How do you play the stock market succesfully?

I want to be able to follow the financial news and know how & when to change the allocations in my retirement finds which is a bunch of mutual funds?

Go to morningstar and look up the weighted average PE ratios of the funds for stock funds and duration for the bond funds. As most funds underperform the indices over time, treat them as index funds.

For stocks, never hold a fund with a PE over 15. It works out that unless your expected return is very low, fifteen is a good rule of thumb for discounted cash flows to time 0, as an upper bound for price. You can take the PE, find the estimated growth of the indices and go to moneychimp.com and estimate return. Keep tinkering with the growth rate until 1.00 in earnings yields a PE of the same value.

For bond funds, look up the duration and credit quality. Junk bonds can lose extraordinary amounts in stressful times. I remember a time in the '90's where one third of junk simply was written off the balance sheets of funds. In any case, look up the duration. Figure out the weighting between classes (morningstar should tell you) and go the the Financial Times of London or Barrons or the Wall Street Journal and look up the yield for that approximate duration or average maturity. That minus the fees will be your yield.

Compare this to your goals.

My guess is that if you do this, you will be in for a shock and be very upset and disappointed. You might then look at bankrate.com and buy a moneymarket or CD from GMAC Bank or the State Bank of India (member FDIC). You will likely do better than in the markets. Prices are high in most funds relative to what they provide.

My checking account at GMAC Bank pays me 4.65% and I am globally among the best investors in the world, from a purely statistical perspective. Most general public investors are in over their heads but they don't know it. The professionals don't want to tell people because if you withdrawal your money they get lower fees.

There are not a lot of funds that are reasonably priced compared to their underlying assets, and have a good management history. I know, I have looked and I am trained to evaluate portfolios.

The stock market is not a game.

You have already been given good advice by several responders. I would like to add my 2 cents worth and that is probably more than it is worth.

There is a place for mutual funds in every portfolio, especially mutual funds that invest in foreign markets because they supposedly have better access to those markets. Also mutual funds that invest in small companies, because they supposedly have access to better information about those companies. But. Mutual funds in general are for the lazy. 70% of mutual funds underperform the market in general. Not a very good recommendation for mutual funds in my oppinion. But I do own half a dozen. A couple that invest in foreign stocks and a couple that invest in small companies.

I believe that a person who is willing to work at it can pick stocks more succesfully than the mutual funds can. Not all picks will be winners, but if 50% are you will do well. And the market bias is up. Always has been. Of course if you jump in at the top of a bubble, you will not do well at all. If you don't believe that ask those who bought the tech stocks during 1st half of 2000. Intel at $80 for example. Or Global Crossing. Or Enron. Or RCA in August 1929. There is an old saying buy low, sell high. But for some reason, many investors do not seem to understand that saying. They prefer to buy high, sell low.

I don't know for sure if Intel is a good buy at the current price but I would much rather place a bet on it now than at $80. Actually, I would rather place a bet on a company that does not have to keep spending large amounts of money on capital improvements. Even better I would rather place a bet on a company in an expanding market, such as for example China.

Look at stuff that's low priced, but people will use later. Also look at developing countries.

I don't know if this is a plan or not; but I seek out companies that appear to have value based on their PE ratio, debt, cash and projtected growth. They are out there; and once in a while I have to avoid them because they are temporarily high.

When I buy them I will hold them for years; but if I get a quick gain I'll take out my original investment and leave only the gain behind in my brokerage account. I have at least 13 stocks now with nothing but proceeds from their short term gains.

To play the stock market successfully you buy stock when the price is low and sell when it( the price) is high.

You go to the the Website: www.globeandmail.com.
Then go the the Globe fund Section. Then go to the 5-Star Ratings Section. That section gives you a list of very profitable mutual funds that you can choose. For example, AGF Aggressive Global Stock (US$) brings 1yr Return of 33.53%; 23.88% for 2yrs and 34.53 for 3yr. Good Luck.

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