Archive for the ‘Stock Market Investing’ Category

Personal Investing Online

Monday, August 18th, 2008

Personal Investing Online

Online access is probably the greatest development in the last century for personal investors. All levels of investing have benefited from this explosion of information and communication, but the personal investor has probably reaped the greater portion of the pie. Information and access to other investors, and investor groups have given the home researcher tools that use to take brokers and advisors decades to create and groom. This isn’t to say that all of the information out there on the internet is “real” or “correct”, but a good portion of it is, and there are more than enough resources to place you in decision making positions. To be accurate, it really isn’t the Information age, but rather the Communication age. The computer started out as a source of information storage and access. Spread Sheets were quite nice to crunch some numbers and databases for notes were good tools. When the computer was connected to the internet and given access to other investors however, it became a tool of communication. Email, news groups, news websites, personal and company blogs, as well as investor forums sprang up give the personal investor access to a huge community of people looking for real information.

Being able to make our own trades online was probably the greatest boon for us as home investors. Thanks to Charles Schwab and many others since, we can sign on to our own discount broker accounts, make a trade, or sell our shares and not have it cost us a bundle in the process. Company press releases hit our inboxes moments after release. Add that to real time investment information; with stock quotes and company news on other websites and we had ourselves a set of genuine investment tools that were far beyond our capabilities only a few short years ago.

Subscription news is a great tool. Websites such as Google News and Investors Business Daily (http://investors.com/), offer the ability to have delivered to our email inboxes the results from particular searches on a daily, weekly or “as it happens” time frame. This gives us the news we need, as it happens. There are many website sources which offer this same service, but I find it so useful I’ll give the details of how to do it on Google for you here.

The website is http://news.google.com. Google’s news area searches through news releases and news services around the world, indexing them using the Google relevance engine. The main page is like most other news pages, a summary of today’s news. Using the search field, search for any topic you are interested. For example, today I’m interested in Google itself, so I just type in “Google” and hit the Search button. In this area, we are only searching “news” sites, not the whole Web. Google’s New search defaults to showing us recent news per Relevance to our search, but allows us to search by “most recent” as well.

Now that I have my search I can scroll to the bottom of the search results page, where it offers to track new stories and send an email alert. Clicking on that link brings you to a simple page where you can choose to have email alerts sent to your address. This is very handy for the serious investor to keep track of what is happening with the companies we have investments in, or are simply keeping track of. Another great tool Google now offers is Google Finance (http://finance.google.com).

Tapping into the news for a company is a great service, but the online experience offers much more than simple timely news bulletins. By making use of the online community you can get in touch with other investors who are interested in the same stocks or companies.

A great example of this is the Motley Fool Online community. Going to the Motley Fool website (http://www.fool.com/), you reach a place full of information for the personal investor. Honestly, you’ve hit the jackpot here. Not only do you find a resource for professional opinions, but a wealth of information from various other investors just like yourself, who are asking questions, and giving opinions. Some of them are amazingly savvy, while others you can do without. It doesn’t take long to filter the wheat from the chaff however. The discussion boards are set up on Motley to be subject by company. So again, if we are interested in Google as a company, we simply search the message board for GOOG, and we are in touch with several hundred other investors all over the world who are interested in the same investment. While the news gives us a great deal of information, these other investors come across tid-bits and factoids we probably would not ferret out any other way. Some of these comments are from people who work at Google, some are from professional fund managers and industry insiders. Others are from the guy down the street who happens to be a really great investor himself. The free flow of data, news, ideas and opinions (even rumors some times) help to make the vital decisions surrounding the personal investor. Honestly, once you go online, you never go back.

Online Brokers

Just because you can do a thing, doesn’t mean you should do a thing. This is one of those philosophical thoughts designed to give us pause for a moment before we do something we really believe we want to do. I’m a firm believer in the online investing experience. Not just in the communities and information websites available but also with the actual trading.

There are some questions you should ask yourself before you get started however. They are basic questions, but never the less, you should pause and really consider them before moving your investment holdings to an online broker.

First, do you feel comfortable conducting business online? Many people don’t, and it will add to the ‘fear factor’ of investing if you do. Have you purchased other items, such as books or movies online?

