My brother and I talked about investments the other day, because I was curious about where he was headed with his portfolio. This conversation may seem innocent on the surface, but I had two ulterior motives. First, I wanted my daughter, Cora, to realize that it's a good idea to talk to others about portfolio investments for ideas and for reassurance. Secondly, I wanted to pick my brother's brain, because his occupation is different than mine and he has a different outlook on specific industries.

The first motive, where I want to teach my daughter about investment techniques, is slippery. The person who originally stated "in one ear and out the other" was probably talking about a teen. So, when a conversation like the one that occurred this past week is finished, I always talk with her afterwards to help reinforce great ideas (and, of course, these great ideas are all mine).

The first lesson was centered on listening to the message, not just the words. If my brother invests in a certain company, does that mean we also need to invest in that same company? The answer is "no," especially if the company's equities are overpriced and the volume is rising. What does this mean? Let's look at how Cora and I hashed out this conversation:

1. If the person we talk with touts a specific stock, we try to discover more from this person's perspective. The company that makes this product (or supplies a service) may also produce other products (or services). What are they? Are they related products, or are they diverse industries under one roof? How much does this person know, and why is this information important to them?

2. What sector does this company fall under? If there are diverse products or services, this information may mean that this company is a conglomerate, and investments in this specific company are similar to investments in a diverse portfolio. However, this seeming diversity could also be a weakness, especially if more than one product or service is represented by low quality or low performance. Also, it isn't wise to invest in just one company, even if it is a conglomerate, because one bad apple could spoil the whole bunch (I'm just full of clich?s today?). If the company only makes one product or renders only one service, then it's easier to place them in a sector. For instance, bottled water is under the food and beverage sector.

3. When did the person buy their stock in this company, and - if this individual is forthcoming - we might learn the initial stock price. If the person is investment-savvy, they may even tell you about their investment's competitors. This information is important, because competitors always try harder. Competitors may be just as valuable and yet offer a lower stock price per share.

4. Where is this person headed with this particular investment and why? If the price is high and the volume is rising in a specific equity, then this means that the volume is composed of both buyers AND sellers, and the demand for the stock is pushing the price up (high volume and falling prices means that most of the volume consists of sellers). If the board of directors does not plan to split the stock anytime soon, the price may begin to fall because buyers may view the equities as overvalued. A stock split does not lower the value of the stock, but the lower share price per share often appears more attractive to buyers and just as often encourages sellers to hold on to their shares.

What does all this information mean to us? If we are unfamiliar with a sector, this opens a door for further investigation. On the other hand, if we understand this sector, this grants us an opportunity to look at another category within that sector. After Cora and I finished our conversation with my brother, we went to a search engine and typed in "bottled water." If you use Google, under the shaded blue division on the search results page you'll find a link entitled, "News results for bottled water - View all the latest headlines." If you click on the first link specifically for bottled water, you'll come to a page filled with headlines devoted to this industry.

Most of the news stories carry company names for bottled water products. As we went through the stories, we kept a list of the companies and the main points from each story. Then, we went back to the search engine and typed in each company name to see if we could learn more about the companies. After we marked a few interesting companies that were on the market, we went to BUYandHOLD to learn more about these investment prospects. Our research gave us three companies to investigate further, and we put these companies in our stock tracker to watch their progress. This move also buys us time to learn more about this particular industry, so we can decide whether we really want to invest in this branch of the food and beverage sector.

If you don't have any investment-savvy relatives, try an investment club. Nancy Dunnan wrote an interesting answer to a person who inquired about setting up such a club as a lesson for a school class. BUYandHOLD also offers a way for adult investors to share information through their View-Only Access. These are just suggestions to open channels of communication with others so we can learn more about investment opportunities.

Of course, I gave my brother a few leads, too. It's always nice to give as well as receive. Next week we'll delve deeper into investment-savvy relationships to see what else we can learn?

Until Next Week,
Linda Goin