The stock market is confusing to most, and even to many “experts” who study it. It goes up, it goes down, and moves all around, with no visible rhyme or reason. The big reason is external forces, i.e. politics, bankruptcy, pandemics, hurricanes, flooding, Bob in accounting slipping and falling. Ok, maybe not the last one, but you get the idea. Once you start seeing what is going on, who is trading with who, or not trading, where massive weather related disasters occur, and even when politicians decide to allow, or not allow business to occur, things begin to fall into place, a little.
Take for instance, with the 2020 pandemic, REIT’s (Real Estate Investment Trusts) took a big hit, especially in the residential area, REIT’s such as AIV (Apartment and Management) stock took a massive hit, and they had to stop paying out dividends. Whereas MPW (Medical Properties Trust Inc) took a hit but recovered and still kept their dividend because it was in a different field.
Now, when investing, you should step back and take a look at the different markets, or sectors, i.e. Oil and Gas, real Estate, Medical, and the different sub markets and sub sectors, to give yourself some ideas, and help make a game plan. Ask yourself some questions such as, do I want to invest long term or short term? Do I invest in individual stocks, or mutual funds? How much should I invest? These are questions you need to answer, and then develop a game plan off those answers.
If you do mutual funds, it will become, how much is it to invest in the mutual fund? What sector is the mutual fund in? What’s the load type? What are the benchmarks? Look at the funds, take notes, and compare. Once you do this, you’ll have an idea of where to go.
When it comes to individual stocks, if you are really good at reading graphs, crunching numbers, etc., then day trading might be for you, but, if you’re horrible at all that, such as myself, stocks that pay out dividends might be the route you go down. When looking at these stocks, you still need to pay attention to the graphs, news, and any information, but maybe not as closely as a day trader would. Reason being, if a stock is valued at $10 but has a $5 annual dividend, the company might be going bankrupt or in a heavy restructuring and has not had time to adjust the dividend. Now, if the stock is at $10 and the dividend is 80 cents, still look at the graphs and news, make sure nothing is happening, but it MIGHT be a better buy than the first one.
Now, when buying individual stocks, it is a great idea to diversify because if one sector takes a hit, you still have the other sectors to help keep your portfolio alive. Also, look at stocks with dividends, I have personally invested in MPW (Medical Properties Trust Inc) HBI (Hanesbrand Inc) T (AT&T) and SHLX (Shell Midstream Partners) to name a few. It keeps me diversified, allowing some comfort that what might hit AT&T wont have a serious chance to hit the rest. Diversity in stocks helps keep you from having a portfolio that is worth $10,000 to become worth significantly less.
Doing you’re homework, making a game plan and learning what influences markets (non of us are perfect at this) it will help you make choices on investment a lot easier. It does not require a lot to invest, and as long as you know what’s happening, and keep you’re finger on the pulse of your portfolio, you’ll do fine, as long as your willing to learn.