WASHINGTON, February 6, 2016 – With the market likely set to do a Wile E. Coyote cliff-diving routine in the coming week, this may seem like a strange time to launch a new series of educational articles whose aim is to introduce and/or educate new and/or potentially returning investors on the hows, whys and wherefores of stocks and bonds.
But actually, the timing is pretty good. Since the beginning of 2016, action in stocks and nearly everything else except government bonds and mattress money has been so horrendous that the best advice one can give to a new investor right now is to stay out of the markets, not get in. That, in turn, gives us time to launch our new series, which will describe as simply as possible how investing really works (or should work).
As we gradually get deeper into the investing thicket, current traders and institutions will eventually exhaust the current selling barrage, the majority of stocks and bonds will have hit rock bottom or bankruptcy, and pretty much everything that’s left will be on sale. And that moment, if you can catch it, will be the best time to start getting in. (BTW, we don’t think that magic moment will happen next week, either.)
“Investing 101” is based on a six-week adult education course I taught for several years at a local community college back a couple of decades ago. To my surprise, the course proved quite popular, so I offered it many times until I chose to leave the business, largely due to what I felt was the investing industry’s profound unfairness toward the average retail investing client. That’s industry talk for you and me.
To be perfectly honest, over the past couple of decades, this unfairness has actually gotten considerably worse for a variety of reasons, most of which I cover on an almost daily basis in my other financial column, a trading diary I file “Market Maven,” right here under the CDN banner.
That said, if a small investor knows what’s going on, he or she can often read the tea leaves and generally avoid getting trapped by Wall Street’s cadre of well-heeled thieves. And ultimately, that’s the aim of this series: to give the average investor a fighting chance to make some money.
In the coming weeks and months, we’ll define and explore many of the following topics in some detail, along with associated sub-topics:
- Stocks and bonds
- Market averages
- Mutual funds (load and no-load)
- ETFs and ETNs
- How markets work (or don’t)
- Precious metals and alternative investments
- Investment objectives, techniques and strategies
We’ll try to keep things short, simple and interesting. Many of the things we’ll cover have varying degrees of complexity we won’t get into. But that’s not a problem. There are other places where you can find more detailed information and we’ll let you know what a number of these are as we move from topic to topic. Here, though, we won’t burden you with the kind of detail that could be useful later but likely will only confuse a new investor.
Much has changed since I last offered this course in what seems like ages ago. Back in the 1980s for the retail investor, there were no such things as:
- Online investing via personal computer or otherwise
- ETFs or ETNs
- Short ETFs that take the place of shorting sectors of stocks
- ETFs that stand in for commodities or commodity futures
- High-frequency Trading or Traders (HFTs), spoofing and quote stuffing
- Really cheap commissions
- A completely ineffective SEC
All these and more have changed the tone, tactics and techniques of investing in recent years, particularly during and after the Great Recession, a stock market and real estate Super Slam that allegedly ended in 2009-2010. (We think that for many Americans, it’s still ongoing.)
We’ve been revising our course material to keep up with all these changes and more as they transpire. But do keep in mind, investing is ultimately a movable feast, and even for the professionals, alertness and continuing education is a must to stay ahead of the crowd.
If the often exciting—and sometimes profoundly depressing—world of investing is something you want to learn more about, check back here from time to time for ongoing Investing 101 installments. I hope to post them about once every week to 10 days, depending on how busy the current tumultuous market keeps me.
Have a good week.
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