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Archive for category mutual fund

Race Horses and Mutual Funds

May 19

Posted by Al Thomas in business, mutual fund | No Comments

For years investors have been taught to look
into the composition of a mutual funds. In other
words the “experts” want you to take the time to
analyze the stocks within the mutual fund
portfolio, categorize them by industry group and
try to understand the objective of the fund
manager. This is nonsense.

When I go the track I look to see what the horse
has been doing for the last several races. I
don’t give a hoot what he had for breakfast. All
I want to know is has he been fast? Is there a
good chance he will finish in the money in the
next race? I only want to know how he has been
performing.

Most mutual fund managers, except those who
follow index funds, are always trading. You have
no idea that what is in the portfolio today was
there yesterday or will be tomorrow. Some fund
managers trade more than others, but you can
prove this to yourself by looking at the fund
prospectus at the beginning of the year and one
of the updates that funds publish quarterly.
Many of the stocks will still be there, however,
you don’t know if the percentage holdings are
the same.

By the way, don’t bother reading a mutual fund
prospectus. They are worthless when it comes to
making money. Consider that most of the
information in it is about a year old by the
time you read it. Think about this seriously for
a minute. Is there anything you can find out in
the document that will show up in your bottom
line? I’ll wait while you think. OK? There
really wasn’t anything was there? All
prospectuses are basically worthless.

But you say the SEC (Securities and Exchange
Commission) in Washington approved this. No,
they did NOT. They don’t approve of anything;
they just read it to be sure it meets the
regulatory requirements for disclosure. There is
almost no difference between the prospectus for
the worst mutual fund and the best mutual fund
and both of them may have been read by the same
Dilbert in his cubicle at the SEC.

There is one excellent way to find out which
fund to buy. It is based on performance. How
much has the fund increased in price during the
past 12 months? Just 12 months. Many financial
analysts want you to look at 3-year, 5-year and
10-year performance. Remember that horse? I
don’t care how many races he won 3 or 5 years
ago. Can he run NOW? There are many publications
and web sites that tell you the best performers.
Investor’s Business Daily prints a list of best
performing funds each day. You might have to see
the paper every day as they sometimes just tell
about the long-term performance. You want the
last 12 months and the last 3 months.

Three years ago you could have bought the best
performing fund on the street and today have a
dog. I call a dog any mutual fund that is not
outperforming the S&P500 index.

If you were a jockey you would want to ride the
fastest horses because in many races you get a
percentage of the purse. The same applies to
mutual funds. You must own only the best
performing funds at all times. Like the jockey
you must pick the fastest horse if you want to
be a winner.

You should review your fund holdings monthly to
see that you are only in the best funds. It
might take you an hour, but you will find that
you will double the current return on your
mutual fund investments. Do it!

Author: Al Thomas
Article Source: EzineArticles.com
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No Load Mutual Funds: Investment Hype vs. Investment Help

May 29

Posted by Ulli G. Niemann in mutual fund, stocks, strategies | No Comments

With the internet such a huge part of our daily lives, many investors have access to a wide range of instant investment information.

Whether youre into stocks, bonds, mutual funds, futures or options, there are tons of electronic investment newsletters offering to turn your small stake into a giant fortune. All you need to do is subscribe and watch your portfolio soar.

Yeah, right!

As a practicing investment advisor specializing in no load mutual funds, I have received my share of e-mails from disillusioned subscribers wanting to know how to better evaluate newsletter services.

While there are no absolutes, I can give you a few pointers that might help you make a better decision:

1. Stay away from the most obvious hype. Ads promising to turn your $10,000 into $1 million in 2 years by buying this incredible stock or hot commodity are not promoting investing they are selling gambling. Follow the “If it sounds too good to be true, it usually is” rule.

2. Most mutual fund newsletters wont make those outlandish claims, but some of them are still pushing the truth as far as they can. So try to get a free issue or two to examine. If you can’t get a sample, check if they have a trial period? How about a money back guarantee? If not, pay with your credit card. These days youre pretty well protected by this payment method even if the newsletter doesn’t offer a satisfaction guarantee.

3. Consider the editor as well as the disclaimer notes. Is he or she only publishing a newsletter? Or is he also an investment advisor with a practice?

