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- Ignore TheRumpledOne
|5/14/2008 6:04:03 PM
The 7 Pillars of Trading
- Ignore TheRumpledOne
|5/15/2008 5:43:07 PM
The 7 Golden Rules for the Lazy Investor
By Steve Christ | Thursday, May 15th, 2008
By Warren Buffett's own math, matching the gains of the U.S stock market over the last century is going to be quite a tall order.
In his most recent annual report Buffett once again pointed out that in order to equal the U.S. market over the 20th century, the Dow will need to close at roughly the 2,000,000 mark on December 31, 2099.
That means that the Dow will need to gain about 1,987,000 points to match the incredible gains in the years known as the American Century.
It was in those years that the Dow advanced from 66 to 11,497 at the close of 1999. That's a compounded annual growth rate of 5.3%, an impressive achievement to say the least.
But let's face it, does anybody really think the Dow will close at the 2 million mark? Of course not.
After all, a full eight years into the new century we have only added about 1500 points. And at that pace we would have to be extremely lucky to crack the 2 million mark over the next 92 years, as Buffett is quick to point out.
But that begs the obvious question: How can investors hope match the performance of the last century when it's clear that U.S. equities as whole are not likely up to the challenge?
The answer is two-fold.
One they need to be very good stock pickers over the long haul, which is exceedingly tough for most retail investors. Or two they need to juice their returns with the dividends of income stocks.
That's because as every dividend player knows, income investing allows you to win two ways— first with a cash payout and second through price appreciation. That makes the 5.3% compounded annual growth rate of the last century much more achievable. It's the dividends that make the difference.
Income Investing: The Lazy Investor's Approach
The best part is you don't exactly need to be a mutual fund star to exceed those results. In fact, the truth is that you need to be just opposite—you need to be a lazy investor.
That's no typo. You really can accomplish more in the markets in the long run by doing less.
Of course, seasoned lazy investors themselves have known this for years. That's why the truly rich don't spend their days glued to the financial news. They're too smart for that.
They realize that while most investors think trading is where the action is, investing in high-yielding income stocks is just as rewarding provided you do nothing but basically ignore them.
Sure, it's lazy but it works. The name of the game, after all, is profit and income stocks provide them like clock work.
But that is not the only advantage to be had with a "lazy investor" portfolio. The other benefits of the income investments include:
* Safety- If preserving your money is at the top of your list, income investments are preferable because of their low risk.
* Diversification- If the balance of your portfolio tilts towards growth, income investments can help you diversify your risk by acting as buffer to unpredictable market swings.
* Access-income investments usually offer investors ready access to their funds.
The Seven Golden Rules of Income Investing
Here then are the six golden rules that every successful lazy investor lives by. Follow them and you can build a million dollar portfolio the easy and boring way. It just takes time and patience.
1. Ignore the News-Warren Buffett doesn't bother to watch CNBC, why should you? The financial news, after all, isn't any different than your own 6 o'clock news. Drama may draw viewers, but it is a nothing more than a distraction to long-term holders. Smart lazy investors set their portfolios and forget them, ignoring the shrieks of financial press.
2. Be content to take a single- Sure homeruns are exiting, but a string of singles is just as good. Building true wealth takes time, but it's completely achievable. For instance, did you know that a 25-year-old could turn a $3,000 a year investment into $1 million dollars in 40 years with only a 10% average annual return? They can, and the smart ones do.
3. Reinvest your dividends- When an investor receives dividends, they have two choices. The first is to take the cash and spend it, the second is to immediately take those funds and purchase more stock. The smart investor chooses the latter. Dividend reinvestment programs are an automatic way to build wealth and are as lazy as it gets.
4. Remember the Rule of 72-Compounding is one of the powerful forces known to man. That's where the Rule of 72 comes in. The rule says that to find the number of years it takes to you double your money at a given rate, you just divide the interest rate into 72. For example, if you want to know how long it will take you to turn $12,857 into $25,714 at 9 % you divide 72 by 9 and get 8 years. But what if you actually saved $12,857 a year at 9% interest for a period of 24 years, how much then would you have? The answer is about $1,076,154. Not bad huh? Lazy investors know that it's the turtle that wins this race—not the hare.
