The Secrets Stock Trading Reports Reveal
Filed under: Finance
Annual and quarterly financial statements are like report cards. Avoid the glossy charts and the pretty pictures, and you’ll be able to tease out trends. The 10K is the annual report equivalent filed with the SEC. It’s sometimes more revealing than the corporate reports to shareholders and comes without the rosy verbiage.
You’ll also want to get your hands on a copy of the most recent proxy statement. This document details the proposals put before shareholders at the annual meeting, such as executive compensation programs and the election of directors.
Finally, the 8K form is a report that a corporation’s managers must file with the SEC within 30 days of any event that might affect the financial status or share price of the company.
Many investors are naive enough to think that they can consistently beat the market by timing their entry into and out of stocks. In their excellent publication 10 Ways to Beat an Index, Tweedy Browne managing directors Christopher Browne, William Browne, and John Spears tell us that, “empirical research has shown that 80%-90% of investment returns have occurred in spurts that amount to 2%-7% of the total length of time of the holding period. The rest of the time, stocks’ returns have been small.” In other words, had you been out of the market on just a handful of the best performing days, your returns would significantly below average.
There’s also another very powerful reason to avoid short-term plays: taxes. Whenever you sell an investment you’ve owned for less than one year, the profit is going to be taxed at your personal gains rate, which can be as high as 35 percent (2005). Long-term capital gains, on the other hand, are not taxed at a rate higher than 20 percent. The longer you defer your tax bill to Uncle Sam, the more capital you have working to compound your net worth. Over an investing lifetime, the difference can be millions of dollars.
TIP: Obviously, there are good reasons sometimes to sell a stock. Maybe you made a mistake in the first place, or the company has fallen apart. But your best bet is to buy the stocks of stable, high-quality companies that you’ll feel comfortable owning for a long time. If they pay a growing cash dividend, so much the better.
Mark Crisp is the Author of “How I Made $6 Million in the Stock Market”
Want to know how some traders make a killnig in stocks?
Prepare to be shocked:
http://www.sixmillionstocks.com
Tags: fiannce, investing, stocks
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