investing in index funds vs investing in stocksSep-21-2008 investing in index fundsInvesting in indexes even in our bad economy I think will not do as good as stocks if you know how to choose the right securities for your portfolio. Most indexes right now have been going down and index funds as well. So how do we choose good stocks that will allow us to not suffer from these falling index funds and keeping active investing in stocks. Well of course we will try to use fundamental and technical analysis to do our research and find the securities that we need to keep our wealth growing. Unfortunately the only thing that we can be sure of thanks to history is that the market will always go up eventually and that most of the stocks will go in a pattern of either up or down. It is true that value investing can come into play when the market is going down like it is now. You have to think about the true value of a stock and what it's actual price should be. There will be stocks that will fall in a down market that you know should be doing better than the price demands. stock investing mistakes investing in stocks that are good instead of investing in index fundsWall-street analysts will put price markers on what they believe that a stock is worth usually i.e. a guess price in of what as security will be in one years time. Unfortunately they are not always right and many times new information can come out that will make the one year analysts estimates way off from what they previously were the last time that you looked at the security. The only thing that you can do is use logical assumption for why a stock should be going up based on current market and economic conditions. For instance say the price of gold is going up then mining companies should also be going up in value since when they get gold and the value of that gold will be worth more to sell. However when picking stocks vs investing in indexes you must look at common sense, analysts estimate and management. |