Your Questions About How To Pick Stocks

Betty asks…

Is making 14% on investments in the stock market in 8 months good?

About 8 months ago I kind of got interested in the stock market and did a little bit of research on the subject. I then developed my own formulas and equations. I wanted to see if my equations would work so I picked 40 stocks. This way I could really see if my picks based on my formulas really worked. Also, I didn’t pick penny stocks or options or anything else like that. Some of my stock picks have reached 60%+.

John answers:

/that is real good

Mark asks…

where can i find a complete list of stocks so i can choose one for a school project?

i have a school project due,and we are supposed to pick a stock to “invest in” and i want to see a complete list of the stocks so i can pick a good one. anyone know where?

John answers:

Complete List of Stocks, NYSE, NASDAQ, OTCBB
All content is FREE, Stock Market Records, Real time stock quotes, real-time …’s complete listing of stocks and other issues. …

John asks…

what does the great gatsby have to do with the stock market crash of 1929?

I have a english project and i picked the stock market crash of 1929. what does this have to do with the great gatsby?

John answers:

Im not sure what it has to do. The stock market crash wasnt emphasized in the story as far as i remember.

Maria asks…

Question for those who have read A Random Walk Down Wall Street?

Did the book convince you that trying to pick stocks and beat the market is completely useless?

John answers:

I fail to see how you can extrapolate that stock picking and beating the market is useless from that.

The efficient market hypothesis says that if you managed to price in all possible factors than all that’s left is a random walk, well a random walk would be good, you can make a profit from that. A random walk states that the probability of the price going up or down per unit time is 50/50 hence any projection to a point in the future will be a gaussian normal distribution or rather a log normal gaussian distribution and that the most likely difference between the current price and that of the future would be the root mean square of the time units projected into the future multiplied by the volatility per unit time hence allowing for predictions such as with the Black Scholes equation.

If all that’s left is a random walk then the probable future price will be centered around the current price, a bias to the return can be achieved with a call option, a put option or even a stop loss and since the probabilities can be calculated from volatility, the expected outcomes can be quantified and the investment sized appropriately to allow for the possibility of loss.

Indeed, this is how data is transmitted over the Internet, the data is sequenced to be as close to random as possible in order to maximize bandwidth, the closer the better. Complete randomness is the goal of data transmission to be approached but never reached. To an Engineer, being able to guarantee a true 50/50 result is as good as gold cause then just about anything can introduce a slight advantage and extrapolate that advantage over many trials to the desired results.

The EMH leaving only a random walk tells me that it is possible to beat the market, it simply means that the investments must have strategy. It isn’t as satisfying to the ego as believing that the profit is from you’re being able to pick the right stock but it makes the prospects of a profit far more real from an engineering perspective.

The biggest problem with the EMH is the amount of effort required to get to the random walk being all that’s left.

Linda asks…

What is a very good bargain investment?

I want to invest money and I am looking for bargains out there.
I think that natural gas is very low at $4, so I want to invest in it.
I also like real estate in Detroit, because there are so many foreclosures there.
I am not planning to invest in degrees because I want to be a self employed investor, and I educate myself reading and learning books.
I don’t like to pick single stocks because they are too risky, I prefer index funds.

John answers:

A couple of thoughts.
1) Nat gas is excellent. $4 is way too low. My favorite play is XTO it’s an excellently run company with long reserve life, good quality assets and a relatively low debt load.
2) Following the foreclosures isn’t a bad idea. Following a shrinking industry is. Detroit is based off one thing: cars. Everyone can see that the industry is headed for heck. Chrysler just sold itself to Fiat for cheap, GM is in bankruptcy and Ford is hiding, hoping they can stay solvent during the next decade. If the American auto industry shrinks fewer people will have employment (especially with the breaking of union contracts) and even fewer will be interested in investing in real estate in the area

3) not sure what degrees is but going it alone is definitely the way to go! I’d suggest you read Intelligent Investor (’49 edition)

4) Index funds wrap the good up in the bad (most of the time). You are essentially guaranteeing yourself subpar returns (assuming there are publicly traded companies in the industry). If you are any good as an investor go for the companies. You will make more.

A bargain investment right now depends on your view of the economy. If you think this is a temporary blip before things get better then you should buy some short funds (or short stocks yourself). Probably head for credit cards and banks.

If you think the economy is heading up I would say oil and gas. If you have noticed oil really wants to go up. For the past 3 or so years when the market has been strong oil has as well.

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