Stocks investments done in the old style are one of the ways that you can minimize long-term losses and maximize long-term gains in the constantly fluctuating world of the stock market.
There are people who have made these stocks investments for the long term, whose investing decisions are primarily based on the characteristics of the company issuing the shares, and who are relatively unfazed and much less worried compared to other stock market traders during this time of financial crisis.
They have made stocks investments after thoroughly understanding the companies whose shares they are buying, and have decided that the stocks they have bought are a long-term investment as opposed to investors who make money by flipping stocks and bonds over the short term.
Many short-term investors, whose stocks investments are primarily for the purpose of quick trades, are now anxious since the value of the stocks they hold have dropped more than 20 percent in the last few weeks. The long-term investors, on the other hand, are now in the position to purchase undervalued stocks of companies that have good businesses.
Old style investors such as Warren Buffet are disciplined long-term investors whose stock investments are based on thorough analysis. Their stocks investments are in companies whose businesses they understand. These old-style stock investors have for the most part shied away from investing in hard-to-understand derivatives the key to the current financial crisis, derivatives. Most stock market traders do not understand derivatives, yet continue trading in these little-understood securities.
The old-style investors primarily made stocks investments in companies whose business were not easily understood, but the companies they have invested in are run very well. Berkshire Hathaway recently invested in General Electric and Goldman Sachs because these two companies are run well; in addition, they are businesses that are transparent and are known for their corporate integrity.
Buffet’s Berkshire Hathaway could have brought anything else in the market right now, and there many that could be bought with the fallen share prices, but Berkshire Hathaway chose to invest in solid businesses with known corporate integrity.
The old style of making stocks investments is not based on a quick tip to make easy money by flipping a stock, or making money through trades and margins. This style of making stocks investments is through understanding what makes the business runs well.
It is about making a thorough analysis of company data and history. The analysis is based on reading the company’s annual reports, and understanding the way the company uses the investment in order to increase shareholder value. The old style of making stock investments is about buying into a trusted and investor-worthy company, and holding on to the shares for the long term.
Significant earnings can be made through dividends and company buy-backs, as opposed to making money out of stock trading. It doesn’t mean that the stocks could not be or should not be traded in the old style of stocks investments. The stocks can be sold, especially if the investor can get very good prices for his stocks, and if the investor needs cash to be freed up for other uses.
Old-style stocks investments are made for the long term, in companies that are known to be good businesses in terms of management, integrity, and shareholder value.
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