the Securities and Exchange Commission has
been investigating the recommendations of their in-house analysts because of
the very poor results of their calls. Some have been accused of giving buy
recommendations on stocks it was obvious were dogs. Let's hope the SEC does
something besides a slap on the wrist.
We used to have a guy where I was a broker who wrote
reports. He was told to do a report with charts and graphs. He said, "OK,
do you want it to be bullish or bearish?" He could slant it any way we
told him using the same facts and statistics and never tell a lie. The small
investor is at the mercy of these people.
One of the greatest sources of information is Morningstar.
They have every bit of information that is available about a company and they
will sell it to you at a reasonable price. My problem with all this information
is there is one important thing they cannot tell you - if I buy it, will it go
up?
After more than 30 years in the business I will tell you
that all the information you can gather about any company or mutual fund is
totally and completely worthless. Trying to pick a winning stock is very
difficult so what I do is let a very smart guy do it for me and he does it at
no charge. How? Simple. I hire the manager of a no-load mutual fund that is
currently going up and I buy that. As long as his fund is advancing in price I
will keep it and as soon as it starts down I sell it and find a new smart fund
manager who can make money for me.
There is no such thing as a "good" mutual fund. At
times they are good and at times they are bad. Good is going up. Bad is going
down. If a fund has been advancing for more than 60 or 90 days at the rate of
more than 2% per month it will show up on my Buy list. I don't need to know
anything else about it and no further research is necessary.
Show this to your investment club members. A chart is
helpful, but the numbers will speak for themselves. The only research your club
needs to do is find a no-load mutual fund that is advancing the most in the
last 90 days. Forget about 3-year and 5-year performance. What has it done
lately? Your club can be a winner every year.
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