There is no doubt that online trading will save you money in the trades. Some online brokers are down to $12 to $14 dollars a trade, which is fantastic. Most of these discount brokers however don’t offer any other service besides the trade though. There’s no one to ask advice from, or give you market researcher. You will need to have the time and resources to do your own background research for your trades. Can you do that? Do you have those resources? I’ve introduced already several resources for that information and more are coming on line every day. So, the answer is probably yes, but really ask yourself if you have the time to perform those tasks.

There are also several features from online traders you might want to consider before choosing one. They all have great advertising and are all #1 on some list or other, or give something away “free” when you join. We aren’t talking about a cell phone carrier, however; we are talking about a firm that is going to be holding your future in their care.

Do they allow check writing? How will you get your cash back when you want to spend some of those dollars? What is the hassle factor of doing so? Many discount brokers only send checks through the mail on request. Make sure you know exactly what your options are before signing up. If it takes a phone call then make the call. Might be a good thing to do anyway so you know how difficult it is to get someone on the phone if you need to in the future.

When working with an online broker, not all of your money in your account is going to be invested all of the time. Make sure that your core account is an interest bearing one, and that you money isn’t just sitting there. Find out if there is a minimum balance before interest is paid. Small balances earn less interest than larger balances normally, so make sure you understand the scale and rates. Also check to see if core account balances can be swept into a money marker mutual fund. Find out what your options are for your core balance account.

Most online brokers (at least every one I’ve ever seen) are not insured by FDIC (Federal Deposit Insurance Corporation), but they are typically (should be) insured by the SIPC. The SIPC is a private fund supported by member broker-dealers, which insure cash and securities in accounts up to a total of $500,000 ($100,000 cash). We aren’t talking about being insured for money lost because of market risk here, we are talking about being insured against your online broker going insolvent. If you are planning on investing more that $500k, then check to see that your broker has the insurance to cover you.

There are a number of normal services offered by the online brokers. Check them over and make sure that they have the tools you feel you need. Some of them have different tools, and sometimes they won’t offer something that you have available from another source.

Streaming Quotes. Many of the online brokers offer a little tool that you can install on your computer which gives you a running ticker across the bottom of your screen. These are fairly nice. Not everyone uses them.

Real Time Quotes. This should be a given. I don’t know of any online broker who doesn’t give you free online real time quotes. Yahoo and Google both do it as well, so you don’t really need them from your broker, but if they didn’t offer them, I would certainly want to know why.

Level II Quotes. Unless you are trading in and out of the NASDAQ daily, you probably don’t even know what these are, but they are a common service offered by online brokers. Level II quotes show the amount of shares being offered for purchase and for sale. They show the bid and the ask price. If you know what they are, then you need them, if you don’t, you might need them in the future. It is nice to have them available. Some traders swear by Level II screens, claiming that they give the most complete picture for predicting stock price movements. I’m not aware of any free real-time Level II quote systems, but ActiveTrader.net offers a free delayed Level II display–which won’t help you at all if you are a day trader, but it might be fun to experiment with.

Market News and Research. I’ve already introduced several ways of getting this information, but your broker should not be charging for market news, and you shouldn’t be paying for it either. Having it handing on your broker’s website however can be a convenience you will want. Some that I haven’t brought up yet are Silicon Investor (http://www.siliconinvestor.com/), Raging Bull (http://www.ragingbull.lycos.com/), and Datek (http://www.datek.com/). I personally like the Silicon investor and Motley Fool, those two with the new Google Investor website covers more than I need for my personal research.

Multiple Investment Products. Can you purchase mutual funds, corporate bonds, and Treasuries? Some online brokers don’t, do don’t take it for granted that they do. I don’t know why they don’t, never got a real answer for that, but make sure yours does if you feel that you are, or might be interested in these. Having two or three online brokers doesn’t make any sense. Make sure that is going to cover your needs. Only you know what those needs are, so it may not bother you at all that your broker doesn’t offer a service, such as…

International Trading. Do you do this? Does the broker you are interested in offer this? Again, several don’t. Even if you aren’t currently looking at international trading however, you might want to keep this in mind for your decision making. The world markets are changing. Whether that is good or not is up to you to decide for yourself, but why be in a position of having to have two services in the future?

