The Motley Fool: Every Sunday, useful tips on investing
Protecting principal; knowing your holdings; crane-maker comeback
Ask The Fool
Playing it safer
Q: I want to buy my first home in a few years. How should I invest the money I've saved for that?
A: Unfortunately, you should consider the place that's usually best for long-term appreciation, the stock market, to be off-limits. In the short run, the market can go up — or down — sharply. In the long run, it has averaged roughly 10 percent per year, but even that is an average, not a guarantee.
Don't risk money you'll need within three years (or even five or more years, to be more conservative) in stocks, or you may end up able to afford only a corrugated aluminum shack. Keep short-term moola in a safer place, such as CDs or money-market funds, to protect your principal.
Learn more about short-term savings at bankrate.com.
My dumbest investment
Sold too soon
Dear Fool: I have so many dumb investments to choose from! For example, I owned 5,000 shares of IMAX and sold all but 500 at $5 per share. They traded above $20 recently. I owned so much that I got scared out of the position. My lesson there was to know what you own and why you own it, so you can hang tough when the market tests you.
I also sold Ford stock around $2 per share when I saw General Motors and Chrysler slump, locking in a loss from my purchase price at $20. Again, panicking is bad — so aim to really know what you own, so when the idiots say sell, you hang on.
The Fool responds: That's a good lesson. Too many people lose money in the market because they get impatient or scared.
The more you understand your holdings, the better you'll be able to distinguish between temporary challenges and long-term problems. If you're rather confident that a company will be worth much more in the future, hang on. Ford has recently been trading around $10 per share.
The Motley Fool take
An appealing equipment maker
Crane-maker Manitowoc (NYSE: MTW) has been performing pretty well, but its shares have taken a beating. That presents an opportunity for long-term investors.
The crane business has bounced back strongly after the financial crisis. In Manitowoc's fourth quarter, sales growth hit the highest year-over-year rate since 2007, and new orders climbed to levels last seen in 2008.
The company kicked off 2012 on a solid note, too, with the division's first-quarter backlog value reaching its highest level since the recession.
A recovery seems to be under way, with data from the U.S. Census Bureau finding the dollar value of total "construction put in place" in March and February 6 percent and 5.8 percent higher, respectively, than last year.
Manitowoc's other business, food-service equipment, seems poised for a good year, too, thanks in part to new products.
The company does carry a lot of debt, but it has initiatives in place to reduce that. Its growth plans are robust as it expands in emerging markets; the proportion of revenue Manitowoc is generating from Asian markets has doubled over the last five years.
It recently became the first company to make rough-terrain cranes in Brazil. The time is ripe, as the nation gears up for the 2014 World Cup and 2016 Summer Olympics.