The above picture is a chart of the S&P 500 Index within the last 90 years. The graph was sourced from http://www.macrotrends.net/2324/sp-500-historical-chart-data
In this series, I plan on picking public stocks that are known to many and give a brief fundamental and comparable company analysis. Again, this analysis is somewhat brief and should not be the sole source of information when you are performing research to add stocks to your portfolio. As a finance major in college, I have taken a variety of courses in business valuation, investment management, and I have internship experience in fields including private equity, and structured finance (fixed income).
I believe in looking at fundamentals of companies and keeping in mind the economic/political landscape of the United States. I’m not someone who believes in technical analysis, but then again, I have not really studied in-depth technical charting tools. If any of you are well-versed in technical analysis of public stocks, please comment and let me know. I am bullish on the US stock markets in the long-run, but I do believe that it is important to time investments according to where the economy could be heading in regards to its stage in the business cycle. I recommend a diverse portfolio and to always keep in mind your appetite for risk and your investment horizon.
I want to give you guys facts, and an easy-to-understand analysis so that you guys can build off what I have written as you form your own stock portfolios. I recommend always performing your own research before investing in a stock. I am currently forming my own stock portfolio, and I am not an expert by any means. On the contrary, I welcome everyone to comment below and bring your own knowledge and expertise as well. I will definitely follow and upvote those of you who can bring your own knowledge in investing, financial markets, and fundamental analysis. I believe through discussion and the sharing of thoughts and ideas, we can all reach a greater level of knowledge in any particular subject matter.
Before I start, looking at a specific company, I want to discuss a few things in the current economic and political landscape. Obviously, there are many important factors not mentioned below, but the 3 facts below should be considered.
Economic/Political Environment
- Interest Rates are slowly on the rise. After years of historic low rates, it appears interest rates are back on the rise, indicating that the feds are now enforcing a tightening of the money supply.
- Market Capitalizations of companies are high, and stock market returns have been positive for the past 9 years.
- North Korea/United States tensions are causing money investors to park funds into money markets. IF North Korea or the United States were to take any significant action, the financial markets will definitely take a hit in the short run.
As I have said before, I am bullish on American in the long run. I believe in the long-run America will continue to increase its population, and there will be more people eligible to work. Using this simple fact, the 5-year chart on Colgate’s stock price has been consistently trending upward (I am sure there are other factors that have contributed to Colgate’s growth, but this simple fact is one of them). I believe a stock like Colgate will continually have value since there will be more and more people that NEED toothpaste. General factors like human population and people eligible to perform work will directly affect stock market returns. If you have enough funds to park funds, in a fundamentally sound company, for a long period of time (greater than 5 years), then do your research and invest. IF you want to maximize your returns, then consider timing your point of entry also.
If your situation matches below the three points below, I suggest that you look to invest in the stock market, and start looking at prospective companies for your portfolio.
- Your Investment Horizon is 5 years or longer
- You have a decent amount of capital for investing purposes, and have NO need for these funds to maintain your standard of living for the next 5 years.
- You are willing to take on additional risk.
I am a college student that is looking to stay on top of student debt, and paying living expenses. Luckily, I have been able to build my savings through scholarships and internships. Therefore, I am looking to invest (in a limited capacity) because my time horizon is longer than 5 years and I EXPECT a downturn within the next 5 years. However, I am still considering when I should enter the market.
This was a brief review, but be sure to always consider your investment horizon, your risk appetite, and your ability to maintain your standard of living before investing. HOWEVER, I do recommend that you build the skills necessary to be able to take part investing in public equities once you are at a point in your life where you can invest.
Stay tuned. This article was more of a preface, but I plan on diving into companies in the future. I will be starting with Apple. Comment below and let me know your thoughts/investing advice.
Authored by Joseph