Day5 Education: 2 fundamental investing strategies
Hey, tigers:
Congratulations! You have studied for 5 days.
I think you may make great progress. And, I am especially grateful to these friends for your support.
@AliceSam 、@MHh 、@Khikho 、@Fenger1188 、@muiee 、@爱上投资学 、@koolgal 、@surfer guy 、@Kingcat ,@RDPD富爸穷爸
Let's review the content of the previous days.
DAY1：5 practical knowledge of US stocks
DAY 2 Education：two directions of US stocks
Day3 Education：5 types of orders for US stock trading
DAY4 Education：Finish your order by useful functions
In this article, I mainly introduce the classic strategies of US stock investment.
This strategy is simple and is divided into 3 steps:
① Judging the macro environment;
②Choose an industry and find a high-quality company;
③Using technical indicators to obtain the best buying and selling price.
Today, let's talk about the first step, judging the macro environment.
The macro environment looks at two aspects:
Firstly, the policy aspect;
Second, the financial aspect.
Policy Aspect
Q: Why should you pay attention to the policy side?
A: Regarding the policy aspect, it can help you target the areas where high-quality stocks are most likely to appear, which can increase the probability of your investment success.
Q: What is the policy aspect?
A: The policy aspect refers to the volatility of the stock market due to changes in national policies. There are generally three types of such policies, namely industrial policy, fiscal policy and monetary policy.
Industry Policy
An industry policy is a policy that the state supports or reduces a certain industry for a certain purpose. After the general policy is announced, it will boost or suppress the stocks of related industries.
For example, in October 2021, White House press secretary Kevin Munoz issued a statement on Twitter that the United States will lift entry restrictions on foreign travelers from 33 countries and territories, reopen borders on November 8, and resume U.S. tourism Industry.
As soon as the news was released, the international aviation and international travel-related industries, which had been hit hard by the epidemic, reacted violently, with a surge in air ticket bookings from Europe to the United States, and stocks in the aviation, hotel and cruise industries in the United States rose, including $American Airlines(AAL)$ Inc. Straight up 2.8%.
Fiscal policy
The main initiator of fiscal policy is the government. When the economy is not good, it will vigorously develop infrastructure, increase the government deficit, and stimulate economic development.
When the business is difficult, it can help the company to tide over the difficulties through actions such as precise tax reduction and exemption. For example, under the influence of the new crown epidemic in 2021, in order to better recover the US economy, the Biden administration has successively launched trillion-dollar infrastructure plans, focusing on electric vehicles, bridges and roads, and affordable housing.
As soon as the policy was released, the stock market responded enthusiastically, and the S&P 500 index directly hit a record high.
Monetary Policy
Fed rate hikes and rate cuts are one of the most important ways in which monetary policy is implemented. To put it simply, if the Federal Reserve wants to increase market funds and reduce the interest rate level in the market, it will purchase US dollar treasury bonds through primary dealers and put US dollars into the market. The more dollars there are in the market, the lower the interest rate level.
From a monetary point of view, the Fed raising interest rates is to recover the liquidity of the US dollar, making the US dollar scarce and valuable, the US dollar has become more valuable, and its purchasing power has also increased. At the same time, the US dollar index will also begin to strengthen and rise.
Financial Aspect
Q: What is the funding side?
A: The capital side refers to the money circulating in the market. Generally speaking, the looser the monetary policy in the stock market, the more abundant the funds, the better the stock market; the tighter the monetary policy, the tighter the funds, the more negative the stock market.
Q: Is more money in the market the better?
A: Let me talk about the conclusion first, no. This is because an overly loose monetary policy has many side effects, such as overheating the economy and causing inflation.
Let me give you an example: if the monetary policy is too loose, the factory will have more funds, which will lead to business expansion, and the commodities in the market will increase. If the supply of goods in the market exceeds the demand, it will cause inflation, that is, money is worthless.
The impact of the current loose monetary environment is gradually changing your life and mine. For example, in order to cope with the economic downturn brought about by the epidemic, the United States has used a large number of monetary easing policies in recent years, superimposing the impact of the Ukraine-Russia conflict on energy supply, which directly led to the bursting of inflation data in the United States.
As of April 12, 2022, the U.S. Department of Labor's March inflation report was released; the consumer price index (CPI) rose 8.5% year-on-year in March, the largest year-on-year increase since December 1981.
Among them, food prices rose by 1% month-on-month, housing costs rose by 0.5% month-on-month and 5% year-on-year, and energy prices rose by 11% month-on-month.
Excessive monetary easing will lead to serious inflation. It not only makes your cost of food, clothing, housing and transportation go up in an all-round way and depreciates the currency in your hands, it also requires you to take greater investment risks in exchange for more returns. to cover these rising costs.
Well, congratulations that you have mastered the first step of the strategy .Tomorrow we will talk about the second step.
See you next~
Interaction today:
What is your first step in investing?
Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.
① Judging the macro environment;
②Choose an industry and find a high-quality company;
③Using technical indicators to obtain the best buying and selling price.
[开心]
Yar, it's boring 😴 to read 📚 reports... but it's the closes way to get to know the company financial health [Sly].
Thanks for a great lesson in Day 5 of learning to invest in the US markets. My first step in investing is understand the macro environment of the US markets under Policy and Financials. The current macro headwinds are Quantitative Tightening to curb high inflation and Rising interest rates.
In this backdrop, I will look for industries that will benefit from this macro environment. Example would be the banking industry which would benefit from rising interest rates. Then I would target quality companies in thisector like Bank of America.
I like the systematic approach to learning and look forward to your next lesson.
The first step in investing is to understanding and develop the following important and classic strategies before deciding to invest a company:
① Judging the macro environment;
②Choose an industry and find a high-quality company;
③Using technical indicators to obtain the best buying and selling price
Beside using the above strategies to invest, the most important thing is to use only spare money to invest, stay claim in times of horrendous, volatile & wild stock market and be very very patience.