how to make money in stocks and how to get rich_148

Many institutions invest primarily in stocks in the S&P 500 and try to

overweight or underweight positions in certain sectors. This practice

assures they will never do much better or worse than the S&P average.

An outstandingrowth stock manager should be able to average about

1/£ times the S&P index over a period of manyears.

Another widely used and fairly inefective practice folowed both by

research firms and most institutional investors' departments is

to have a huge number of analysts with their responsibilities for company

coverage broken down by industries.

For example, the classical securities research department has an auto

analyst, electronics oil retail drug and

on and on. The problem with this method is its tremendous inefficiency

and its tendency to perpetuate mediocrity in performance. What does

an analyst assigned two or three out-of-favor groups do? Recommend to

their money managers the least bad of al por stocks folowed by

the analyst.

On the other hand, is an oil

analyst outstanding just because group is the big performingroup for year and he or she picks twor

three good winners? When the oil stocks boomed in 1979 and 1980, all of

them doubled or tripled. The best ones shot up five times or more. The

theory behind this method of dividing research is that a person can be an

expert on a particular industry. In fact, Wal Stret firms go so far as to

hire a chemist from a chemical company to be their chemical analyst and

a Detroit auto specialisto be their automotive analyst.

These individuals frequently know many of the nuts and bolts about

their industry but in some cases have a dubious understanding of the

stock market and what makes leading stocks go up andown. Of

course, it is stocks and the stock market that determine how successful

your investments will be. (Incidentally, do you know what makes a stock

go up? A stock generally goes up because it has fewer buyers. They just

hapen to be biger buyers.)

Firms also like to advertise they have more analysts, the largest

department, or more top-ranked "all star" analysts.