Sectors you may want to avoid

I have my reasons to eliminate the following sectors:

Loan companies/banks. The financial statements do not show the quality of the loans. Following this advice, you may be able to skip the bank meltdown in 2007.

Drug (generic is ok). You need to know the pipelines and its potential profits of new drugs and the expiration of its current drugs. A lawsuit could wipe out a good percentage of the stock price.

Miners. Hard to find how much ore(s) they have, and how easy to extract/transport them. When the cost costs more than its production price, the company will not be profitable for a while. You need to predict their future ore prices and the demand.

Insurance. You need to know the quality and the performance of the company's portfolio.

Emerging countries (not a sector).  Some of their financial statements cannot be trusted. Frauds and insider trading are common as most do not have similar regulations as the US. Larger companies are better.

If you want to buy companies in these sectors, you may want expert info. from specific newsletters and advisers. Alternatively, buy an ETF and/or mutual fund that concentrates on that specific sector if you think that sector is moving up.

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(c) TonyP4 2012. Written in 1/12/12. Last updated in 7/16/12.

Disclaimer:

Do not gamble your money you cannot afford to lose. Past performance is a guideline and does not guarantee future performance.

All my posts are for informational purposes only. I'm not a professional investment counselor. Seek one before you make any investment decision.