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Investing 101 Archive

  • Ron Blue has an investment philosophy you don't hear very often these days. Specifically, the Founder and Managing Director of Kingdom Advisors says the old proverbs found in the Bible hold the keys to today's investment success.

    Blue began reading and studying the bible only after becoming well-versed in the tenets of financial reporting as a Certified Public Accountant. What surprised him was the degree to which doing either effectively came down to the same basic rules. Blue recently came on Breakout to share some of these proverbs and how their meanings apply to investors of any faith.

    1) Establish Written Financial Goals

    "The plans of the diligent lead to profit as surely as haste leads to poverty." -Proverbs 21:5

    Write down your end target then determine your steps towards getting there. A little bit at a time, all of the time, is a wiser plan than taken frantic all-or-nothing shots.

    2) Save and Invest Before You Spend

    "Put your outdoor work in order and get your fields ready; after that, build your house." -Proverbs 24:27

    As Blue puts it, "don't spend in the short-term because you won't have it in the long-term."

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  • Technical analysis, or charting, is the art and science of graphing past price movements of an asset in attempt to divine their next moves. In a world of sophisticated financial analysis and correlations between various arcane assets, charting is often dismissed as voodoo. Despite claims to the contrary, it's a dirty truth of Wall Street that everyone analyzes charts.

    Fundamental analysis is much more important for the long-term. Macroeconomics, as we've seen, can make hash of a graph overnight. Charts are dispassionate and visual. They reduce the noise both in and outside of your head.

    Why Use Charts?

    Because sometimes they work; which is much better than most investing metrics.

    Too much trading is dangerous, but paying more commission is a better deal than pointlessly hanging on for dear life when you can see a sell-off coming. Breakout viewers got a heads up last May when the S&P500 broke through it's uptrend, ultimately falling 19%. There were plenty of missteps in between but losses were always, always, limited.

    Your brain will tell you whatever you want to hear in terms of holding on to a losing stock. Prices and graphs don't lie. If trends hold up, you hold or buy on the line. If they break, you sell on any close 1% below support and retreat. That's a plan; an exit strategy for trading. Once you have a way in and a way out you can try most anything you want.

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  • Never has there been a time in market history when more people who think of themselves as investors were actually gambling with their money. From Wall Street to Main Street the lines are blurry. Just look at the trials of JP Morgan (JPM), where even the bank itself confused hedging risk with making an enormous bet; and Facebook (FB), whose IPO created a frenzy that has so far lost money for investors that rushed in. If it can happen to them it can happen to you. Mark Matson, the author of "Main Street Money" joined Breakout to discuss three signs that you're gambling with your money, not investing it.

    1. Stock Picking

    Matson says "the idea that you're going to have inside knowledge, or knowledge that nobody else has" and use it to pick stocks with better returns than the broader market is folly. Individual stocks are always more risky than a diversified portfolio. You're kidding yourself if you think otherwise. This rule applies not just to the go-to names like Apple (AAPL) but perennial value plays like Berkshire Hathaway (BRK).

    Matson advises that instead of hand-picking your portfolio of five to ten stocks, you must be much more diversified with exposure to 11,000 global stocks.

    2. Market Timing

    "The trick to investing is not buy and hold, it's buy and re-balance," he says.

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ABOUT INVESTING 101

Breakout’s Investing 101 is a new way to gain insight on money management and trading. Whether you’re managing your own retirement account, just beginning, or an advanced investor in need of a good refresher, Investing 101 will help you learn, grow, and keep you informed of the basic steps to effectively manage your money. Expect investing tips that focus on trading strategies, asset allocation, and portfolio management.





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