Lately I’ve been trying to make some money in the depressed NASDAQ-and I’m wondering if a portfolio of severely depressed stocks is the way to go. Here’s the scenario… buy 10-12 stocks of good companies, whos values are off their highs by 50% or more. Will such a portfolio return better than avargae results when 9and if) the market finally turns around? Is bottom fishing worth the risk?
It’s a gamble, that’s the name of the game. Have people come up that way? Of course, people have made millions after chronic recessions like the one we’re in. Some people “knew something”, whereas for others it was dumb luck, which I assume it would be in your case.
I would suggest that you look at the economy like a giant support network. When the basic building blocks of industry (i.e. high tech firms; Microsoft, Boeing, etc.) start to bounce back, which they have been, that is indicitive that people(large corporations) feel comfortable spending money again. In turn, you may see the return of blatant and unnadulterated spending by consumers.
If you look in the Seattle Times Classified Section under “Range Rovers for Sale”, you will notice the uncanny availability of late models for sale, obviously people who had revelled in the bliss of a new six-figure salary from one of the many “dot bombs”.
My advice would be that if you are eager to make some quick cash, invest in the staples. But you won’t really be able to make a killing until consumerism gets back into full swing.
A real “bottom fisher” would buy stocks that are trading at less than 10% of their high, and there are plenty. We’re not talking “S” curve bottom, we’re talking stocks that can’t possibly go any lower (or can they?). It’s all about how you choose the stocks and define “good companies”. To me, (and I say this without any fear of contradiction) it’s all guesswork in a fancy suit. I have no investments to recommend.
I’m investing in a NASDAQ index fund… I figure that the value of the index as a whole must be way down… and over the long haul, it’s going to go up… hopefully WAY up due to the current down time…
I am investing long term however… you might be looking more short term…
I’m with wooba. My IRA is all-NASDAQ, since I can’t touch it for another 24 years. This is a lull; tech is the future. (IMHO)
Short-term? I dunno.
Your IRA is ALL NASDAQ, Farmer Oak?
Whatever floats your boat.
I have a portion of the NASDAQ 100 ETF in my IRA (QQQ).
But why limit yourself only to NASDAQ?
You’re making a big bet in a small area. With your time frame you’ll probably do well, but expect a roller coaster ride (I’m sure this is big news to you after the last 9 months).
If Buddy1 is asking about buying stocks when they’re out of favor…well, that’s one of the oldest strategies in the book. It started with Ben Graham in the early 30’s and it’s called Fundamental Value investing.
Folks that had value funds in the go-go growth year of 1999 felt pretty out of the loop. On the other hand, when the tech market tanked in 2000, folks holding value funds started to look like gurus.
A diversified portfolio contains both growth and value.
Three value funds favored by Morningstar research (July 6 newsletter) are: Selected American Shares, Dodge & Cox Stock and (if you must pay a load) Washington Mutual Investors.
Yes, but I have the bulk of my portfolio OUTSIDE my IRA, mostly in an S&P fund and blue chips.
If you’re indexing in a taxable account you’ve done your homework.
Hope this works, anyway, I remember from my MBA Finance class, there is a financial ratio called the “z” ratio, which can predict a firm’s imminent bakruptcy. I propose to pick firms off their highs by no less than 50%, no more than 95%, and reject all with a bad “z” ratio. I would them limit the lisat to firms that trade at least 1 million shares/day. Buy the stocks, sit back, and wait for the recession to end.
Anybody want to try? This portfolio should return easily 25-50% by next year!