Wall Street has sure had a rough go of it. Lehman Brothers, a 158-year-old securities firm, is suddenly bankrupt.
Just a week prior, it was Fannie Mae (FNM) and Freddie Mac (FRE) that needed a government handout. Merrill Lynch has been bought out, and American International Group (AIG) is now a ward of the state, and Citigroup and WaMu could very well be next (see, “Lehman and Wamu in Death Pact“).
If you feel like someone dumped a bucket of cold water on your head, you’re not alone. But instead of deconstructing the last 14-months of this tsunami-scale credit crisis, I’m here to tell you that this, too, shall pass.
It’s time to clean up the debris and get on with our lives. Wall Street will survive–with or without Lehman Brothers (LEH). That’s the way the free market works!
See, many people forget that old phrase “risk vs. reward.” If you invested in the stock market with the expectations of steady positive returns, perhaps you’re confusing Wall Street with low-yield bonds!
The reasons stocks can generate 10%, 20% or even 50% returns in just a few weeks is because investors are taking on a big risk. And those risks are not without consequences.
So I’m not going to bother giving you advice on how you can prevent losses; that would be futile. But what I will do, is tell you how to invest so you can reduce your risk and increase your rewards, so that over the long term you will see a healthy portfolio that delivers results that beat the market 3-to-1 or more!
Three Easy Steps to Beat the Market
1. Don’t put all your eggs in one basket. It’s a very risky proposition to rely on only one or two stocks, or only one or two sectors. Diversify to make sure you limit losses, and to ensure you get in on a wider range of profits when the market rebounds.
2. Steer clear of financial firms for now. They are too volatile–meaning the risk is NOT worth the reward (see also, “Will Goldman Sachs Be Next?“). Sure, some stocks may be a bargain and skyrocket in the coming months. But others…> may lose 90% of their value overnight.
3. Get back to basics. Don’t follow Wall Street fads–just look at companies with solid balance sheets and growing profits. Make sure that your portfolio consists of fundamentally superior stocks that can weather the current storm on Wall Street and really cash in this earnings season! (see my “Top 5 Stocks for September“).
If you want no-risk investments, the market is not for you. But if you are realistic about Wall Street and know how to invest in such a way that limits your risk to a reasonable level, there are ways to profit big-time in the coming months.
But you have to build your portfolio carefully and strategically. By this I mean you should only buy stocks that demonstrate the fundamental superiority to generate big sales and big profits.
Amid all the chaos in banks and brokerages, many investors have forgotten about this lately. But once the dust settles from the headlines, investors will come barreling back to stocks that actually have a strong bottom line–and potential for future profits!
If you want to know how to invest and generate significant returns, the formula is simple: You must keep investing over an extended period of time, and stay diversified in several different sectors and industries.
There are a lot of fundamentally superior stocks out there that are a bargain right now–just keep buying them up. Six months from now, you’ll be glad that you did.
This market will turn around. If you don’t start positioning yourself now, you could miss it!
It’s been a tough year for most investors, but here at Blue Chip Growth our stocks have continued to be an “oasis” in these trying times. We’ve not only beaten the market by more than $3-to-$1, but our top stocks continue to pile on the profits in these uncertain and jittery times.
Also in this issue:
