Stock Smarts: Traders v$ Investors
Long-term investors buy and hold in the hope that (over time), the good will outweigh the bad. And over the past 25 years, you would be looking at an annual return of 10.4 percent on the S&P 500. But short-term traders are more nimble and cut their losses fast before things get really bad for a stock. And over the past few years, we have certainly see the bears take control.
So is it better to trade or invest in today’s market?
Wayne Rogers of Wayne Rogers & Company says investing is the way to go. He defines an investor as one who looks to buy stocks to hold for more than six months. Over the long-term, he says the returns are there. “We do not have a stock market, but a market of stocks, and you have to be very selective in what you buy.”
Dagen McDowell of FOX Business News believes you need to be both a trader and investor. She says that being an investor and working under the philosophy of “buy and hold,” does not mean “buy and ignore.” An investor still has to do their research and make sure that the long-term investments are worth holding on to.
Jonathan Hoenig from Capitalistpig Asset Management is a trader. He thinks there is a lot to buy and sell out there, and that we are in an environment where you can make money – but not in the large-cap stocks. It is still a bull market for the small-cap stocks.
Jonas Max Ferris of Maxfunds.com believes in investing for the long-term, and looks towards mutual funds for guidance, noting that the best fund managers buy stocks and hold on to them for more than a year, picking stocks that have long-term prospects for growth.
Hilary Kramer of A&G Capital agrees with Jonathan that there are opportunities out there for traders. Because we are in an “event driven” market, you can essentially “take the money and run” by trading as opposed to investing for the long-term.
Little Known $tocks
Some members of the panel named their favorite stock you may never have heard of.
Jonathan’s pick: Magyar Tavkozlesi (MTA). This is a Hungarian telecom company. Hilary thinks it is too risky a play; Wayne likes the chart and agrees with Jonathan that it’s a buy. (Jonathan has a position in MTA.)
Hilary’s pick: Aramark (RMK). Aramark is a food/concessions provider. Both Jonathan and Wayne like the stock. (Hilary does not own RMK, but does plan on buying the stock.)
Wayne’s pick: Sicor (SCRI). Sicor is an Italian pharmaceutical company. Hilary and Jonathan think it is a strong stock. (Wayne has a position in SCRI.)
Mutual Fund Face-Off: Best Low-Fee Funds
Dagen: Harbor Capital Appreciation Fund (HACAX)
Minimum Investment: $1,000
Expenses: for every $6.60 for every $1,000 invested
Year-to-date (through 5-17-02): DOWN 7.7 percent
Jonas: Dodge & Cox International Stock Fund
Minimum Investment: $2,500
Expenses: $9.00 for every $1,000 invested
Year-to-date (through 5-17-02): UP 9.8 percent
Dagen and Jonathan wrapped up the show by answering some email questions
Question: “What do we do with our General Electric (GE) stock? It's dropping like a stone.”
Dagen: There are three good reasons to drop GE:
1. You can sell for a tax loss.
2. If you have a large-cap mutual fund, it probably has some GE in the portfolio, so why own the stock separately?
3. Money managers don’t like the stock right now.
Jonathan: This stock is going to continue to go down, especially towards the end of the year when people sell for tax losses. It could certainly get down to the $25 level.
Question : “Do you think it's time to sell Whirlpool (WHR), and is it a short candidate?”
Jonathan: Definitely not a stock to short – this is a great stock. Maybe you want to take some profits and prune your position.
Dagen: A very good stock – people will still be buying appliances, even in a tough economy.
Question: “If I have to do my own research to know what stocks to buy, why do I have to pay a broker to buy and sell them for me? What am I getting for the broker's fees?
Dagen: More often then not (today), brokers are giving more financial planning advice, as opposed to pure stock picking. Continue to do your own research, and maybe look to a discount broker.
Jonathan: A good broker is like a good therapist. You should choose a broker with whom you can have a relationship and discuss your investment style. If your broker is giving you the brush off and you don’t feel you are able to establish a rapport with him or her then find another broker.
Question: “Given the planned international expansion of Starbucks (SBUX), do you think this may be a good buy for a year or two haul?”
Jonathan: Starbucks coffee is like a drug, and that’s a good business to be in.
Dagen: Cultural differences could cause the international expansion to fizzle – Italy already had good espresso.
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