24/7 Toll Free Customer Service/Trading Telephone Center. That’s a mouth full, but one you want to have around. Eventually, you are going to want to talk to some one. Money brings that out in people. Something is going to happen, something is going to seem odd to you, or you are going to want an answer about something, and email, IM and forum boards are not going to cut it; you will want an accountable human voice on the other end of the phone to answer your question. Some online brokers charge for this service. Some charge by the minute. Make sure what this is going to cost you. The call may be free, but is the talking?

Wireless/Anywhere Technology. Ah, this is my personal favorite service, because sometimes, I just want to know what is going on, and all I have is my cell phone. Some firms offer services for Palm Pilots, cell phones and other ‘connected’ devices, though they are rarely free services. You can get text messages if a stock reaches a certain level, goes down a certain amount. Some send stock news, or notification of trade reports. Some even let you trade with your phone, which is nice. If you are on the road most of the time, or have places in the day that are ‘dead air’ times, it is nice to get something done, and it might even be worth the cost.

Direct Download for Accounting Software. Do you use Quicken? How about Microsoft Money? Most of the online brokers I have seen offer this service, allowing you to download your account information in Quicken or Microsoft Money format. It is a very handy service, and something you will want to have. You might be shaking your head right now but trust me, you will want it eventually. If nothing else, you might want to switch brokers, and you will want all of your records. And don’t forget about tax time. Make sure they offer this.

Local Branch Presence. This is difficult to find, but it might be a decision maker. Knowing that you can jump in the car and go down to a real office and talk to a real person is very nice. The whole idea behind online discount trading is that you don’t have this service, which is why those trades are only $5.00, but I have to suggest that perhaps $20, and a local office might be worth it, again, up to you to decide.

Now let’s talk about some trading features that are normally offered in the online world, and go through some of the trading rates that are available.

Absolute Discount (trades for $0 – $10). Sounds great, you think, as you read the ad. So what’s the catch? The catch is that probably most of the services we just talked about aren’t available. These tend to be bare-bones operations. That is not to say this is not a good thing. As we have discovered there are many services offered out there on the web which may make up for a bare-bones operation’s deficiency. Best thing to do, is to use some of those services such as the forums over at Motley Fool, to find out more about the broker, the website, and any experiences people might have had with them.

Low Commission ($10 – $30). The average commission out there at the time of this writing is about $14. If you had a choice between $14 for commission and $30 for commission but you could talk to customer service for free and have a local office you could visit, what would you take? Commission prices are a major consideration. $15 is … well… $15.00! If you make several trades a week, that commission rate adds up fast. What might change your mind is …

Multiple Trading Channels. This is a must, and well worth a few bucks on a trade commission. You have to have more than one way (website only) to make a trade if you need too. Make sure your broker offers alternatives such as phone-in or Touch Tone trading; something that allows you a connection to your trading service beyond the website. Many offer this service, but find out how much it costs. You will probably never need it, right? (was that a ticking sound I heard on your hard drive?).

Online Option Trading and Short Selling. Do you do these? Check to see that the broker does as well. The service should be through the website, but some online brokers only offer them though a representative (with the added rep-assisted commission attached of course).

Extended Trading Hours. This is a big one. Normal trading hours are from 9:30 to 4:00 PM EST. Some online brokers offer 8 am to 8 pm EST extended trading times. Pre-opening and extended-hour trading is mostly seen on the NASDAQ. After hours trading is not for everyone, but it could be a nice option to have available. The last item to look at is probably obvious, but becomes a major item as time goes on, and that is the website itself. Can you read it? Can you understand the layout, and options? Is the information readily available, or do you find your self hunting for information you feel you should have at your fingertips. Read some of the help files, do they help? Are they well written? Can you understand what they are explaining?

There are currently over 150 online brokers on the Internet today. You won’t be lacking in available alternatives. Not all are created equal, but then neither are all furniture stores, just make sure it’s a place that provides you with the tools you need and the price you are looking for.

