Investment Guide

Investment Guide The book helps the investor to learn about the basic investments and guides in selecting and analyzi

01/26/2022

January 26, 2022
The past week has shown how much the stock market behavior is affected by the monetary policy. The mere prospect that the Federal Reserve was going to increase the interest rates and tighten the monetary policy to tame the inflation led to rapid fall accompanied by large fluctuations in the prices of stocks. The investors who panicked sold probably in that stock market rout and suffered severe losses. This is why it is emphasized that investing in the stock market is for the long term such as for your retirement years. This is so because the prices recover over a period of time. In other words, the money intended to be used for use in the near future such as for child's education, purchase of a home or breakdown of appliances should not be put in the stock market.

The Fed meeting this afternoon indicated that the measures will not be as drastic as suspected. This calmed the market with the NASDAQ remaining higher by 2.5% ET, the S&P 500 rising more than 1.5% and Dow adding about 1%.

01/17/2022

The buzz word at this time is that inflation needs to be constrained which is currently running at 7%. This will require multiple increases in interest rates along with the constraint on easy money supply that had been needed to keep the economy afloat during corona virus disruption. In other words, the easy money supply is out. This is expected to hurt technology companies which were capable of generating high profits from this money. This could also hurt housing industry and other industries supporting the housing industry because the mortgage rates will go up thereby decreasing the affordability of homes. On the other hand, this will be good for banks because they will be able to earn more in terms of the interest money. The general idea laid down here should be your guiding factor in selecting the stocks for investment.

01/09/2022

Stock market has to do with money and so is affected by the monetary policy (see section 14.8 of the book). When the unemployment is low and the money supply is abundant, the economy heats up resulting in higher inflation as is the case now. The corrective action by the Fed is to reduce the supply of money by increasing the reserve requirement for banks and/or increasing the discount rate. This results in increased interest rates for appliances, cars, houses etc. The stock market perceives these changes and responds well in advance of the changes being declared officially. In tight money policy as being perceived now to reduce inflation, high priced technology and growth stocks do not fare well. This has been going on in the market currently. The stocks expected to do well in the present tightening atmosphere are consumer goods, pharmaceuticals, utilities, etc. and those related to the green energy such as copper, lithium etc.

The book covers the topics related to investments which you need to build wealth, such as the following;:Concept of sto...
01/08/2022

The book covers the topics related to investments which you need to build wealth, such as the following;:
Concept of stocks and stock market, financial reports, stock selection and analysis using the relevant data available on brokerage websites, practical examples
Concept of mutual funds, selection and analysis
Exchange traded funds (ETFS), selection and analysis
Asset allocation in the portfolio

08/23/2021

The Federal Reserve System controls the money supply and interest rates to achieve the desirable economic conditions. The Fed has maintained easy money policy during the corona virus havoc so as to make it easier for people to borrow money at historically low rates. This has been further supplemented by the Government by providing incentive money to low income people. The result is very high demand of new housing and improvements to the existing real state. People have money and so there is high demand of all kinds of items and so the business are prospering. This is good for the economy as well as the stock market. Notice that the stock market has done really well in this period. Recently the Fed gave an indication on cutting the purchase of bonds to reduce the prospect of inflation. This would tend to reduce the easy money supply and be negative for the stock market. The effect of that was felt in the stock market for a few days. For more details, refer to chapter 14 entitled "Economic Factors in Investment Decisions" in the book.

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