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Posts Tagged ‘Stock Market’

How to keep new year resolutions?

Thursday, January 1st, 2015

Most of us write new year resolutions on this day. However, only some of us are able to feel sense of achievement at the end of the year. Here are some tips to make sure you keep and succeed in your resolutions.

1. Make sure your resolutions follow SMART principle. Each resolution should be specific, measurable, actionable, realistic and time-bound. Believe me, if you can’t make your resolution adhering to SMART, you better remove it from your list to save you some frustration down the road.

2. Write positive resolutions. Meaning that, do not write “I will never ever eat that big fat pizza again”. That won’t work! Instead, write “I will eat more vegetables every day”.

3. Be realistic. You know your strengths and weaknesses more than anyone else in the world. Make your resolutions believable… to you!

4. Do some reverse engineering. Set a specific deadline for a goal and work backwards. Plan everything from now to that target date. Weekly plan works better.

These are simple, but proven tips. Try it out. Everyone in MoolaMania wish you and your family wonderful new year and prosperous days ahead! 2015 will be a pretty decent year for U.S. stock market. Plan well and profit well!

Mutual Fund Red Flags, High Cash Reserves

Sunday, October 31st, 2010

When selecting a mutual fund there is an area that is commonly overlooked, and that is cash reserves.

Perhaps you have heard the saying, ‘Cash is king’, well that may be well and good but it’s not king when you are paying your mutual fund manager to sit hoard it. I can do just fine sitting on my own cash and I don’t think I need to pay someone two percent to sit on it for me.

With a historical return of 4% on cash why is my mutual fund manager sitting on so much of it. I am not talking about conservative income funds or the money markets; I am speaking of actively managed growth funds with ten percent of their holdings being cash. When you buy shares of mutual funds you are paying them to own stocks and you are not paying them to own cash instead.

There are basically two reasons for keeping so much cash on hand. The first reason is they are keeping the cash on hand just in case shareholders suddenly decide to sell of their shares of the fund. Should the end of the world be nigh, they have the cash there so they do not have to sell stocks when they are at the lowest prices ever.

In addition to that mutual fund managers keep some cash available is to take advantage of times when the market is oversold and there is a fire sale in the equities market. It the classic buy low sell high, timing the market. Obviously managers do this because they think they can time the market and actually get in at the low. No one else can do that but apparently fund managers can, or so they would have you believe. In theory this is great but in practice it has turned out the opposite.

Research shows that mutual fund cash reserves are at their low right when the market is at the high and at their highest levels when the market is at its lows. In other words, if there is anyone who knows how to time the market (probably not); mutual fund managers are not those guys.

Good luck and happy investing.

The Laddered Portfolio, a Great Way to Invest in Bonds

Sunday, October 31st, 2010

There are many bond strategies, and the laddered portfolio is an excellent way to structure your interest payments and to reduce your interest rate risk.

One of the few risks involved in bond investing is the risk that interest rates will raise and investors will not have cash to take advantage of new bonds with higher interest rate (coupon). The problem can be solved by having a laddered portfolio.

When you structure your laddered portfolio the idea is to have bonds that mature every year or two, that way if rates raise you will have bonds maturing which will free up cash to buy the new bonds with a higher coupon payment. If rates are dropping you still have long bonds that have a higher rate than is currently available in the market today.

The other nice thing about having a laddered portfolio is that it is possible to structure your portfolio with bonds that pay their coupon payments every month or so. Since nearly every bond issue pays only twice a year you need at least six different issues if you want to insure that you have monthly income.

The only drawback here is that it takes a fair sized lump payment to get started. It can be tough to buy only one bond, or even five at a time. In general you need to get a lot of ten bonds at a time, which means you will need to spend $10,000 for each bond issue. This means you will need about $60,000 to build your laddered bond portfolio. Once you have made the initial investment then you only have to buy a bond when one matures and you will have the cash to do so from the maturing bond. If you don’t have the initial capital to structure a laddered portfolio but still need monthly income, you should look into one of the many bond mutual funds.

Good luck and happy investing.

Another Roller Coaster Ride in Stock Market

Wednesday, October 28th, 2009

Well, just when you think that stock market is the goose that laid the golden eggs, it shows the cruel face. Market is screwed up. Everything is down. Fear and panic everywhere now.

Goldman Sachs Group Inc. reduced its expectation for the nation’s economic output for the July-September period from 3% to 2.7%. The government’s report on third-quarter GDP is due tomorrow. Economists are looking for growth at an annual rate of 3.3 percent after a record four straight quarters of contraction. Goldman Sachs’s prediction and weaker home sales report today contributed to big decline in Dow Jones today.

I am not surprised. Most of the big companies reported earnings. Many companies beat the market expectations. There is a lot of money on the table. Traders need to take profits to protect their capital. You will see similar corrections, October is notorious for that. Just put your stop losses tight and choose your investments wisely. As for as I am concerned, I have my shopping list ready. I will buy more quality stocks when the market goes even lower.

Bottom Fishing

Tuesday, December 30th, 2008

For last three months, stock market bottom has been elusive. Many investors and traders tried to find the market bottom, bet millions on it and ultimately lost the money. Traders used to play with the market, now the market is playing with them.

There were many days in the recent past, where the sudden rally looked like the bottom was definitely in place. I compared those days with October 9, 2002 when I discussed with my colleagues. October 9, 2002 was the ultimate bottom before the short bull market began in 2002. However, there is no true bottom this year. Every bottom turned out to be black hole for the traders that dumped the money hoping that they are buying really low.

Bottom picking is always a dangerous game because you are assuming that stock market carnage is over, at least temporarily. Just when you think like that, another bank fails and everything goes back to square zero. Bottom picking might work when we have orderly market and free credit flow. All our analysis tools are based on certain assumptions.

One of the major assumptions is that we have healthy credit market. We have completely unhealthy credit market. Fed reduced the rate to zero; still the banks are putting lot of restrictions for the loans. Another assumption is that good companies (like GE, CSCO, IBM, etc.,) make money and grow their businesses. This assumption is also not true now. Even GE is losing money. On top of all these, fear is everywhere in the market. Every trader is worried about deflation, depression and the coming failure of other banks.

If you truly want to pick the bottom of the market, you should be familiar with technical analysis. If you are not, do not try to pick the bottom. You should look for technical indicators such as VIX, volume and moving average of major market indexes. It’s almost impossible to pick the bottom accurately. In the current situation, it’s better being two days late to the game rather than trying to get in the game one day earlier.

Former UBS executive was sentenced to 6.5 years

Monday, November 10th, 2008

Prosecutors claimed that it was the biggest insider-trading scandal in Wall Street since 1980s. Mitchel Guttenberg had been an executive director and institutional client manager at UBS — a position that gave him access to stock recommendations by analysts before the information was made public.

During a meeting at Manhattan’s famed Oyster Bar in Grand Central Terminal in 2001, Guttenberg offered to give a friend inside stock tips in exchange for forgiving a $25,000 debt and for a cut of the profits. Over the next six years, the friend made millions of dollars by trading stocks for himself and two hedge funds he managed.

I won’t be surprised if Mitchel Guttenberg get brand new avatar and become a celebrity after he is released from the prison. Look at what happened to Henry Blodget, he doles out advice in Yahoo Finance. Surprisingly some people still listen to that guy.

Related Link: The Trial Of Henry Blodget

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