Basic Concepts of Investing

Monday, August 18th, 2008

Basic Concepts of Investing

You have done your research and due diligence, you like the company, the products and you really feel after all you have learned that the set of stocks before you is where you want to stick your investment money. By all means, at this point, invest the money. After all you have learned, it isn’t going to get any better than this for the buy in. Now let’s go over some of the basics of investing in the stock market. While this may seem a bit odd to talk about after you have already pressed the buy button, in all honesty, this is when investing starts, not where it ends.

Our main objective is to make money. That is our guideline and our goal. The first principle to making money with stocks is to sell the losers and let the winner’s ride. It is fairly common to hear strategies of selling once the investment has doubled or tripled, and many people have a problem with letting go of a declining stock.

The principle is easy to agree with, but the reality is that we tend to get sucked in to an investment hoping it will rebound. If you are hoping, you shouldn’t be investing. There needs to be solid reasons for our play, not just a feeling. Again, this sounds like fairly plain and simple advice, but more often than not I hear “I should have…” from intelligent, well researched investors riding a hope to the bottom.

Riding out the winner can be just as difficult to do at times. The stock doubles and we start thinking “sell”. After all, we have doubled our money, we didn’t get burned. We’ll get the money out, and start the research again.

Peter Lynch often talked about his “ten-baggers” which were a small set of stocks which had increased in value by 10 fold. It is said that most of his overall success was due to keeping well informed regarding a small number of stocks, which returned big. The truth is that doubling on small buy-in stocks isn’t that hard to accomplish; however, the time and effort involved in picking good stocks is a huge investment. If you have a personal policy to sell after a stock has increased by a certain multiple – say three, for instance – you may never fully ride out a winner. Don’t underestimate a stock that is performing well by sticking to rigid personal rules – if you don’t have a good understanding of the potential of your investments, your personal rules may end up being arbitrary and limiting.

Selling the loser after all of that research and time, can be very difficult, but like it or not, there is no guarantee that a stock will come back up after a protracted decline. Somewhere along the line we forget that we can do all the right moves and still not make the right choice. If a stock is in a protracted decline then cut it loose.

Never be ego-ed into keeping a stock you know is a looser, just because you like the company.

In both cases, the point is to judge companies on their merits according to your research. In each situation, you still have to decide whether a price justifies future potential. Just remember not to let your fears limit your returns or inflate your losses.

Hot Tips are just as devastating. You can consider this the hottest tip you are ever going to get, “don’t buy into hot tips”. Whether the tip comes from your brother, cousin, neighbor, or even your broker, no one can guarantee what a stock will do. When you make an investment, it’s important you know the reasons for doing so: do your own research and analysis of any company before investing. Tidbits are for bedtime snacks and toppings on frozen yogurt, not for information. We really want the full meal for information we are going to place our money on.

Just about anyone can get a feeling or hear something the right way. Some people believe that it is better to be lucky than good. Statistics and my personal adventures down both paths tell me otherwise. Be informed in your investments, not just vested. My personal rule is, if my broker has to have an answer today, then the answer is no. Absolutely no investment is worth my money if it is not a long term investment. I’m not against doubling my money in a week, that’s why I play poker, but I don’t take that mindset into my investments.

Rule 62, don’t sweat the small stuff. There are several great guides out there with formulas and trend advice. They are great reads and good guides, but when you get to the end of the day, add one more rule to the list ‘don’t sweat the small stuff’. The market reacts like, well, like millions of investors all over the world are trying to figure out what is going to happen next. Rumor mills grind, and special news reports investigate and political bodies rub against other political bodies. As a long term investor learn to watch short term movements with a casual eye. When tracking the activities of your investments, you should look at the big picture. Remember to be confident in the quality of your investments rather than nervous about the inevitable volatility of the short term.

Granted, active traders will use these day-to-day and even minute-to-minute fluctuations as a way to make gains. But the gains of a long-term investor come from a completely different market movement – the one that occurs over many years – so keep your focus on developing your overall investment philosophy by educating yourself.

Investors often place too much importance on the P/E ratio. Because it is one key tool among many, using only this ratio to make buy or sell decisions is dangerous and ill-advised.

