Posts Tagged ‘stocks’
The stock market is showing real strength at this time. A lot of stocks that were hit hard during the market’s recent correction are fighting back and making good progress in their share prices. Consider Caterpillar Inc. (NYSE/CAT), which is an important benchmark stock to follow. The company’s second quarter came in slightly below expectations, then the market began to correct. The stock was around $112.00 and dropped like a stone to $82.00 per share. After experiencing a recovery to just over $90.00 a share, it dropped again to the $80.00-per-share mark. Now the stock has broken past the $93.00-per-share level and its near-term price momentum looks to be intact.
So here we are: the last trading day of the month for stocks. And what has August brought us except a lot of pain during those 400- and 500-point single-day sell-offs on the Dow Jones Industrial Average? Depending on how stocks close today, stocks are ending this August at about the same place they started 2011. We are doing a lot better this year than we did in 2010. Last year, stocks were down five percent in the first eight trading months of the year—but stocks ended 2010 10% higher than they started.
Diversification is the key to success in the stock market, especially given the current negative bias. Whether you buy or short, or add put and call options, the key is akin to being a good pitcher—mix them up and you increase your chances of success. The reality is that it doesn’t matter if you are investing in the real estate market, gold, stocks, art, or antique cars; the best way to protect your wealth is not to put all your eggs into one basket. This is obvious, but I’m surprised at how few investors actually follow this.
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