Personal Finance Q & A
Research Tools For Stock Pickers
Q How does one research stocks? How does a lay person read a financial report?
- C.F., Essex, Conn.
A Books have been written on that subject. Helpful accounts are "Making The Most of Your Money," by Jane Bryant Quinn, and "The Only Investment Guide You'll Ever Need," by Andrew Tobias, plus several lively books by mutual-fund guru Peter Lynch. All stress buying stocks in companies you understand. Lynch would go to the shopping mall, listen to his wife and kids, and follow product reports to find companies making popular products.
Many libraries carry Value Line stock reports - one-page financial backgrounders on hundreds of companies. And look for stocks in industries that don't appear to face economic threats in the coming year.
Ms. Quinn's book has several pages on reading annual reports. She suggests you pay special attention to the footnotes, where companies often bury important news.
Q I've heard about the strategy of owning stocks only for a couple of days. Is it for real?
- Name withheld
A "Day trading" is mostly used by professional investors, who often buy a company for a specific reason, such as "an upcoming stock dividend," says Standard & Poor's analyst Joseph Lisanti. "The strategy, however, is not for average investors, since brokerage commissions will eat you alive." Also, studies show that holding stocks produces the best returns over time.
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