Investment Guide

The buzz word at this time is that inflation needs to be constrained which is currently running at 7%. This will require multiple increases in interest rates along with the constraint on easy money supply that had been needed to keep the economy afloat during corona virus disruption. In other words, the easy money supply is out. This is expected to hurt technology companies which were capable of generating high profits from this money. This could also hurt housing industry and other industries supporting the housing industry because the mortgage rates will go up thereby decreasing the affordability of homes. On the other hand, this will be good for banks because they will be able to earn more in terms of the interest money. The general idea laid down here should be your guiding factor in selecting the stocks for investment.

Stock market has to do with money and so is affected by the monetary policy (see section 14.8 of the book). When the unemployment is low and the money supply is abundant, the economy heats up resulting in higher inflation as is the case now. The corrective action by the Fed is to reduce the supply of money by increasing the reserve requirement for banks and/or increasing the discount rate. This results in increased interest rates for appliances, cars, houses etc. The stock market perceives these changes and responds well in advance of the changes being declared officially. In tight money policy as being perceived now to reduce inflation, high priced technology and growth stocks do not fare well. This has been going on in the market currently. The stocks expected to do well in the present tightening atmosphere are consumer goods, pharmaceuticals, utilities, etc. and those related to the green energy such as copper, lithium etc.

The book covers the topics related to investments which you need to build wealth, such as the following;:
Concept of stocks and stock market, financial reports, stock selection and analysis using the relevant data available on brokerage websites, practical examples
Concept of mutual funds, selection and analysis
Exchange traded funds (ETFS), selection and analysis
Asset allocation in the portfolio