Monday March 5, 2007: Are Stocks Still Worthwhile Investments?
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In view of the late February/March 2007 sudden market decline, there are some investors who are questioning the value of long term investment in the stock market as a way to build wealth. These and other readers can read my article, Hedge Funds - Derivatives - Debt - China and the Risk of Systemic Market Panic, to gain insight into what types of systemic events I believe could cause stocks to surrender their investment value.
There is no doubt that a rapid market decline can engender fear and cause investors to sell into the decline. I myself had been selling some stock prior to the recent market fall in order to diversify my assets, as I was fully invested in stocks for some time before the price decline. I even bought a small amount of puts before and into the drop, though not enough to offset the fall of the paper value of my portfolio.
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Hedge Funds: Four Reasons Why You Should Not Invest in Them
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Hedge funds have become a fad on Wall Street these days. Many banks, including one where I have my money, are rushing to say that hedge funds should be in many wealthy investors’ portfolios, as an “alternative” investment that can balance out your portfolio. The sellers of such investments say that in a general market swoon one’s overall portfolio losses might be partially mitigated by profits from the hedge fund’s short holdings, if there are any. I will say however, that most fads end badly.
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Stock Market Investing and the Power of Contrary Opinion
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The term “contrary opinion” in the field of equities refers to taking the course of action which is least popular in the stock market. Simply said, it means buying stocks when the majority are selling and selling when most others are buying. This often means taking an action which is against the emotions you may be feeling.
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