The P/E ratio (for those that don’t know) is one of the tools often used by investors to asses the value of a potential stock investment. The P/E shows the relationship between a stock price and its company’s earnings (or profits) per share of stock. Let’s say that the XYZ Company has a stock trading value today of $20 per share. Last year the XYZ Company earned $1 per share. So the P/E is 20 / 1 or 20.

“Great!” you say, “and what does that mean?” For starters, notice that the ratio expresses stock prices in terms of the earnings per share (EPS). The P/E ratio uses the earnings of a company to value that company’s stock. Earnings are indeed the inside track to valuing a company’s stock, and the P/E is a nice simple tool that quickly values a company off of earnings. Unfortunately, like any useful tool, such as the flat head screw driver or hammer, people have a tendency to grab it for use even for jobs where another tool would give better performance. The P/E formula most folks know from the financial sections of news papers and some Internet web services is actually a simplified version of the dividend discount model, which matters only in that the P/E ratio is a shortcut valuation technique that omits more than it includes. Specifically the P/E ignores risk and the time value of money. It also wrongly assumes a one-year snapshot of earnings is representative of the company’s sustainable earnings power. As a result, eyeballing a company’s P/E ratio to determine its value is a little like trying to figure out how much a car is worth by sampling the exhaust.

The P/E ratio must be interpreted within a context, and it should be used in conjunction with other analytical processes. So, a low P/E ratio doesn’t necessarily mean a security is undervalued, nor does a high P/E ratio necessarily mean a company is overvalued. We will discuss P/E and EPS more in-depth later, let us continue on with the basic concepts of investing first.

Another misconception is Penny-stocks. Some believe it is better to stick with lower priced stocks, rather than go for the higher priced stocks. Basically however the starting of this logic is wrong. Whether you purchase 100 $5 shares or 100 $75 shares, if you lose all of your money on them, then you still have a 100% loss ratio. A bad stock is a bad stock. Don’t let the price of a stock throw you, start with the question, “Is it a good stock?”

You are going to learn new tools and strategies all the time. I don’t believe I have seen a year go by that there was not some new book on stock picking strategies on the shelves. We just talked a little about P/E and EPS, but there are other common strategies. For example you could value a real-estate company’s stock not off its earnings but by using the value of its land. Dividends could be used to value a company that pays a large dividend more off of the value of its dividend than its earnings. Every year someone comes up with something new and there are volumes out there already full of strategies.

After reviewing enough of them to get an idea of the basics, find a strategy which works for you and stick with it. There are many ways to the top of the mountain, but all of the paths end in the same place. An investor who jumps from path to path often only reaps the worst parts of the strategies he jumps between.

I’m not saying that you should stop learning new strategies, or not to adapt your current strategy to a new technique if it makes sense to do so. What I’m suggesting here is to develop your strategy with care and then hone the technique over time. Second guessing yourself is the killer of portfolios.

The real tough part is that we are trying to make informed investment decisions on events and facts that have not happened yet. No matter what, at our best position we are still faced with glaring black holes in our information base. Yes, we have historical data and current data, but what really matters is the future, isn’t it?

A quote from Peter Lynch’s book “One Up on Wall Street” about his experience with Subaru demonstrates this: “If I’d bothered to ask myself, ‘How can this stock go any higher?’ I would have never bought Subaru after it already went up twenty-fold. But I checked the fundamentals, realized that Subaru was still cheap, bought the stock, and made sevenfold after that.” Keep the idea fresh in your mind that the future, really doesn’t depend on the past for its shape. Use your strategies by focusing on the future potential.

We just talked about Penny stocks, but I do want to point out that small-caps are not bad investments. Many great companies are household names, but there are several non-profitable investments floating around the household as well. From 1926-2001, small-cap stocks in the U.S. returned an average of 12.27% while the S&P 500 returned 10.53%. Many investors were thrown off the startup and small company investment during the Dot.Com era, but really what happened then was not that we were investing in small start ups, but that we forgot the basics of investing. A great many of the Dot.Com businesses had no earnings, and yet they were invested into anyway.

I guess what I’m reiterating here is that finding good stocks is not based on the size of the company, small cap or blue chip. General Motors is a great example, a blue chip stock currently going south in a big way.

