So which stocks give the highest reward? The least risky stocks. Found this article with the research debunking the myth that taking on “higher risk can get you higher reward”. Now that’s welcome support to my most cherished belief that low-risk ideas actually gives you high returns. “What the researchers found is surprising: The riskiest 25 percent of stocks—those most vulnerable to swings of the broad market—logged an average annual return of just over 7 percent per year. The least-risky 25 percent of stocks returned 10.6 percent per year. On a $10,000 investment over those four decades, the lower-risk stocks would have yielded more than $450,000.” That’s a whole lot of difference. My book “High Heeled Traders” gives the reader a fun and easy way to understand how to do low-risk high-reward investing. Get it with discount in Amazon.com here. Perfect gift for the ladies out there!
Meanwhile, oil prices, what a ride! I still have an oil stock and that is definitely giving me a challenge. I haven’t gotten out of it because it is just part of my overall portfolio, and I’ve been amiss in getting out early. Nevertheless, is it time to look for “bargains” and is the worst over?
Let’s look at some signs.
1. Stimulus – this is an iffy and disappointing one with the European Union, there is a standing one for corporate bonds most people want more, BUT Japan and China the 2nd and 3rd biggest economies have adopted stimulus measures like QE and rate cuts and may continue to do so to prop up their weakening economies. When it comes to political will, China has lots of it and they have proven wise to use it. Not to mention having a fair interest in the commodity market (Chinese investors were buying up mines and oil remember?).
2. Economic Growth – the US is certainly on strongest footing in this regard coming off their years of recession. Only this week,
>> the Oil inventories report showed an increased demand, with the price of oil at this level it has been reported people are driving more
>> Employment is steadily growing and most importantly, wages are increasing, from .01 at the previous report to .04. ( Wow!)
“a jump in wages as well as the biggest hiring surge in almost three years suggests the world’s largest economy is putting aside doubts about the strength of the expansion”. In the last 12 months, wage growth was 2.1 percent, and that’s very encouraging. Article here.
>> Motor vehicle sales rose to a 17.1 million annualized rate in November. And guess what these run around with… certainly not water! Oil is certainly cheap right now, but I doubt it’s going to go down much more with this kind of demand.
That said, I know now where the wise men of OPEC is coming from!
3. Geopolitics, Weather and What not — I mean what else! Russia is still out in the cold with the rest of the world, ISIS fighting, Syria and those mean weather cycles and oil prices is going to be in an interesting tango. IF oil prices continue to fall, trust that there will be feeding frenzy by the big players for the smaller players (who still have their productive mines/oil wells as assets), and that “M & A” or mergers and acquisitions activity will boost up sentiment on the companies. Survival of the fittest is still the name of the game.
So in the wise words of Warren Buffett, “be greedy when the others are fearful”… yes he said that. We all just need to be patient just like him.