|Stocks & Mutual Fund Information|
Investment Research - The Dalbar Study
Very few people, even professionals, have heard of the Dalbar Study that originated in 1995. Its purpose is to determine the profitability of trading for the small investor of mutual funds. Their results are even worse than I thought.
The BuyNHolders will love the results as it "proves" that buying and holding is better than trying to switch to so-called "hot" funds. My readers know I think that mindless buy and hold is a guaranteed loser - and I can prove it.
During the greatest bull market of all time from 1984 to December 2002 the study came up with an annualized return of 2.57% compared to 12.22% for those who bought and held an S&P500 index fund. These dummies did not even keep up with inflation. The reason was they were switching from fund to fund after it had made its major move and they had no exit strategy if it did not make money.
I would guess it that they paid commissions which immediately put them in the hole. My recommendation is never to buy anything except a no-load mutual fund that does not have a redemption fee.
They also did not have a method to buy a fund with an excellent performance, but also had no plan as to when to sell. Every successful professional trader will tell you that you must have an exit plan as soon as any purchase is made. During any bull market there will be rotations among sectors. During periods of time, usually about 6 to 10 months, a particular sector will outperform all the others. For example, Asian funds might do well for 6 months and then fade, internet funds will do well for 10 months and then telecommunications will take the lead, and so forth.
A sector will do well and as more and more people find out about it the value of the stocks within that sector run to their valuation peak and go no further. That sector runs sideways or starts to fade.
Very few investors realize that mutual funds will only make money during a long term bull market. That bull ended in 2000. Going back in history as far as you want to you will find that every bull market has been followed by a bear market of equal length. During these bear periods there will be short-term opportunities to buy, but they must be held for only brief periods. The key to these is learning to time the market and pick the strongest sector funds. You can learn to do it on your own or subscribe to a proven timing service.
To me the Dalbar Study has proven that you (not your broker or financial planner) must learn market basics if you plan to profit from the stock market.
Al Thomas' book, "If It Doesn't Go Up, Don't Buy It!" has helped thousands of people make money and keep their profits with his simple 2-step method. Read the first chapter at http://www.mutualfundmagic.com and discover why he's the man that Wall Street does not want you to know.
Box Of Chocolates
Ever have one of those sample boxes of candy? Each little piece is beautifully wrapped in colorful foil or decorated with an interesting design. Taste just one. So good! One more. And another. Before you know it the box is empty. Nothing left.
Dont Buy Stocks based on P/E Ratio alone
I use the P/E ratio as a secondary indicator for buying and selling stocks but I don't use the ratio in the same a manner as many value investors teach. I will explain the difference in my methodology for using the P/E ratio to your advantage.
Mutual Fund Ball and Chain
The broker told me not to sell because the mutual fund I owned had a 2% redemption fee and they would penalize me if I did.
Why Technical Indicators
The fight continues to rage among traders who use technical indicators and those who prefer fundamental information to establish new positions and to exit current positions.
One of the great "secrets" of successful people is discipline and it doesn't make any difference whether it is manufacturing, processing, servicing or investing in the stock market.
Some Good News for A Change
Before we get into all the good news out there, let us first take a look at what the term "news" really means. By definition, the term "news" means the exception to the norm. If it is expected to happen then it is not news. If it differs from the norm, then it is news.
Investing in Dividend Paying Stocks
I was recently interviewed for a press release through a financial question and answer format. One of the questions asked of me in the interview was:
The Cub; II
We keep hearing about this bear market and that the bottom is "in" or "very close" so we should be invested in these bargain basement prices to take advantage of the next bull so we won't lose out on the expected huge profits.
Boiler Room 7/17/00
On Friday or Saturday evening my wife gets a movie from Block Buster and after dinner we sit, hold hands and watch. This week she brought back one that I think every investor or anyone contemplating investing in the market should see. It is called "Boiler Room".
Its A Bull, Its A Bear, Its Suptertrader!
The higher the market goes the more confusing are the "experts". In the September 14 issue of Investor's Business Daily newspaper we find the great prognosticators such as:
Red, Green, Yellow - or - Stop, Go, Go Very Fast: Which Describes Your Online Trading?
Ever notice how behavior in one area of life can apply to behavior in other areas of life? For example, I've noticed a number of things while driving that apply to online trading. One of them is regarding how people behave toward traffic signals.
Prospering with Mutual Funds: How Anyone can ?Afford? an Investment Advisor
Recently I was invited to appear on a live CNNfn television show to discuss my article "How to evaluate Load vs. No Load Mutual Funds." (You can read that article on my website http://www.successful-investment.com/articles21.htm)
Long Term Financial Vehicles
Investing in long-term financial vehicles give you the most gains but it also puts your funds at greater risk. There is much truth to the saying, "there is no gain if there is no risk". Still you can reduce your chances of losing your hard earned money, by researching and taking time to understand what you are buying. Would you purchase a house you've only just seen on the outside? Both of these are serious investments and you need to arm yourself with the basic knowledge about the subjects.
Everything you invest in has risk so you want to do your research before you put your money on the line.
In today's volatile and confusing stock markets everyone is searching for a guru who knows which way the market is going and when. Ask any economist and he will have an answer. Ask 2 economists and you will have 2 answers. Ask 3 economists - ad infinitum.
Losses, not Profits, will Stop You from Trading in the Market
Should the market turn against you, it is important that you design a system that will produce as much loss as you are prepared to take. This loss, known as drawdown, is the maximum amount by which your trading float will temporarily drop at anytime. Doing this in advance, will help you avoid nasty surprises in the future. This gives you the confidence to continue trading when the good times start once more.
No Load Mutual Funds: Investment Hype vs. Investment Help
With the internet such a huge part of our daily lives, many investors have access to a wide range of instant investment information.
When you become interested in a stock or mutual fund you can call your broker and he will send you reports on how the company is doing, what their management is like and what might be the projected earnings for the company and how the industry is doing. Great information.
Stock Market Insanity
Let's first define insanity. It is doing the same thing over and over and expecting a different result. And that is what most investors do and they can't understand why they are not able to make money in the stock market.
Choosing An Investment Stock Broker
If you want one.
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