asset management assocates
Private Portfolio Management

   


Many investors feel that the role of an investment advisor or any good investor is to pick winning stocks. Unfortunately, picking stocks is much more difficult than it appears. Think about your favorite football team. You could study all of the players right up to a few minutes before the game. You could look at the competition, the playing field, the weather and many other factors. With all of this information, you might think that you could pick the winner. But, even the most knowledgable sports gurus have a hard time picking the winners consistently.

Owning stocks is a popular way to build an investment portfolio. Investors sometimes buy well recognized household names or pick stocks that were written up in a financial publication. Some take it a step further and subscribe to a service or use a broker's recommended lists. There are also many people that view stock picking as a form of recreation. If this is the case, I would suggest dividing your assets into two categories. The real money and the fun money. The fun money will allow you to get into the next Microsoft. The real money is the stuff you want to keep just in case what you thought was Microsoft was really WorldCom.

In order to be a successful stock picker, you have to develop a criteria for the type of stocks that you want to select. Then you have to buy a statistical sample of that criteria in order to make it work. Buying one stock that meets that standard is not enough.

It may also help to be an expert in a particular sector or industry. In order to select drug stocks it would help to have some experience in the medical industry. Unfortunately, it is difficult to be an expert in the drug industry and pick between a Merck or a Pfizer and then at the same time be an expert in Japanese stocks. This would leave little time to study junk bonds or REITS.  

As an advisor, this is why we prefer to buy stocks through an index or a fund. This allows us to hire an expert in a field or a obtain a statistical index of a market niche. We could easily own many sectors instantly. The advisory job is about understanding how these sub-portfolios relate to each. 

At the same time it does not hurt to own some stocks that you are comfortable with. We try to work with our clients on these issues. As a rule we do not try to pick hot stocks that we think will soar. There are plenty of stock gurus doing that. We focus on the bigger picture and try to generate a solid bottom line return without getting into a lot of stock picking.

Most of the information we obtain on stock research comes from investment  firms and paid subscription services,  but here are a few free websites. Some are very interesting.

Newsletters and Bulletins
Blog