5. Avoid taxation- Inflation is bad enough, but taxation is even worse. As a result, smart lazy investors avoid the tax man. That's why municipal bonds are often a part of every lazy investor's portfolio these days. They pay more than U.S treasuries and are free of federal taxes. That leaves more money for the lazy investor to reinvest, fattening up thier portfolios.
6. Protect your Principal-Successful lazy investors know that chasing yield and yield alone is much too risky. So instead, they search for dividend stocks that have a long and solid history of earnings. That helps to protect their portfolios against downturns when dividends are either cut or eliminated.
7. Lazy Investors Don't Procrastinate- Time, after all, is literally money in this case. Smart lazy investor's don't wait to act.
So don't let Mr. Buffett's market math discourage you from investing in the markets. His point after all was that this century's markets were going to be a bit different from the last. Beating them then is going to take some different strategies.
That is why the lazy investor's approach to the markets is looking pretty good these days for investors looking to build wealth with few risks. After all, if you're already booking a 7% or better dividend with your investments, you're beginning the race with a pretty big head start.
Buy it, hold it, and watch it grow. Those are the rules the lazy investor lives by.
Your bargain-hunting analyst,
Chief Investment Analyst
The Wealth Advisory
- Ignore TheRumpledOne
|6/5/2008 7:42:01 AM
The Virtuous Investor
By Michael Masterson
If you want to be successful as a stock investor, you must have these three virtues:
1. Modesty. You don't need to be the best and most successful investor in the world. If you set modest objectives - 10 percent to 15 percent - you will have a good chance of reaching them.
2. Humility. You don't know enough to predict the future. Admit it by setting stop-loss points and sticking to them.
3. Consistency. Umpteen studies have shown that the most important factor in stock market success is the consistent application of a rational system. Which system you follow is not as important as your consistency in adhering to it.
A 10 percent to 15 percent return on your investment may not make you wealthy overnight. But if you stick to these three virtues - and don't abandon them when you hear an irresistible story about a "can't lose" stock - chances are you will do much better than your friends and colleagues.
- Ignore TheRumpledOne
|11/30/2008 11:18:50 AM
3 Rules for Today's Markets
By Brian Hicks | Friday, November 28th, 2008
I've been asked by several friends, family and readers of this letter...
"What are you doing with your money?"
"Is this the end of the stock market, of America's empire???"
"Are we headed for a great depression?
Or even worse, are we headed for a post-apocalyptic version of Cormac McCarthy's best selling novel, The Road?"
In the next several pages, I'm going to tell you what I'm doing with my personal investment capital, the precautions I've taken, and what I see on the horizon as possibly the greatest investment opportunity this century (hint: we're getting the opportunity to turn back the clock to 2003).
My Personal Investment Decisions
Rule #1: Protect your cash: That's how fortunes are made
In July of 2007, I started to raise cash. I began selling my speculative holdings in pretty much all sectors except for energy, biotech and few microcaps and precious metals stocks.
I didn't have any great insight into coming crisis. I didn't see it coming. Instead, I couldn't figure out the direction of the market. As a result, my gut told me that if the market couldn't figure out which way it wanted to go, neither could I.
You see, on July 19, 2007, the Dow made a new record high. I, like many other market analysts, thought this was confirmation of a new bull market.
DJIA Thanksgiving 2008
After all, by any technical definition, the market had been in a bear market for 7 years. For instance, the NASDAQ topped out at the lofty level of 5000 in March 2000. For 6 of the last 7 years, it's been trading below 3000.
So I figured it was about time that the broader markets broke out to a new bull.
But after making a new record high in July, the Dow completely broke down.
In the following 9 trading days after breaking above 14,000, the Dow lost 1000 points. It rebounded, only to sell-off 1300 points.
More disconcerting and ominous, some of the intraday moves during this period were massive.
This was about the time of Jim Cramer's famous rant about how the fixed income market had ceased to exist.
This confirmed the worst. Gold World's Greg McCoach's warnings were right! Subprime and housing were about to crash the market and the economy.
I immediately started raising cash.
