In putting together the best stock investment strategy for 2014 you can concentrate on finding the best stock investment or you can try to come up with the best strategy to deal with a market hitting all-time highs. Unless you have a real flare for stock picking, I suggest you focus on investment strategy.
There are two traditional ways to view the stock market: the fundamental approach and the technical school. The first approach tries to come up with the best stock investment or strategy by analyzing all kinds of economic and financial data like economic growth, unemployment and trends in corporate sales and profits. The technical school focuses only on the action in the stock market itself, like volume of shares traded and price trends.
I’ve followed this stuff for 40 years, sometimes in search of the best stock investment and sometimes (in my later years) paying more attention to investment strategy. Here’s what I see in 2014 and beyond, combining both schools of thought.
The fundamental data is luke-warm at best. We’ve recovered from an economic crisis and a deep recession, they say. But economic growth is weak and unemployment is still in the 7% range. Corporate profits have grown, while sales growth has been lackluster. The stock market has been hitting all-time highs, as our government has gone deeper in debt while keeping interest rates artificially low to stimulate the economy. This looks nothing like the best stock investment environment compared to past recoveries. Things just don’t look right from a fundamental viewpoint.
Technically, the stock market has been in an upward trend for about 5 years, showing gains of over 150%. This has happened before. But there’s something to consider when trying to put together the best stock investment strategy for 2014 and beyond. If the fundamental data does not really improve to support these gains by 2015, stock investors who jump in now might be showing up at the party late. The upside action could be coming to an end.
Here’s what else has happened before. Many investors missed this market and have just recently jumped on the band wagon in search of the best stock investment to make up for lost time. This is not new, nor has it normally worked out well for the average investor. If you missed out, I have a suggestion for you.
Don’t play “catch up”. Sometimes it’s best to stay safe and liquid – waiting for a future opportunity. In other word, your best stock investment strategy for 2014 and beyond could be a passive strategy. As I once heard Warren Buffet say, “every 5 years or so the stock market runs into trouble”. This could be one of those times.