Successful investing involves doing two seemingly contradictory things at the same time. First, you should always be aware of what your fellow investors are doing. Second, you also need the courage to go against the grain, because that's often when you'll make the most money.
Over the past couple of weeks, the stock market has started shaking more wildly than a samba dancer. You've seen a big decline, followed by the obligatory bounce. But to figure out what's coming next, it's helpful to look at which favorite stocks mainstream investors are buying -- and which they're dumping like hot potatoes. And you don't even have to go out on the street to ask everybody as they're walking by.
The everyman indicator
Fidelity provides its brokerage customers an excellent way to measure investor sentiment. In its stock research center, the broker gives a list of top stocks that Fidelity customers have bought and sold in recent market sessions.
Obviously, what average investors are doing doesn't make these stocks automatic recommendations. It's entirely possible that mainstream investors are buying when they should be selling, or vice versa. But it's still useful to see the thinking behind the moves they're making. Here are some of the most important conclusions I drew from the list.
1. Technology reigns supreme.
Investors have long seen technology as a lucrative sector to invest. But recently, another strong yet completely unexpected reason to choose tech has emerged: value. Top pick Apple
That goes a long way toward explaining why more investors are jumping into tech. All three of these companies have far more buyers than sellers lately. Combined with the dividends that an increasing number of tech companies offer, tech stocks have something for everyone -- whether you like growth stocks or are a dividend-seeking income investor.
2. Speculation is at a crossroads.
Many of the vehicles traders use to make high-octane bets on market moves show roughly equal buying and selling interest. In a generally positive environment for financial stocks, for instance, the bearish leveraged Direxion Daily Financial Bear 3x
3. Taking gains while they're good.
One notable sell was Motorola Mobility, which saw a takeover bid from Google yesterday. Shareholders didn't hesitate to lock in their 55%+ gains by dumping shares. Yet at the same time, investors picked up shares of Google, which indicates that overall, people seem to like the deal.
4. The old economy is alive and well.
Even though tech has a lot of interest, you'll find plenty of regular stocks as well. Popular names including General Electric
It's easy to understand why. During times of trouble, nervous investors naturally retreat to what they're most familiar with. Whether it's an F-150 truck, a phone line, or a light bulb, investors find it easy to identify with what these stalwart companies do -- and that makes it easier to invest in them.
What you should do
So should you follow the course these investors have set or take your own path? It depends on how adventurous an investor you are. On a basic level, these moves make sense, and so mimicking them wouldn't get you into much trouble. But if you're an advanced investor, you'll probably do better to move beyond these top stocks and look for smaller, less-followed companies where you can build a true edge. That's most likely to get you the outperformance you crave.
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Fool contributor Dan Caplinger will have Bob Seger's "Main Street" stuck in his head all day now. You can follow him on Twitter here. He doesn't own shares of the companies mentioned in this article. The Motley Fool owns shares of Microsoft, Ford, Apple, Bank of America, Intel, and Google. Additionally, The Motley Fool has opened a short position on Bank of America and has bought calls on Intel. Motley Fool newsletter services have recommended buying shares of Ford, Apple, Microsoft, Intel, Google, and AT&T; creating bull call spread positions on Apple and Microsoft; and creating a diagonal call position on Intel. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool's disclosure policy is our favorite.