The Nowicki family Christmas dinner was tonight. Michelle, the Nowicki family psychiatrist, said (to my FATHER, not me, the securities wonk)
“How do I know what stock to invest in? I don’t follow the market. I don’t watch the stock shows on MSNBC. Jim Cramer – the mad money guy – all of that.”
After I convinced Michelle that I was credible, given my Wall Street background and my SEC background, I suggested she do two things:
1. Think about products that SHE and likely the rest of the population need. Lawn mowers, for example, are a good example of generally needed products. How ’bout the company that makes ROOF sheeting? How ’bout the company that makes . . . blinds!? I suggested that my sister look around and look for companies that make products that are really, honestly, undoubtedly NECESSARY.
2. Pull from the website of the relevant company the past couple of years’ worth of annual reports. Take a look at “measures of success” – profit, earnings per share, stock price. Ask “did the company do well over the past few years? How has the stock done over the past decade?”
Chew over points one and two above. Take your $3000 Roth IRA and invest accordingly. Pay your sister qua financial advisor a small fee when you are wealthy.
SERIOUS POINT: Joe Common Investor, or my sister, needs to avoid reading the WSJ or watching Squawk Box (etc.) for purposes of seeking “hot” investment tips. Instead, look for a good, solid company, a fair assessment of the company’s use to the public, and a simple review of recent annual points.
The day-to-day drama of the market, about which I have before blogged, is not anything about which ye olde average investor should much care. Instead, it seems that the more sensible thing to do is take a LONG view of products that have a LONGER-term, solid future.  Invest in companies in which it makes common SENSE to invest. Unless you need to worry about cash in the short-term, I am not convinced that paying attention to what is currently “hot” and what is “not” is of the most value.  (Mind you, I am not an investment professional, nor am I giving advice for those who have less than … 20-30 years left to live.)