Rule #2: Go Short... It's a Bull Market in Reverse
Super trader Ian Cooper told me something last year that has made me a lot of money in the past year. To paraphrase Ian, "Bull markets never end. They simply change asset classes and psychology."
Ian, like Greg McCoach, was spot on.
If the trend is down, play it for all it's worth.
In the past 14 months, I've played the UltraShort Dow30 ProShares (DXD) a half dozen times. I first played it as a hedge to protect my downside and to protect my long positions when it was clear that the market was in the throes of indecision.
But now I play it for net profit.
Rule #3: Patience Wins the Day: Start Putting Cash to Work
I have recently started putting small amounts of new investment capital to work. I'm building positions in Pfizer (PFE), S&P Biotech ETF (XBI), ProShares Ultra QQQ (QLD) and PowerShares DB Gold Double Long ETN (DGP). I'm going broad to keep risk at a minimum.
I'm buying Pfizer as a defensive play in healthcare. The company is cash rich with $26 billion in the bank. It's estimated forward p/e is 6.4. Assuming the "e" in the p/e is solid, I see very little downside risk at current levels of $16 per share.
The best part is that Pfizer pays a dividend of 8% at current price levels. In this uncertain market, you want yield that is certain.
Pfizer is part of my Baby Boomer Investment Thesis (BBIT). The first cohort of the baby boomer generation began retiring earlier this year... and there's no disputing the demand for more medicine.
Pfizer has been out of favor ever since it launched Viagra in 1998. In fact, all of Big Pharma has been out of favor since 1998-1999.
I believe the environment is ripe for a big pharma revival.
The Biotech ETF (XBI) is also a component of my B.B.I.T.
Biotechnology drugs will play an increasing role in addressing the healthcare needs of the aging population.
In general, biotech companies have minimal exposure to the credit and housing crisis. They don't have any exotic derivatives hidden in the cellar.
Once considered the market's most speculative industry, biotechnology has become somewhat of a safe haven. Year-to-date, the XBI has returned +2.45%. Small for sure. But when you compare it to the Dow's loss of 35% YTD, I'll take it any day.
The Ultra QQQ ProShares is play on the tech-heavy NASDAQ. My thesis on this is that technology will lead this market out of the bear because technology companies are sitting on record cash reserves.
Check this out. The top 10 holdings in the QLD are sitting on $108 billion in cash against $28 billion in debt.
And lastly, I'm long gold through PowerShares DB Gold Double Long ETN (DGP). I'm not going to debate whether owning physical gold is safer than owning a paper certificate for gold.
I'm simply looking for liquidity. And owning DGP gives me a very liquid way to play gold.
With the number of dollars being printed, at some point we will have inflation. And gold is still the best hedge against inflation.
That's my investment strategy for now.
However, I'm waiting for an opportunity to play our Peak Oil Trade. The price of oil has come down more than 60% since July. We are still believers in Peak Oil... and the recent IEA World Energy Outlook report confirms our thesis that oil supplies are dwindling.
We could be looking at a once-and-a-lifetime opportunity to play oil futures for a 1000-to-1 return. In my next article, I will lay it out for you.
- Ignore chetron
|9/1/2009 9:20:32 AM
I GOT THIS EMAIL FROM TRADEGUIDER.COM
WEEKLY EVENTS & NEWS
THIS WEEKS NEWS
The Biggest Development to the VSA Signals in 20 Years!!
For the past 18 months Tom Williams, Veteran Trader and Inventor of VSA has been working with Fund Manager Philip Friston to add, refine and further develop the next level of VSA signals.
The early results show the signals are so good, we may never release them for purchase!
What we have decided to do is release them as soon as they are available to VSA Club members for an evaluation period. Make sure you get your chance to test out the biggest rule-set development in TradeGuider's history.
To find out more about the VSA club, sign up and be the first to get the new signals when we release them for evaluation
To find out more about how the new signals will "lift the Fog" to view our recent archived web seminar which "Lifts the Fog" on what really happens in the markets.
SO GOOD THEY WON'T SELL IT, BUT COULD YOU TEST IT FOR US??????????
- Ignore johnpaulca
|9/1/2009 11:12:37 AM
How do you say another........ SNAKE OIL.
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