so I finally finished that book on retirement. but now what? I still need to make the choice and dive into the stock market. and I still can't predict it. so from all the information I've gathered I think I will allocate a big chunk to bonds, some ETFs, some cash and then of course some stocks. After all the crazy economic unrest in the past years and the fact that I don't need my retirement money RIGHT NOW I don't think I want to put that much in the stock market, whether it's through mutual funds, options, or stocks. I know bonds are safe and low in return, but it's still money! and it's what I feel comfortable doing right now.
I am however, more interested in learning about trading on the stock market. So we'll see where that takes me! I learned all about gap trading, the january effect, and window dressing, which I am eager to try out.
According to Rule your Freakin Retirement, gap trading is when you analyze the how a stock changes over night (or when the stock market is closed). Since you can still buy stocks when the market is closed, when the market opens the next day the stock price is usually at a different point than when it closed the day before. However, the volume of trades affects the price and at night fewer people buy and sell stocks, thus the price can change dramatically, while during the day the sheer volume of stocks bought and sold will stabilize the stock price. What does all this mean? Well from what I learned it means that most likely sometime in the morning the stock will jump back to close to its price the day before, and that's where you can make money. I'm not 100% sure I have completely understood it, but it helps trying to explain it to someone else!
Window dressing, according to my memory, has to do with how fund managers try to make their funds look more appealing, even when they have been doing badly. Before each quarter these managers will sell off stocks that haven't been doing well and buy stocks that have. This will make it look like the fund has 100% winning stocks. This will make the price of those stocks that were sold off go down somewhat dramatically. After the quarter, most of the time fund managers will buy those stocks again, realizing that it's a good stock and that it's really cheap (now). So what you can do, is look out for stocks that randomly decrease in value a week or two before the end of the quarter, buy it, and then sell it a couple days after the quarter's end. I feel like I'm missing something here, but I can't remember what and I had to return the book to the library. =( I'll have to do some more research.
Well anyways, the January effect is similar, because it has to do with fund managers buying cheap stocks driving up the price dramatically.
That's that for now...I'm excited to start trying these techniques...and the whole retirement saving! are you?
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