When starting out in the online stock market trading game it can seem like a real minefield of information with stock market advice tips and not having a clue which are the best stocks to buy, should you delve into hedge funds, how do you know if those really are hot stocks, which stock market trading tool should you use and what is swing trading?
You can guess and bet and work on a hunch, but in the end you will need the assistance of a company or individual who can give qualified stock market advice tips. Even so this person does not make the final decision about your stock market trading strategies, that is always up to you to decide what route you want to take and which are the best stocks to buy.
This decision making process is what you will come to consider as your stock market trading strategies. A stock market trading strategy is just a way of planning your moves ahead of time just like in a game of chess, you will need to learn what you intent to do with your pieces several moves in advance.
You need to work with your online stock market trading partner or company to formulate a simple plan of action. This would decide in advance such basics as how much cash you want to invest in stock picks or hedge funds.
You will defiantly need to consider an overall strategy for portfolio management, with such considerations as how much of your portfolio will be in securities and how much will be cash. Then there are aspects such as the amount of diversification your stock investment can handle, when thinking about different sectors or industries.
The reason you need a plan is because it is a bad idea to work from intuition, gut feeling, or tarot cards. If you don't have a plan all you can do is fall back on your psychic to make the decisions, if that worked the psychic would be on Wall Street not predicting your future stock market trading options.
You will need help in predicting viable trends that you can jump on, it is no use following a trend, if you are following it has already happened and the smart traders have taken the best stocks, made their profit and moved on, that's not the time for you to consider getting into last weeks stock market hot picks.
A plan, a lot of research, knowledgeable help, quality stock market trading strategies and perseverance are what are needed, if you give up because you lost money on your first transaction then stock investment was probably never for you. You need to have the foresight to stick with it even in the tough times so that you can get through to the sweet times when your plan and perseverance pay off handsomely.
The S&P 500 is up about 7.5% thus far this year. That's a good return for just over six months. Will it keep going up? Consider this. The earnings of the S&P 500 companies are expected to grow by about 5% in 2007, according to a leading Wall Street brokerage firm. That means if the market was fairly valued at the beginning of 2007 and there were no big changes as to how investors think about the market, the S&P should only go up by 5% in 2007. Hence, game over. Come back next year.
But wait! Let's examine each of the above assumptions. Was the S&P fairly valued at the beginning of 2007? Well, for the 12 months ended June 2007, it's up 22%, so it had a pretty good run in the second half of last year and considering that 2006 was the fourth year of the current economic expansion, it's likely the S&P was around fair value at the beginning of 2007. Okay, but doesn't the market discount the future? And aren't all the Wall Street analysts talking about 2008 earnings? Yes to both (although December 31, 2008 is 18 months away, so maybe there's some uncertainty). 2008 S&P earnings are projected to grow by 7.5%. Amazing, the same percentage the S&P is up this year. I could end this report right now but I think it's a coincidence.
I don't know how far into the future investors look or whether they're looking at 2007 or 2008 earnings. Either way, though, there's not much of a case to be made for further gains in the S&P unless theress multiple expansion. (The P/E multiple has to expand when stock prices grow faster than earnings.)
So, will P/E multiples expand and the S&P continue to go up? Depends upon what makes multiples expand. Common factors include accelerating earnings growth (I don't think 5% to 7.5% qualifies), an improving economic outlook (balance of trade, energy prices, inflation), or a reduction in interest rates. The last one's a two edge sword. If interest rates fall (the Fed cuts rates) because of declining inflation expectations, that's bullish (along with an expanding economy that's the goldilocks scenario). If the Fed cuts rates because the economy is slowing down, that's not good. A Fed cut for good reasons appears unlikely.
Thus, the S&P is likely to be flat to down over the next few months, until earnings growth is ready to take it higher.
Both Scott Miscall & Bill Byrnes are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.
Scott Miscall has sinced written about articles on various topics from Supplements, Alternative Medicine and Home Management. CrushThisMarket.com takes the guess work out of finding the right stock to trade by providing great . Whether the market goes up or dow. Scott Miscall's top article generates over 301000 views. to your Favourites.
Bill Byrnes has sinced written about articles on various topics from Financial Planning, Currency Trading and Financial Planning. Bill Byrnes is co-founder of MUTUALdecision, a website providing , and the author of the MUTUALdecision Blog. He's been an investment banker with Alex.. Bill Byrnes's top article generates over 6600 views. to your Favourites.