When it comes to picking specific stocks for investment, there are two ways to analyze them. The first is Fundamental Analysis.
Fundamental analysis the process of examining a company’s “fundamentals”. This means you look into their balance sheet, their income statement and the statement of cashflows. You look at the concrete facts about the company.
Ask questions like, is this business profitable? Do the facts suggest it will increase profitability in the next few years?
What kinds of debts (short-term and long-term) does this business have? Will it be able to pay them?
What weaknesses are there to this business and its market that could challenge its position? What are its strengths?
The second type of analysis is Technical Analysis. This involves projecting the stock price based on the trends. You look at the 50 day moving average, and even the 200-moving average. This is more of a charts and trends-based analytical process.
Overall, for long-term investors, fundamental analysis is the way to go. Not only does Fundamental analysis involve more logical and foundational decision-making, it is also the strategy used by some of the best investors in the world like Warren Buffet. Overall, if you’ll wondering which strategy is best, consider your purpose for investing.
As interest rates have risen considerably over the last year or so, many people have come to wonder if saving now “makes sense”. The characteristic of saving as a give or take isn’t quite right because saving should always be a part of someone’s financial picture. Let me describe the reasons one would want to save and ways in which to go about doing this.
1. Emergency Fund
The emergency fund is one of the universally required parts of any financial plan. Without emergency reserves the risks of anything, whether a personal household or a business operation, increase exponentially.
Savings for an emergency fund need to be accessible at a moments notice. Keep them in either a bank account or money market account.
2. Short-term savings
Short term savings, for things like buying a house are usually best placed in a short-term CD or money market. For example if you know you want to purchase a home in three months or so, getting a three-month CD can make sense.
If the timeframe is less certain, stick with a money market or basic savings account.
3. Long-term savings
For savings intended for expenses that are further out in the future, your best bet is in either a CD, government note, or a combination of more riskier investments. For example if you’re saving up for a car in 3 years, it might make sense to put the whole thing in a CD.
However if you’re able to take a little more risk, you might consider putting 25% in an S&P 500 index, 25% in a short-term government bond index, 25% in a gold bullion ETF and 25% in a money market. These four together over the last forty years haven’t lost money over any 3-year period as long as their rebalanced annually. (However past returns doesn’t guarantee future performance.)
4. Other Savings Goals
Any other goals should be taken in a case-by-case basis. Talk with your financial advisor about any questions you have before making investing decisions that you aren’t sure about.