Finding High Return Investments
Stock Market Investing Advice, Stock Market Investing Strategies
We all want to find high return investments. One way of increasing your chances of finding stock market bargains is to change the way you think about stocks and their current values.
One factor which has never changed in the stock market and which never will change is the fluctuation. The only thing which is constant is change, as someone famous quite possibly once said. If you look at it this way then it is clear that high return investments are those which you purchase when the price is low and sell when it is substantially higher. That sounds obvious, doesn’t it? Yet, one of our most common instincts is to shy away from stocks which have fallen and lean towards those which have recently risen.
Let’s look at it another way and assume I have something I want to sell you, a pair of shoes for example. Last week the shoes would have cost $50 but today I will sell them to you for $20, and I don’t know how much I would want to charge for them next week. It’s clear that they are cheaper now than last week. Are the shoes now good value at $20? That doesn’t just depend on how much they might be worth next week but on how much they could be worth longer in the future. The only way to know if the current price is good or bad is to look at the underlying value of the shoes. Are they a nice pair of leather moccasins which are really worth $80 or a pair of beaten up old 1960’s winkle pickers which you couldn’t reasonably expect to sell for $5?
This is my point. Making high return investments is about knowing when a stock is under valued and when it is over valued. If the price has fallen that doesn’t make it a bad investment, it just means that current demand is low. When you see a stock fall sharply, or over a long period, the first question you should ask yourself is when it is going to start to rise again. High return investments, unlike winkle pickers, will never go out of fashion and being aware of high quality stocks which are temporarily under valued is one of the keys to making a great stock market profit.
Tags: high return investments, Investing, Stock Market, Stock Market Investing