Why would that last point matter? I may be biased, but I believe that you get far better advice from a writer who also is in the trenches every day investing their own as well as their clients portfolios. They would have far better insights as to what works and what doesnt than someone who has the theory down but no practical experience.

4. Look at the investment recommendations. Are they suggesting you buy into a certain orientation such as mid cap, small cap or large value? Or are they picking specific investments based on a variety of technical indicators?

In my no-load mutual fund practice I use specific recommendations, even for my free newsletter subscribers. They are first based on my trend tracking indicator giving us the green light and secondarily on the selection of mutual funds based on momentum analysis.

The more specific the recommendations, the better, because that allows you to follow along either just on paper (which you should do at first) or with your actual portfolio.

5. Are they recommending when to sell a mutual fund either because of gains or to limit your losses? This to me is the most important issue. If there is no plan in place for getting out, how will you ever know when to sell? This has been the greatest downfall of most publishers (and investors!) since the bear market of 2000 not selling even if market conditions dictate it would be in your best interest to do so.

The advice of most newsletter services can make you money in bull markets. However, with the continuation of the bear market still a distinct possibility; be sure to look at any newsletter’s investment advice record since 2000.

For many people investing is an emotional issue. The pendulum swings between fear of loss and greed for greater returns. If a complete methodology for buying and selling is offered in a newsletter, such as one I advocate, be sure that it fits your emotional make up.

There is no sense in following an investment approach, which may have merits, if it means sleepless nights for you. You wont stick with it for the long term and long-term investing is essential for making your portfolio grow and prosper.

So, the bottom line is to look for a newsletter that:

  • does not promise the moon,
  • has a track record through up and down markets, and
  • recommends an approach that not only is compatible for your investment style but also has an exit strategy so you can capitalize on your gains — in the bank, not only on paper.

Following these guidelines may not make you rich, but it will help you avoid some bad advice.

Author: Ulli G. Niemann
Article Source: EzineArticles.com
Provided by: Excise Tax

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Using Sector Funds to Construct Diversified Mutual Fund Portfolios

Apr 21

Posted by Sam Subramanian in investing, mutual fund, stocks, strategies | No Comments

Sector funds are too risky. I doubled my money with Fidelity Select Technology in 12 months! Avoid sector funds. If all of this sounds confusing, you are not alone. Sector funds are among the more misused and misunderstood investments. So, how should you use sector funds?

Before looking at one of the uses of sector funds in detail, lets review what sector funds really are: Sector funds confine their investments to a particular sector of the economy. Fidelity Select Healthcare (NDQ: FSPHX) is an example of a sector fund. By focusing on stocks of companies in the healthcare sector, the price moves of this fund are more dependent on factors that impact the healthcare sector rather than the economy as a whole. Demographic change, such as increasing age of the population, is an example of a factor that particularly drives investments in healthcare. By diversifying its assets across over 60 companies within the healthcare sector, Fidelity Select Healthcare provides investors with the opportunity to benefit from secular trends driving the demand for healthcare while mitigating company-specific risks such as failure of clinical trials conducted by a particular company.

Lets now look at a high-potential approach of using sector funds.

Using sector funds to create a diversified mutual fund portfolio By allocating assets across a group of sector funds, investors can effectively create a diversified mutual fund portfolio using sector funds. This approach gives the investor flexibility to over-weight or under-weight certain sectors versus broadly diversified indexes such as the S&P 500.

To implement this active approach to money management, it helps to have a diverse group of sector funds to choose from. Fidelity Investments manages 41 sector funds under the Fidelity Select Portfolios umbrella which makes this family of sector funds well-suited for this purpose. By dividing assets across, say, 8 sector funds in the Fidelity Select Portfolios, e.g., Fidelity Select Biotechnology (NDQ: FBIOX), Fidelity Select Computers (NDQ: FDCPX), Fidelity Select Energy Service (NDQ: FSESX), Fidelity Select Home Finance (NDQ: FSVLX), Fidelity Select Medical Delivery (NDQ: FSHCX), Fidelity Select Multimedia (NDQ: FBMPX), Fidelity Select Retailing (NDQ: FSRPX), and Fidelity Select Wireless (NDQ: FWRLX), one can build a customized diversified portfolio. With each of the sector fund managers actively scouting for the best investment ideas within their sectors, this cluster of Fidelity Select Portfolios packs a lot of power into your diversified portfolio.

