The writing of this post coincides with a visit yesterday to my bank, in order to make a deposit I received. My bank's tellers (very nice people) have been attempting to convince me to open a savings account from the day I opened my checking account 6 months ago. I haven't opened a savings account for three reasons: (1) pitiful interest rates, (2) possibility of buying a house, and (3) possibility of investing more into stocks. Now, the first reason remains and I do not think I will be taking up reason two unless something really good comes up. I have been muting on the third reason due to the inactivity of the financial market. Yet I realized moments ago that right now may be a good time to jump in.
The stock market (Dow Jones, Nastaq alike) have been acting crazy for most of the summer. And I do not mean "crazy" in a good way at all -- nor am I glad that a former prediction turned out to be correct. Reasons for its melancholic activity can be attributed first to the slow disintegration of the EU's monetary stability, and now because of the possibility the U.S. will default on its debt. Both are worrying developments with a very real probability of the worst becoming realized. The EU and its single currency system, in spite of looking good on paper, has resulted in all member states tying economic stability to one another. This means that a domino effect -- the economic downfall of one country, say, Italy-- can drag the entire EU bloc into economic hardship. For the U.S.'s debt default problem, the fear is that the current political standoff between Republicans and Democrats will not be resolved in time. Neither party is willing to suck it up for the good of the country.
So where does that put me? Well, I am unsure about how to invest the savings I've been accumulating for the past many months. The only certainty I have it that I need to find elsewhere to park it than my checking account -- which pays an even more pitiful interest rate than the savings one. Problem is, the highest interest rate I can get for a savings account is 2% -- which is at least 3% less than real inflation. This leaves the other viable alternative as jumping back into the stock market. Yet this triggers another question: where or who to invest in?
There are a few options:
- An obvious course of action is to bolster my current positions, namely in AMD and in Ford (GE grows too slow). AMD is the more attractive option at the moment: not only did its stock price jump up almost 6% today, but the fortunes of its main rival, NVIDIA, has been faltering. (Ford Motor has actually been slowly sinking lately.) But I hesitate to strengthen my hand in AMD further due to a number of concerns. The first is that the microprocessor market may be moving away from x86 architecture in the future and into ARM architecture. I would use Microsoft's demonstration of its Windows 8 OS running on ARM as the evidence to support this; furthermore, the current disparity between processing power is not an unbridgeable gap. Another is the persistent debt-to-asset ratio of AMD -- it's still too high a number.
- Buy Pepco Holdings. I've been eyeing this stock for almost a year now, namely because of the high dividends the company likes to pay out. It seems stable, with a steadily cashflow, and even possibility of being acquired by a bigger rival (lots of consolidation in this industry). BUT, its stock price has been holding steady, which makes it a GE-clone.
- Buy Nokia. If you've been reading my posts on "tech news", you'd realize that I am a big fan of Nokia. I have not been thinking of owning its plummeting stock...until I read this article today. The author sounds overly optimistic, but I understand the stated optimism. The CEO sounds like a complete idiot when making statements like this though. More research is needed but, for now, it looks promising.
- Buy Towers Watson. A very close friend of mine works for this consulting company, which was formed last year out of a merger between two competitors. It appears to be a solid company based on my friend's anecdotes and, if synergy means anything to you, I anticipate an upward movement of its stock price.
There you have it, the options have been documented. Hard part is to decide which one to take -- as I do not have the capital/audacity to try more than one. I am going to think about this for the next couple of days...