A Prudent Q3 Investment Strategy
I have devoted my last few columns to QE3, that is, the recent decision by Fed Chairman Ben Bernanke to stimulate the economy via purchases of mortgage securities and other bond buying activities. Followers of my column may be thinking that I am harboring conflicting views: In one breath, I suggest that U.S. equities will finish off nicely in 2012, while in another breath I'm advocating that investors consider putting on the breaks as this market becomes more and more dangerous. The views don't conflict; rather, they are two sides of the same coin.
Those two sides are investment vs. speculation. Investment involves rigorous analysis in which only those securities that promise an adequate return and safety of principle qualify. Anything else is speculative. That certainly doesn't mean there is anything wrong with speculation, but by nature a speculative bet is not relying on analysis or a margin of safety but instead on beliefs and predictions. The notion that QE3 will continue to boost stock prices is a belief and prediction. And to purchase stock based on those assumptions is to speculate, not invest....463 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.
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