This newsletter is intended to help our new investors through a time when markets are at all new highs and investors are wondering what the future will bring in the next few months. Customers have been asking, is now the time to buy? Investing to make money does take research of many quality companies as well as have patience to be sure to buy great companies at a good price. For example, an investor that buys great companies because of their strong fundamentals and understands great companies that have excellent past performance, always have them on their radar as stocks to purchase when there is a down day in the market. An investor needs to build its core holding and reinvests their dividends to build wealth. Also an investor can own what we call a speculative stock which may be lower in price and have a high P/E ratio because it looks like it’s a growth company ready to take off in price.
Now back to the today’s markets. With the Dow industrial average and the S&P 500 at all new highs, are investors worried about a big correction coming in October? Investors should always be concerned with the market up and downs. Yes it is true once the federal reserve stops adding liquidity (money) into the economy (by buying US Treasury Bonds) and the 75 billion dollars they are spending a month stops, because they think the economy data indicates it has recovered and they raise interest rates for the first time in 5 years there probably will be some type of correction in the stock markets. How much of a correction nobody knows. Although we need to be prepared for it by having money saved so when the market drops we can all purchase our stocks on our wish list and buy, buy, buy! For those who are pessimistic and think that the market is going to correct and not come back to new highs, again we need to explain to them to look at past history of the stock market and they will see the markets have always come back in a big way. We would also say to them read some books that the greatest investor of all time Warren Buffet has written or recommends to read and you will see what we mean by market recoveries. Of course we are not saying to stop investing and wait for only your best stocks to be in the buy zone on our your list. Try to find beaten down stocks that have had strong sales and earnings performance in the past, or maybe they had a bad quarter or two but you find some information that makes you feel comfortable about buying the stock that has some potential upside. Be what is called a contrarian investor. As I write this article what comes to my mind is Whole Foods (WFM) which is an excellent company, its stock price is down 40% from its high. You might want to look at other grocery stores in its industry to compare, like Kroger (KR) which just announced they are hiring 20,000 new permanent employees. Compare the two companies. Remember you want to invest in great companies that you have researched that are at a stock price low enough which you believe will go up because they know how to make money.
Good luck and happy investing from CFE finances, we will be in touch with another newsletter soon. If you have any questions or concerns, please email us from our contact page.