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How To Pick A Profitable Mutual Fund
We have all heard the advantages of investing in a mutual fund
over trying to pick individual stocks. First of all mutual funds
hire professional analysts that are market experts and devout
many hours of study to the various stocks. Unless you...
Inflation Proof Your Investment Portfolio with ETF’s
Even though inflation has been relatively quiet in the U.S. since the late 1980’s, there now appears to be some strong evidence that it may be starting to heat up again with an expanding economy, combined with skyrocketing oil and housing prices in...
InvestorIdeas.com presents "The Insiders Corner," from Michael Brush: “Six Months to Make a Mayor Proud,” A Six Month Market Performance Review of his Insider Reports and Analysis.
For Immediate Release:
June 16, 2005
InvestorIdeas.com presents "The Insiders Corner," from Michael Brush: “Six Months to Make a Mayor Proud,” A Six Month Market Performance Review of his Insider Reports and Analysis.
"Perhaps just as...
Mid-Cap Stocks: Asset Class with an Identity Crises
Much like the middle child, mid-cap stocks have long struggled to find their identity. Carved out from the upper echelons of the small caps and the lower end of the large caps, the mid-cap sector has a rough definition of stock with a market...
Peter Scannell - Market Timing Whistle Blower
In March 2000, Peter Scannell had only a fundamental knowledge of how a mutual fund company worked. Despite this, he got a job at Putnam Investments' call center in Quincy , Massachusetts . Peter Scannell was only working there a short time when...
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Dealing With Market Corrections: Ten Do’s And Don'ts
A correction is a beautiful thing, simply the flip side of a rally, big or small. Theoretically, even technically I'm told, corrections adjust equity prices to their actual value or “support levels”. In reality, it’s much easier than that. Prices go down because of speculator reactions to expectations of news, speculator reactions to actual news, and investor profit taking. The two former "becauses" are more potent than ever before because there is more "self directed" money out there than ever before. And therein lies the core of correctional beauty! Mutual Fund unit holders rarely take profits but often take losses. Opportunities abound!
Here’s a list of ten things to do and/or to think about doing during corrections of any magnitude:
1. Your present Asset Allocation should have been tuned in to your goals and objectives. Resist the urge to decrease your Equity allocation because you expect a further fall in stock prices. That would be an attempt to time the market, which is (rather obviously) impossible. Proper Asset Allocation has nothing to do with market expectations.
2. Take a look at the past. There has never been a correction that has not proven to be a buying opportunity, so start collecting a diverse group of high quality, dividend paying, NYSE companies as they move lower in price. I start shopping at 20% below the 52-week high water mark, and the shelves are full.
3. Don’t hoard that “smart cash” you accumulated during the last rally, and don’t look back and get yourself agitated because you might buy some issues too soon. There are no crystal balls, and no place for hindsight in an investment strategy.
4. Take a look at the future. Nope, you can’t tell when the rally will come or how long it will last. If you are buying quality equities now (as you certainly could be) you will be able to love the rally even more than you did the last time… as you take yet another round of profits. Smiles broaden with each new realized gain, especially when most folk are still head scratchin’.
5. As (or if) the correction continues, buy more slowly as opposed to more quickly, and establish new positions incompletely. Hope for a short and steep decline, but prepare for a long one. There’s more to Shop at The Gap than meets the eye.
6. Your understanding and use of the Smart Cash concept has proven the wisdom of The Investor’s Creed. You should be out of cash while the market is still correcting. [It gets less and less scary each time.] As long your cash flow continues unabated, the change in market value is merely a perceptual issue.
7. Note that your Working Capital is still growing, in spite of falling prices,
and examine your holdings for opportunities to average down on cost per share or to increase yield (on fixed income securities). Examine both fundamentals and price, lean hard on your experience, and don’t force the issue.
8. Identify new buying opportunities using a consistent set of rules, rally or correction. That way you will always know which of the two you are dealing with in spite of what the Wall Street propaganda mill spits out. Focus on value stocks; it’s just easier, as well as being less risky, and better for your peace of mind. Just think where you would be today had you heeded this advice years ago…
9. Examine your portfolio’s performance: with your asset allocation and investment objectives clearly in focus; in terms of market and interest rate cycles as opposed to calendar Quarters (never do that) and Years; and only with the use of the Working Capital Model, because it allows for your personal asset allocation. Remember, there is really no single index number to use for comparison purposes with a properly designed value portfolio.
10. Finally, ask your broker/advisor why your portfolio has not yet surpassed the levels it boasted five years ago. If it has, say thank you and continue with what you’ve been doing. This one is like golf, if you claim a better score than the reality, you’ll eventually lose money.
11. One more thought to consider. So long as everything is down, there is nothing to worry about.
Corrections (of all types) will vary in depth and duration, and both characteristics are clearly visible only in institutional grade rear view mirrors. The short and deep ones are most lovable (kind of like men, I'm told); the long and slow ones are more difficult to deal with. Most corrections are "45s" (August and September, '05), and difficult to take advantage of with Mutual Funds. But amid all of this uncertainty, there is one indisputable fact: there has never been a correction that has not succumbed to the next rally... its more popular flip side. So smile through the hum drum Everydays of the correction, you just might meet Peggy Sue tomorrow.
About the Author: Steve Selengut http://www.sancoservices.com Professional Investment Portfolio Manager since 1979 BA Business, Gettysburg College; MBA Professional Management, Pace U. Author of: "The Brainwashing of the American Investor: The Book that Wall Street Does Not Want YOU to Read”, and “A Millionaire’s Secret Investment Strategy”
Source: www.isnare.com
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