Contact me to find out how you can be a successful investor. Bill@BillMullen.org Bill Mullen http://ow.ly/iLMEj It is a sad state of affairs when folks like Bill Flynn thinks that small investors believe they don’t …
Two well-known members of the financial community have weighed in on the future of the world economy. Bill Gross, head of the world’s largest bond fund, PIMCO, said in his August 2012 “Investment Outlook” article …
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Wall Street and a great number of advisors advise against buy and hold but rather use a manager to manage your investments. Active management often wins the discussion about buy and hold versus an actively managed portfolio by defining buy and hold as buying a stock or a group of stocks and putting the stock certificates in the bottom draw only to be opened twenty years in the future. Active management means stock picking, market timing and track record investing. Academic research does not advocate either approach.
The S&P 500 stock index is composed of the 500 largest stocks in the US market. Started in 1957, there are only 68 stocks today that were in the index 56 years ago; another is ready to bite the dust-JC Penney. It you bought the index in 1957 (you cannot buy directly into an index but surrogates are available) did you buy and hold? Absolutely not. The stocks in most indices change every year if not more often.The secret to successful investing is to not listen to the propaganda of Wall Street and their definitions of terms. Rather it is to invest in equities, diversity globally and rebalance. Contact me and I will explain how simple, successful investing can be. It is simple but not easy. It is not easy because emotions get in the way. Fire your broker and hire an Investor Coach.
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There is a commercial floating around television and the internet showing a man shaving accompanied by a voice over suggesting that if he stayed home he would be missed because clients were counting on him to manage their portfolios.
The sponsor of the commercial is a very large mutual fund company. It appeals to a belief that there is someone on Wall Street that is looking out for you. Here is the truth. If your portfolio is dependent upon someone showing up every day or never missing a day, your portfolio is in danger.
Returns come from the market not from the manager. Fund managers are famous for market timing and stock picking; two signs that they are gambling and speculating with your money.
Fire your broker and hire an Investor Coach.
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In recent years, there has been a movement from active investing to passive investing. Active investing involves stock picking, market timing and track record investing. According to a blog in Financial Planning, Invested in Advisors, November 3, 2013, by Steve Atkinson of Loring Ward, “…today about 22% of all investments are passive”. The movement to passive investing has been a movement from mutual funds to Exchanged Traded Funds (ETFs). However, if you are using mutual funds and thinking you are investing passively, you may be in for a surprise. According to an article by Bill Barker in The Motley Fool, “Managed mutual funds have an average turnover rate of approximately 85%. A turnover rate of 100% means that the stocks that a fund owns on January 1 are not owned on December 31 of that same year. In other words, the stocks are sold and other stocks are purchased. Every time there is a sale, there is a cost. Every time there is a buy there is a cost. Further, since there is lots of buying and selling, the fund must keep a larger amount of cash then if they were truly investing passively.
Although using ETFs is an improvement over using mutual funds, there is a better way to be a passive investor and that is by creating a globally asset class structured portfolio.
Contact me to find out how you can invest in 19 different asset classes in 45 different countries with very low turnover. Mutual funds are expensive and two iterations behind the times.
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In the October 15, 2013 issue of American Way, the American Airlines magazine, there is an article about using Twitter to beat the market. The article appears within days of Eugene Fama being awarded the Nobel Prize in economics for his work on showing that markets are efficient. Another irony is that the four founders of Social Market Analytics (SMA) who espouse the Twitter theory are from Chicago and Fama is Professor of Economics at the University of Chicago.
SMAs theory is that by monitoring tweets for chatter about particular businesses, their algorithm can rate a company as a buy or sell. According to the article, SMA presents data from December 2011 and June 2013 and states that “…any Wall Street trader who bought or sold on the basis of SMAs “high positive” scores for stocks…would have outperformed the Standard & Poors 500 index by 21%”. Pretty impressive even it is only for 19 months. The S&P 500 index was up about 38% over those 19 months based on data on the website. (http://us.spindices.com/indices/equity/sp-500). Beat it by 21% and you have made a killing. It is not possible to invest directly in the index. The bottom line is that over the time period covered, it was hard not to make money in the market.
It is too early to determine if SMA has indeed found a crystal ball to see which stocks are going up or down but until that is proved I will rely on the academic work of Nobel winners like Harry Markowitz and Gene Fama.
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