It all ends with taxes, but that is not where it begins. Placing taxes or tax concerns into your investment strategies, is not a very good idea. Such a tactic can cause some very poor, misguided decisions. Tax implications are important, but that is not our goal, “to pay taxes”, our goal is to “make money”. Definitely find the ways to pay fewer taxes, less often. You should always attempt to minimize the amount of tax you pay and maximize your after-tax return, but the situations are rare where you’ll want to put tax considerations above all else when making an investment decision. Make the money first, and then worry about the tax man.

Glossary of Indexes

Monday, August 18th, 2008

The Market

People talk about the “Market” like it was a single investment area, but you have probably already worked out that this is not the case. So let’s go through the “Market” and see some of the different indexes that are out there.

 Market Index

First off let’s begin with what a stock market index is before we get into the separate indexes themselves. A stock market index is a listing

of stocks, chosen to represent a portion of the market, so it is also a statistically created number reflecting the composite value of the stocks.

For weights to create these composite numbers, some indexes use Price, and some use Market Value. The index itself is a tool to gain an

overview of how sections, industries or portfolios (such as mutual funds), are doing at any given time. The most regularly quoted market

indices are broad-base indices, such as the American Dow Jones Industrial Average and S&P 500 Index, the British FTSE 100, the French CAC 40

and the Japanese Nikkei 225. More specialized indices exist, tracking the performance of specific sectors of the market.

The Morgan Stanley Biotech Index, for example, consists of 36 American firms in the biotechnology industry. Other indices may track companies

of a certain size, a certain type of management, or even more specialized criteria- one index published by Linux Weekly News tracks stocks of

companies that sell products and services based on the Linux operating environment. A notable specialized index type is those for ethical investing

that include only those companies satisfying ecological or social criteria, e.g. those of The Calvert Group, Domini, Dow Jones Sustainability Index

and Wilderhill Clean Energy Index.

 The Dow

The Dow is one of several stock market indices created by Wall Street Journal editor and Dow Jones & Company founder Charles Dow.

Dow compiled the index as a way to gauge the performance of the industrial component of America’s stock markets. It is the oldest continuing U.S. market index.

Today, the average consists of 30 of the largest and most widely held public companies in the United States.

To compensate for the effects of stock splits and other adjustments, it is currently a weighted average, not the actual average of the prices of its component stocks.

 NASDQ

NASDAQ (originally an acronym for National Association of Securities Dealers Automated Quotations) is a U.S. electronic stock market.

It was founded by the National Association of Securities Dealers (NASD) who divested it in a series of sales in 2000 and 2001.

It is owned and operated by The Nasdaq Stock Market, Inc. NASDAQ: NDAQ which was listed on its own stock exchange in 2002.

When it began trading on February 8, 1971, it was the world’s first electronic stock market. On July 17, 1995 the NASDAQ stock index closed

above the 1,000 mark for the first time. The index peaked at 5132.52 on March 10, 2000, which signaled the beginning of the end of the dot-com boom stock bubble.

The index declined to half its value within a year and is still valued at less than half its peak. However, NASDAQ is now the largest U.S. electronic stock market.

 S&P 500

The S&P 500 is a list of 500 US corporations, ordered by market capitalization. The list is owned and maintained by Standard & Poor’s.

The market-value weighted performance of the stocks of these companies is known as the S&P 500 index.

After the Dow Jones Industrial Average, the S&P 500 is the most widely-watched index of large-cap US stocks.

Many index funds and exchange-traded funds track the performance of the S&P 500 by holding the same stocks as the S&P 500 index, attempting to match its performance.

Partly because of this, a company which has its stock added to the list may see a boost in its stock price as mutual fund managers are forced to purchase that company’s

stock in order to match their index funds’ composition to that of the S&P 500 index.

 Russell Index

The Russell Indexes (yes, Russell uses “Indexes” rather than “Indices”) are a set of stock market indices of listed US companies. The main index is the Russell 3000 Index,

which is divided into several sub-indexes. The list of stocks in the Russell 3000 is managed by the Russell Investment Group. Russell forms its indexes by listing all US companies

in descending order by market capitalization. The top 3,000 stocks (those of the 3,000 largest companies) make up the broad Russell 3000 Index. The top 1,000 of those

companies make up the large-cap Russell 1000 Index, and the bottom 2,000 (the smallest companies) make up the small-cap Russell 2000 Index.

