Stock is one of the favorite investments that investors hold. Though it is the favorite investment of many investors, there is no guarantee for a profit from the stock market. In fact, quite a lot of them have lost money, especially in year 2000 to 2002. The biggest difference between investment and gambling can be the existence of a strategy. Unluckily, the most popular strategy in 2000 to 2002 named as “buy and hold” did not work for such market.

This “buy and hold” strategy failed because it is really not a good strategy. Actually, it seems that there is no strategy at all. There are both safe and dangerous times in the stock market history. Unfortunately, we are in the dangerous time nowadays. Therefore, a simple “buy and hold” strategy is not going to work.

In order to make a profit in an unstable and unfavorable financial market, we need to know the purpose and target of our investment. We do not aim at anticipating the market trend, but give a frame to ourselves. With this frame, we will not buy and hold stocks thoughtlessly. Instead, we follow a model in discipline when determining the buying and holding of stocks.

In this model, there are three factors that determine your decisions including market price, Federal Reserve Bank and market trend. When all the factors are favorable to you (around 26% of time from 1927), it is a good time to purchase. If two of the factors are favorable to your (around 50% of time), you are likely to have an annual return of 10.7%. If all the factors are unfavorable to you, you are likely to have an annual loss of 9.7%.

Whether the price is high or low is determined by PE ratio. With reference to the past 75 years, when average PE ratio is above 17, the market price is considered as high. Federal Reserve Bank plays an important role in interest rate. The financial market is less favorable when federal fund rate increases.

The three combinations of the three factors give you good signals on whether you should buy, hold and sell your stocks. Stocks should be sold when the average PE ratio is higher than 17, interest rate is high or increasing and the market is going upward. Stocks should be bought when the average PE ratio is lower than 17, interest rate is low or decreasing and the market is going downward.

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In the recent 6 to 12 months, it has been a great controversy on the appreciation of the Chinese RMB. Though many countries are still in the recovery of the financial tsunami, China has experienced economical growth which is much higher than the market expected. In 2010, in view of the overheating economy of China, many people expect an appreciation of the Chinese currency RMB.

How well was China doing in 2009? By taking a look at China’s GDP in 2009, you will know that it out-performed many other leading countries in the world. It maintained 8.7 percent GDP in 2009 which was exceptionally high compared to many countries because quite a lot of them are under the recovery of the financial tsunami in 2008. The high GDP was resulted because China was not much affected by the financial tsunami (sub-prime loan) in 2008 and the high internal demand and investments.

In 2010, many analysts or economists expect China’s GDP to reach a higher point because of the significant growth rate in export. It is well known that China has a significant export for years, but actually, the export did not impose any positive impact on the GDP. But in 2010, the further increase (25 percent) in export may impose a positive impact on GDP. This will be an additional impact to its high internal demand and investments and results in a higher GDP in the year 2010.

In the view of international financial market, the pressure for appreciation of RMB is also high. Owing to the high unemployment rate and slow economic recovery in the United States and other European countries, the request of appreciation of RMB is increasing in recent 6 months.

China is emerging among all the international countries and is playing a more important role compared to 5 years ago. But, to be further recognized by the world’s giants, the Chinese Government has to seriously treat the currency issue. Actually, other than the pressures from the world’s giants, there is another reason for the appreciation of RMB, which is the flow of hot money. As many investors are in the view that RMB is going to appreciate, hot money flows to China preparing to reap a sum over the appreciation.

Though RMB is likely to appreciate in a short period of time, the rate of appreciation is unpredictable. The most aggressive opinions on appreciation of RMB were discussed in the World Economic Forum. On the whole, most financial experts estimate the appreciation will be around 5%.

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