Other mutual fund families that provide a relatively wide choice of sector funds include ProFunds and Rydex Funds. Exchange traded sector funds such as Select Sector SPDRs, iShares, and Sector HOLDRS, that trade on the American Stock Exchange, can also be used to construct diversified sector fund portfolios.

The wide selection of sector funds available provides you with the ability to take advantage of changing market conditions and continually optimize the risk-reward characteristics of your diversified portfolio. To employ this approach effectively, you need to understand and follow the dynamics of the individual sectors. You must also be able to make informed decisions on sectors to select and sectors to avoid. At the end of the day, you should be right more often than wrong with the sectors you select.

AlphaProfit.coms research suggests that by constructing diversified mutual fund portfolios using sector funds, investors have the potential to outperform the market averages on the basis of relative returns as well as risk-adjusted returns. The track-record of AlphaProfits model portfolios indicates the potential of this approach.

A Caveat

Diversification is one of the cornerstone principles of mutual fund investing. Sector funds that focus on high-growth sectors or narrow niches of the economy tend to be volatile. It is generally not advisable to commit a substantial portion of your total assets to a single sector fund. Maintaining adequate diversification across sectors in your overall mutual fund portfolio is good investing practice.

Key Points to Remember

1. Sector funds are investment vehicles that focus their investments on a particular sector or industry group. Sector funds provide investors with an opportunity to profit from trends impacting a particular sector or industry while reducing company-specific risks.

2. High-potential diversified portfolios can be constructed by dividing assets among a group of sector funds. This active investment approach requires investors to make informed decisions on sector selection. The power-packed cluster of sector funds may offer investors the potential to outperform the market averages.

3. Diversifying mutual fund portfolios across sectors is good investing practice.

Notes: This report is for information purposes only. Nothing herein should be construed as an offer to buy or sell securities or to give individual investment advice. This report does not have regard to the specific investment objectives, financial situation, and particular needs of any specific person who may receive this report. The information contained in this report is obtained from various sources believed to be accurate and is provided without warranties of any kind. AlphaProfit Investments, LLC does not represent that this information, including any third party information, is accurate or complete and it should not be relied upon as such. AlphaProfit Investments, LLC is not responsible for any errors or omissions herein. AlphaProfit Investments, LLC disclaims any liability for any direct or incidental loss incurred by applying any of the information in this report.

The third-party trademarks or service marks appearing within this report are the property of their respective owners. All other trademarks appearing herein are the property of AlphaProfit Investments, LLC. Past performance is neither an indication of nor a guarantee for future results. No part of this document may be reproduced in any manner without written permission of AlphaProfit Investments, LLC. Copyright 2004 AlphaProfit Investments, LLC. All rights reserved.

Author: Sam Subramanian
Article Source: EzineArticles.com
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How to benefit from rising interest rates.

Mar 26

Posted by admin in commodities, investing, mitigating risk, mutual fund, real estate, stocks | No Comments

If interest rates start to rise, there are ways you can benefit!


While interest rates have been at a record low, it has been hinted that those days are soon over. Typically, higher interests rates are dreaded, as they lead to lower stock prices and higher home costs. However, there are some investments that do actually benefit from rising rates. In these confusing and dire economic times, it is important to learn how to fluctuate in time with the economy.

If interest rates do actually increase, as had been hinted by Federal Reserve Chairman Ben Bernanke, one of the ways you can benefit is by boosting your short-term savings. When interest rates increase, there are better returns from your cash and other short-term investments. Putting funds in money market mutual funds invests in a mix of stable, short-term instruments and you can access your funds quickly. It can also benefit you to put funds in certificates of deposit (CDs) to ensure that your money is easily accessible to you.

If interest rates are going to rise, it is very important to try and pay as much of your debt off as possible. Because credit card debt is already at a high rate, it is probably best to start by paying that off. Next, work to pay adjustable rate loans off. If you have an adjustable rate mortgage, consider refinancing into a fixed rate loan because mortgage rates are very low currently and will most likely increase regardless.

In short, if interest rates increase, benefit from the rise by boosting your short-term savings and building up your emergency funds with money market funds and CDs. While reaping the benefits, make sure you lower your debts to avoid a rise in your monthly payments.

