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_________________________________________________________________ I N V E S T I N G B A S I C S Tuesday, April 24, 2001 benjamin.rogers@enron.com _________________________________________________________________ SPONSORED BY: Ameritrade Open an Ameritrade account now and get commission-free trades for 1 month. Learn more at ameritrade.com http://www.lnksrv.com/m.asp?i=397079 IN THIS ISSUE: Q&A: What exactly are "tech stocks"? Q&A: Are Insider Stock Sales a Red Flag? LESSON: Confronting Contradictory Advice YOUR QUESTIONS ANSWERED -- Q. What exactly are "tech stocks" -- computer makers? -- A. Great question. The term often refers to computer companies and software makers. But these days, it can be hard to think of companies that don't employ a fair amount of technology. Think of pharmaceutical firms, for instance. Drug chemistry and drug delivery processes involve technology. Golf club manufacturers apply technology to their new product development. Pretty much any airplane-related enterprise uses technology -- from building jets to booking flights. Likewise, Federal Express and other delivery specialists rely heavily on technology. Of course, some companies do so more than others. Sun Microsystems, for example, is much more of a technology company than Hershey. When we hear that "tech stocks were up today," we have to wonder what exactly is being said. A good way to think about the term might be to use it for companies that draw most of their revenue from directly using or creating technology. -- Q. How bad a sign is it if a company's insiders are selling shares? -- A. It's not necessarily bad at all. Many executives these days are compensated significantly with stock options. They may simply be generating cash to buy a house or put a kid through college. We wouldn't fret too much unless an awful lot of a company's top brass were selling shares -- and selling significant percentages of their holdings. Even that could be a coincidence, but it might warrant a little scrutiny on your part. P.S. GOT AN INVESTING QUESTION FOR US? Post it on our Ask a Foolish Question message board. http://www.fool.com/m.asp?i=397080 _________________________________________________________________ LESSON: CONFRONTING CONTRADICTORY ADVICE Learning to invest successfully isn't a straightforward endeavor. You'll frequently run across seemingly contradictory advice, which will leave you scratching your head. The solution to this confusion is to understand that investing is both 1. simple and 2. complex. At the beginning, it's simple. Your first steps should be to get out of debt, read broadly on investing, and perhaps invest your initial dollars in an index fund. But once you begin looking into picking individual stocks on your own, you may run into some contradictions. For example: 1. Don't waste your time trying to time the market. Always remain invested in stocks. And 2. Don't be afraid to stay out of the market, at least partially, for a while. Wait for the fat pitches. Here's another pair: 1. Don't add money to a falling stock position. And 2. Dollar-cost average, investing regularly in a stock no matter whether it's up or down. There are many such dilemmas that frustrate new investors. 1. Buy and hold forever (or at least for a very long time). 2. Sell when something much better comes along. And 1. Let your winners run. 2. Rebalance your portfolio when one or more stocks come to dominate it in a big way. There are some points on which most Fools will agree (penny stocks are bad, technical analysis is dubious), but many points on which we differ a little. Furthermore, scratch the surface of a Fool and you'll likely find that many of us are a little contradictory even within our own attitudes. That's fine. It just means we're complex, and that investing can also be complex. In some situations, buying and holding for decades might work well. In others, it might make sense to sell when something much more promising comes along. If you're a good Foolish investor, you're always questioning, examining, thinking and rethinking. You're continually changing your perceptions of investing, perhaps after making some regrettable moves and pondering how they came to pass. 1. Life is simple: Eat, drink, breathe, sleep. 2. Life is complicated: Prepare a tax return, study physics, raise children. Wherever you go, even in investing, there are always contradictions. But that's okay. _________________________________________________________________ My Portfolio: http://www.fool.com/m.asp?i=397081 My Discussion Boards: http://www.fool.com/m.asp?i=397082 My Fool: http://www.fool.com/m.asp?i=397083 Fool.com Home: http://www.fool.com/m.asp?i=397084 My E-Mail Settings: http://www.fool.com/m.asp?i=397085 SPONSORED BY: Ameritrade Open an Ameritrade account now and get commission-free trades for 1 month. Learn more at ameritrade.com http://www.lnksrv.com/m.asp?i=397086 DON'T OVERPAY FOR MUTUAL FUNDS Avoid excessive fees and get better performance. Learn the scoop in our Mutual Funds online seminar. http://www.fool.com/m.asp?i=397087 GET WHAT YOU'VE BEEN MISSING! Check out our Member Benefits Center for our latest special offers, just for you. http://www.fool.com/m.asp?i=397088 BECOME A FOOL! Get a FREE Investing Guide and more... http://www.fool.com/m.asp?i=397089 FOOL DIRECT E-MAIL SERVICES Need to change your address or unsubscribe? You can also temporarily suspend mail delivery. Click here: http://www.fool.com/community/freemail/freemaillogin.asp?email=benjamin.rogers@enron.com Have ideas about how we can improve the Fool Direct or new e-mail products you'd like to see? Try our discussion board: http://www.fool.com/m.asp?i=397090 ____________________________________________________ © Copyright 2001, The Motley Fool. All rights reserved. This material is for personal use only. Republication and redissemination, including posting to news groups, is expressly prohibited without the prior written consent of The Motley Fool. MsgId: msg-8460-2001-04-24_11-43-53-4223399_5_Plain_MessageAddress.msg-11:53:08(4-24-2001) X-Version: mailer-sender-master,v 1.84 X-Version: mailer-sender-daemon,v 1.84 Message-Recipient: benjamin.rogers@enron.com
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