Markets
Step 2: Get a Sense of History
By Katy Marquardt, Staff Writer
From Kiplinger's Personal Finance magazine, January 2008
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In the short term, stocks tend to behave like pinballs, bouncing erratically every time significant—or even not-so-significant—news hits. If you're investing with a long time horizon, you don't need to monitor stock prices daily (although many of us do). "Just realize that any one day won't tell you much," says Craig Hodges, co-manager of the Hodges fund. "But a stock's price action over time is going to tell you the story better than anything out there."
It's worthwhile to study your stock's price movements over different time frames, including bull and bear markets. You should also compare its performance with the overall market, using a benchmark, such as Standard & Poor's 500-stock index, and any other relevant barometers (for example, the Russell 2000 index for shares of small companies). Says Hodges: "Watch where your stock's price moves relative to the benchmark over time. On up days, is your company up more than the market—or vice versa? On down days, is it actually up?"
At Bigcharts.com, run by MarketWatch, you can customize large, easy-to-read charts (a zoom feature ensures that you won't have to squint to find data points). A drop-down menu allows you to compare stocks with indexes or other stocks. You can choose among set time frames or create your own. You can even set up e-mail delivery of charts daily or weekly.
Simplified charts may be found at MSN MoneyCentral, under the "Stocks" tab in the "Investing" section. In addition to viewing your stock's daily closing price over time, you can chart its return in percentage terms and by how much an initial investment would have grown, in dollar amounts, over a given period.
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