Are These the 20 Best Companies?

In a recent post I suggested you check out MotleyFool.com to learn something about investing. In that light by the way there are two kinds of investing that I think have merit for most of us ordinary investors. Neither of them involves “day trading” or efforts to beat the market by trading frequently. I do not suggest it because it does not work.

Two methods can work. One is dollar cost averaging where you invest in a relatively conservative index fund, such as the Vanguard Index Fund, continually add to that investment each month and invest for the long haul. You are not going to touch that money until you are retired. There are no guarantees in the stock market but these index funds have done better than many funds and are not as expensive or risky as many. The beauty of this system is that you just invest your money and you need do little more. Time is your ally.

The other method is value investing such as the approach made famous by Warren Buffett. That involves doing serious research into companies to determine how well they are managed and their true value. Look for those that are undervalued in the market and invest. Then hold as long as their value increases. Done right this can pay off. Buffett has proven that. There is risk. There is more risk with this than there is with the conservative index fund investment held for the long term but there is also more potential return. 

These methods are governed by two undeniable principles in market investing – all such investing involves risk and generally the higher the potential pay off the greater the risk.

If you are not a sophisticated investor it is better to place the largest portion of your long term investments in the safer choices and the long term index fund is a good option. Less return over time and less risk. But, and this is an important but, there is always risk. No one knows what the market will do over time for sure and no one can know for sure how any one stock will do.

Here is an idea that can help you to understand this. Put most of your money in something safe. But follow some recommended stocks for awhile on paper – don’t invest a cent. See how they do. Then if you want to try it out with real money just invest a little at first and see how it goes. Little ventured, little lost. This can be a good education.

So if you want to start learning read the article below and follow some recommended stocks for awhile and see for yourself how good these recommendations may be.

Amand Chokkavelu, CFA has written an article for the Motley Fool website about what he considers the 20 best companies:

http://www.fool.com/investing/general/2011/03/01/the-20-greatest-companies-i-know.aspx

I am not a professional financial planner and I am not recommending any stock. I am recommending that you learn. Remember that any stock investment has risk and invest accordingly. If you need professional advice see a qualified investment professional.

Are these the 20 best companies? Follow them for awhile and see for yourself.

Wishing you success and prosperity,

Daniel R. Murphy
Helping People Learn to Build Wealth
http://www.books2wealth.com

Wishing you Success and Prosperity,

Daniel R. Murphy

Wishing you well,

Daniel R. Murphy
Educating people for building wealth, adapting to a changing future and personal development.
www.danielrmurphy.com
www.books2wealth.com