The Motley Fool: Average volume
Ask the Fool: Average volume
Q: What does it mean that McDonald’s “average volume” is 3.6 million? — C.O., Ballwin, Missouri
A: It means that over a certain period, such as the past 20 or 30 days, an average of 3.6 million shares of McDonald’s stock traded hands each day between buyers and sellers. A stock’s volume will vary from day to day, and it can be very different from the volume of its peer companies, because each company has a different number of shares.
For example, McDonald’s recently had 715 million shares outstanding, while Wendy’s had 192 million and an average volume of 5.1 million. So there’s more trading activity for Wendy’s and less for McDonald’s.
Online data sources such as Finance.Yahoo.com often list both recent volume and average volume. If a stock’s recent volume is much higher than its average, then something is likely drawing attention to the stock, such as good or bad news.
Q: What’s the best amount of personal liability insurance to carry? — B.P., South Burlington, Vermont
A: It depends on what you have to lose if you’re sued. To prevent a lawsuit from becoming a financial catastrophe, add up the value of your home, belongings and financial assets. Add more for legal costs (though insurers sometimes cover those). Then carry enough coverage on your home and auto policies to protect yourself.
If you have a lot of assets, you might want to buy an “umbrella” policy. Umbrella policies generally offer much more liability coverage (typically $1 million or more) and charge much lower premiums than homeowner and automobile insurance policies do.
Insurance may be boring, but it’s vital to protect yourself from potential financial losses.
Fool’s school: Homebuying tips
Part of the classic American dream is buying one’s own home. It’s a tricky thing to do, though, and is often one’s biggest purchase ever. So heed these tips.
- Check your credit score: The higher your credit score, the better interest rates you’ll be offered, so it’s worth taking some time to beef up your score if need be. Good ways to do so include paying down debts and paying bills on time.
- Shop around for the best mortgage: Don’t accept the first home loan you’re offered; check with multiple lenders. Read up on different kinds of home loans, too, to see which is best for you: fixed-rate or adjustable-rate, 30-year or 15-year, and so on.
- Get preapproved: Being prequalified (which means your lender thinks you can afford a given amount) isn’t enough if you want to be a competitive bidder as properties become available. Have your lender preapprove you — meaning it has vetted your finances and is ready to lend you up to a specified limit.
- Be sure to factor extra expenses into your decisions: For example, there will likely be closing costs on your home loan, and a home appraisal and inspection. You might also want to buy “points,” an up-front fee to shrink your interest rate. Once you own the home, you’ll need to factor in homeowners insurance, maintenance and repairs, and property taxes.
- Don’t buy more home than you can afford: Crunch some numbers to see what kind of dwelling you can realistically buy and maintain. You don’t want to spend so much that you’re financially pinched.
- Employ a professional: It’s smart to enlist the services of an experienced buyer’s agent. This real estate professional can offer valuable advice and guide you through the homebuying process.
Don’t view a home primarily as an investment: Real estate can fall in value, just as stocks can, and it typically doesn’t increase in value at a rapid clip. Instead, view your new home as a nice place to live.
My smartest investment: Glad I did nothing
My smartest investment move was a non-move: When my stocks tanked in value, I decided to do nothing. — Ivan, online
The Fool responds: That’s a smart move indeed! If you’re investing in stocks, you need to accept that the stock market is volatile. Pullbacks of 20% or more happen every few years, on average, and smaller drops happen even more frequently. Despite all that, the stock market has recovered from every pullback and has eventually gone on to hit new highs. Thus, it’s important to keep any money you expect to need within five (if not 10) years out of stocks, investing only long-term dollars in the stock market.
Superinvestor Warren Buffett has often stressed the value of not overengaging with stocks you own. He has said, for example: “The trick is, when there is nothing to do, do nothing.” He also advises buying into companies in which you have a lot of confidence: “Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.”
It’s also good to remember that if you’re spending years building a portfolio of stocks, each market downturn presents a great opportunity to grab shares of wonderful businesses at depressed prices.
(Do you have a smart or regrettable investment move to share with us? Email it to TMFShare@fool.com.)
Foolish trivia: Name that company
I trace my roots back to 1900 and 1901, when two brothers who had been in the tobacco business started separate textile companies; they merged in 1965. In 1969, I introduced the wildly successful “L’eggs” pantyhose. I ended up part of Sara Lee and then was spun off in 2006. Today, headquartered in Winston-Salem, North Carolina, I’m a top innerwear company, with a recent market value of $1.7 billion. Brands wholly or partially under my roof include Maidenform, Bali, Playtex, Just My Size and Wonderbra. I’ve won multiple environmental awards. I rake in nearly $3.5 billion annually. Who am I?
Last week’s trivia answer
I trace my roots back to San Diego in 1953, when three fellows founded the Rocket Chemical Company, aiming to create rust-preventing products for aerospace companies. After trying 40 different formulas, I had a winner, and my multiuse water-displacement product debuted in 1958. It was my only product for many years, and I was renamed for it. By 1993, it was found in 4 out of 5 American households. Today, with a recent market value of $3.3 billion, I offer lubricants, penetrants, greases, cleaners, degreasers and rust-management products. I rake in more than $600 million annually. Who am I? (Answer: WD-40)
The Motley Fool take: Built to grow
Amazon.com (Nasdaq: AMZN) is a leader in e-commerce and cloud computing, two areas that helped net sales climb to $638 billion in the latest full year. After e-commerce earnings dropped in 2022 due to inflation, Amazon boosted profits by shifting U.S. fulfillment from a national to a regional system, bringing items closer to customers. This saved on costs and improved its ability to deliver faster. Meanwhile, Amazon Web Services (AWS), the world’s leading cloud-computing platform, drives profits for the entire company.
Amazon has gone all in on the high-growth technology of artificial intelligence (AI). It has developed about 1,000 generative AI applications to improve productivity and efficiency across its retail business, from front-end tasks like customer service to back-end tasks like coding. The company now has major growth opportunities in e-commerce, cloud computing and digital advertising, and it’s using AI to boost revenue and improve profit margins.
Amazon’s shares recently traded at a forward-looking price-to-earnings (P/E) ratio of 33, well below their five-year average of around 48, offering an attractive entry point into one of the tech sector’s most diversified players. Long-term investors may want to consider shares of Amazon for their portfolios. (John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool owns shares of and recommends Amazon.com.)
— distributed by Andrews McMeel Syndication
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