About the Author

*This article was contributed by consumer protection/bankruptcy Attorney Jonathan Ginsberg, our expert bankruptcy contributor whose website can be found at: http://www.thebklawyer.com/thebkblog/


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Market Conditions

Mar 16

Posted by admin in commodities, investing, mitigating risk, mutual fund, real estate, stocks | No Comments

Money Market Recap and Forecast

Treasury prices took a tumble on the heels of the February employment report two Fridays ago.  Yields, which move in the opposite direction of prices, rose and remained high all of last week.

There were no reports to encourage buying in Treasuries.  And Wall Street was pretty quiet.  Bond traders were concerned about the $84 billion in government debt going on the auction block, but demand was very strong.  Nevertheless, worry persists that huge supply will water down demand.

Monday and Tuesday were void of reports, and there might as well not have been any on Wednesday, considering it was on wholesale inventories for January.  They went down 0.2%.

Thursday’s report on first-time unemployment claims for the week ended March 6 showed another decline.  Claims dropped by 6,000 to 462,000, which was slightly lower than the 460,000 forecast.  The four-week average, which smoothes volatility, rose by 5,000 to 475,000 — the highest level since November.  And continued claims, those collecting benefits for more than one week, rose to 4.56 million.  But there was little reaction in bonds, as traders focused on the 10-year auction.

The U.S. trade deficit shrank to $37.3 billion from a revised $39.9 billion, but trading was unaffected.

Friday’s better-than-expected report on retail sales spurred selling, pushing the yield on the 10-year note even higher.  Sales rose 0.3% in February versus a 0.5% gain the previous month.  Excluding autos, sales rose 0.8%, better than January’s 0.6% increase.

The Reuters/University of Michigan preliminary consumer sentiment report for March unexpectedly fell to 72.5 from 73.6, pushing the yield on the 10-year back down.  The final report showed business inventories for January were unchanged.

Although mortgage rates ticked up during the week ended March 5, the Mortgage Bankers Association said that purchase applications rose 5.7%, while refis were off by 1.5%.  Some believe purchases will stay healthy as home buyers rush to meet the new tax credit deadline.

Unlike last week, there are several reports coming out that could influence trade, for better or for worse.

This week begins with Monday’s NY Empire State index on manufacturing conditions for March.  It’s expected to fall to 23.45 from 24.91, which could encourage buying in Treasuries.

However, trading could be subdued as this is the day prior to the Fed decision on interest rates.  Although no rate hike is expected, the markets will be looking for any clues about when that might happen.  They especially want to know if rates will remain low “for an extended period.”  This phrase probably won’t be removed on Tuesday, but when it is a big sell-off will likely follow.

Earlier in the day, data on February housing starts/building permits are due, with declines expected in both categories.  Starts could fall to an annual rate of 587,000 units from 591,000, while building permits are expected to decline to an annual rate of 587,000 from 591,000.

Separately, industrial production in February is expected to come in flat versus a 0.9% increase in January.  Capacity utilization should dip to 72.3% from 72.6%.  These reports could energize buying in bonds.

Wednesday the producer price index, or PPI, which checks for wholesale inflation, is not expected to find any.  It should show a 0.1% decline for February — far better than the energy-induced 1.4% rise the previous month.  Likewise, the more closely watched core rate, which eliminates food and energy prices, is expected to climb by a tame 0.1% versus 0.2% in January.

Thursday’s consumer price index, which checks retail price inflation, should show similar results.  Both the index and the core rate are expected to rise 0.1%, which bond traders should like.

First-time claims for the week ended March 13 are unpredictable.

The Philly Fed index on March manufacturing conditions could affect trading if it moves sharply up or down, as it has lately.  Right now it sits at 17.6, so three or four points either way could move Treasuries.

Leading economic indicators for February should rise 0.2% — a little slower than the 0.3% increase in January.  This report, however, usually has little impact on trading — nor does business inventories for January, which could rise 0.1%.

No reports are scheduled for Friday.

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Legg Mason Fund Manager: How to Beat the Market

Mar 5

Posted by admin in business, commodities, investing, investment gurus, mitigating risk, mutual fund, stocks, strategies, warren buffett, wealth | No Comments

Everyone wants to beat the market.  Very few investors do.  Your friends at Black Swan Management, LLC are always on the lookout for information that will make the road to the riches a little bit smoother.

If the stock market doesn’t go up much, your index fund won’t bring big returns. Robert Hagstrom of investment firm Legg Mason says you should use actively managed funds.

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