The indexes are rebalanced, or “reconstituted”, once each year, on the last Friday in June. The reconstitution consists of updating the list of the largest 3,000 companies

and assigning them to the appropriate indexes. Unlike the S&P 500 Index, the Russell indexes do not immediately replace a company that merges with another firm or has

its stock unlisted. This means that, for most of the year, the Russell 3000 Index has fewer than 3,000 companies in it. For instance, if a company from the index is unlisted in July,

that will be an empty spot in the index until the following June. The annual June rebalancing brings the total back up to 3,000. Many investors use mutual funds or exchange-traded funds based on the Russell Indexes as a way of gaining exposure to certain portions of the US stock market. Additionally, many investment managers use the Russell Indexes as performance benchmarks to measure against.

Indexes are useful tools for tracking trends, and getting quick views of what is going on with separate segments. Most agree that it is the S&P 500 which gives the most accurate At-A-Glance overview of the U.S. Market trends and movements. What is best for you depends on the type of investing you wish to do.

Do you see Doom and Gloom or Doom and Boom?????

Wednesday, August 6th, 2008

Before you go ahead and read this blog post, please go and read
the About section as well as the Disclaimer. The link is located in
the top right hand column.

If most of your money is in the US Market, you’re missing out
on the greatest profit bonanza that our generation has ever
seen…

…and leaving up to 80% of your profit potential on the table!

You’ll soon see that crazy zealots will tell you that the
U.S. stock market is the best place to be invested right now…

Others will tell you that the property is the best…

And others will say that managed funds are better…

But what FACTUAL evidence do any of these individuals
or companies provide as the basis for their point of view?

Unfortunately in most cases it’s nothing more than a hunch.
So let me contrast the difference when you approach this
exercise with in-depth research…

Take last year, for example:

The S&P 500 rose a measly 5.5%.

That alone should give you some clues about where not
to be invested right now…

And, consider this

  • If you had invested in Malaysia’s KLSE Composite Index
    instead, you would have done more than five and a half times
    better – with a 31.8% gain …

  • Brazil’s Bovespa IBRX Index could have made you more
    than eight times more money – with a 47.8% gain …

  • Nigeria’s NSE All Share Index would have made you nearly
    thirteen times richer than the S&P 500- with a 74.4% gain…

  • If you’d invested in Bangladesh’s DSE General Bengal
    Index
    instead of the S&P 500, you would have made fifteen
    times more money – with a 86.6% gain, and …

  • China’s Shanghai SE Composite Index could have made
    you more than seventeen times richer – with a mind-boggling
    96.6% gain!

My question to you now is…

When you look at all the turmoil in the financial markets of late
and you see the soaring prices of commodities and oil, does it
make you see gloom and doom or do you see a once in a lifetime
opportunity to profit
when everyone else is running for cover?

The media is full of stories of turmoil, collapse of major banking
institutions etc. I will not be surprised if in 5 – 8 years time we will
all be looking back on the recent years of boom times as the
most prosperous time in modern day history.

In the years from 2000 – 2008 did you prosper?

If you did congratulations!

You obviously know and have learnt how to position yourself
correctly.
If you didn’t prosper do not despair, because in
this global world we live in there is always an opportunity to
prosper
if you know how.

Like Sir Richard Branson says: “Opportunities are like buses,
there’s always another one coming”.

My views are somewhat off beat from the mainstream media and
if you look at those who are producing extraordinary results
to the upside
, they do not dance to the tune of the mainstream
media
.

By the time “good investments” reach the mainstream media the
savvy investors have made their money and are either ready
to exit or ride the wave
further up because the fundamentals
are strong
.

If this type of perspective on investing takes your interest
stay tuned
, because in the next post I will talk about what sort
of results these savvy investors have achieved for the last ten
years.

And how you can do it do too by putting your investments on
autopilot
and at the same time be in full control of your investment
at all times, which is very important.

Until next time happy investing.