Buy & Hold? Quit & Fold? What Can You Do?

“Stay the course.” “Stick to your plan.” “Don’t make emotional decisions.”

No matter what type of investor you are, the advice given above is usually pretty solid. And will usually keep you on track toward your goals.

But then, in a down market like this, even those of us with the strong intestinal fortitude have to take a step back and look at what’s going on. And what we can live with.

This is the basis of a very eye-opening article I read on today’s NYTimes.com.

The author, Paul J. Lim, explores some important questions – such as: “Should buy and hold investors think about selling some of their lagging stocks?”

He goes on to tell us that the S&P 500 has basically gained nothing over the last 10 years. So, what does that do for buy-and-holders?

But then, what about those investors who sell at the first sign of despair? Aren’t they hurting their long-term prospects? Yes and No and Maybe. It all depends.

And that’s the big phrase here “It all depends.” There are no hard and fast answers here. But Paul and his interview subjects reveal a few options that can help all of us get thru this economic downturn.

So, if you’re wondering what you can do now, check out the article. It could help you make some important decisions that can help you not only now, but also in the long run.

Want to Become a Full-Time Investor? Here’s How.

I don’t know about you, but there are times when I think “Yeah, I can make a living just from investing in my portfolio.” Usually, those times are right after I close a great trade.

But then I come back to my senses and realize that I probably don’t have all that it takes to be a full-time investor. At least not now.

So, when I saw an article about how to become a professional investor on today’s TheStreet.com, I just had to read it.

Written by professional investor and finance professor Scott Rothbort, the article gives a great rundown of what you’ll need to become a successful full-time investor.

According to Scott, the first thing you need to do is to get organized and write a business plan. Yes, professional investing is a business. And you should treat it as such.

Then you really need to look deep within yourself to see how you work – both alone and with others. One thing I didn’t realize is that you’ll need to decide on what legal structure is best for you – such as a sole proprietorship, limited partnership or LLC. This should fit in with the money/tax structure you choose.

Once you make the above choices, you have a few more decisions to make. Are you trading for your own account? Are you managing money for others? Are you doing both? If you’re a money manager, is your fee based on assets or performance?

Yeah, I know that that’s a lot to think about. But then, if you want to be a successful full-time investor, you need to do it the right way. And I’m betting that a pro like Scott knows the right way.

So, if you’ve ever thought about investing full-time, check out Scott’s article. It could be your first step to becoming a pro investor.

Americans in Debt: A Growing Problem.

We all know that managing debt is a big part of living a wealthy life. But what about those of us who don’t – or can’t – manage our debt? What happens to us?

Well, there’s a great article on today’s NYTimes.com about Americans who are way in over their head in debt. And what they’re doing about it.

The piece by Gretchen Morgenson digs deep into the problem of personal debt in America. And it looks at the big questions, such as “Why do lenders give loans/mortgages to those who will probably have a problem paying them off?”

There’s also a great debt calculator, so you can see where you stand debt-wise in relation to others. For instance, did you know that if you have $25,000 in debt, you have more debt than 50% of families? I didn’t know that.

So, do yourself a favor and check out this article and calculator. And if you’re in debt, find ways to get out of it. It’s a very important part of living a wealthy life.

Money in the Bank: Is It As Safe As You Think It Is?

The term “Money in the bank” is usually used to describe something that’s safe. That’s a sure thing. That’s solid as a rock.

That is, unless the bank you’re talking about is IndyMac.

You see, this past weekend, IndyMac failed. Yup, it up and went under. And Uncle Sam had to come to its rescue in the form of the Federal Deposit Insurance Corp. (FDIC).

“So what?”, you might say. “The money in that bank is insured.”

Uh, are you sure?

While reading a great article on today’s MarketWatch.com by Eva Rosenberg, I learned that not all banks are FDIC-insured. But luckily, IndyMac is.

I also learned that there’s insurance that goes beyond the limits that the FDIC insures.

Before we get to this additional insurance, let’s be clear about what the FDIC does insure. Each account is insured up to $100,000. Each joint account is insured up to $200,000. And each retirement account (IRAs, Roth IRAs, SEP IRAs, SIMPLE IRAs, Section 457 plans, Keogh plans and a few others) is insured up to $250,000.

Now, what about that extra insurance? Read more

Hybrid Funds: The Way to a Greener Portfolio?

In a market like this, we all could probably use more “green” in our portfolios. And I’m not talkin’ environmentally-friendly stuff. I’m talkin’ green as in Jeffersons, clams, greenbacks.

OK, so how can we put more green into our pockets? Well, with hybrids, of course. In this case, we’re talkin’ hybrid funds.

You see, hybrids are balanced funds that combine equity and fixed-income securities. And according to an article on today’s TheStreet.com by Kevin Baker, the best-performing hybrid in the Q2 (March 31 - June 30) returned 14.25%. For those 3 months! Not bad.

That hybrid is CGM Mutual Fund (LOMMX). And it’s not alone in the quarterly double-digit gains department. The second-best fund for Q2 was Fidelity Convertible Securities Fund (FCVSX), and it gained 10.60%.

Now, these are pretty great returns for a measly 3 months in a bear market. But will they hold up for a longer period of time – say, a year? That’s the big question.

But for now, it might pay to do some in-dept research on hybrids. The first place to start is the article on The Street. Who knows? Your portfolio just might become a little greener.

The Good News Bear Market.

When I hear the phrase “Bear Market”, I shudder. I know that there’s a great chance that my portfolio will lose value. And that’s bad news in my book.

But, not all the news in a Bear Market has to be bad. In fact, you can find good news in a Bear Market – it just depends on how intelligent an investor you are.

Today, I read a great article on WSJ.com that shed some light on what you can do in a Bear Market. According to the author, Jason Zweig, we’ve been in a Bear Market for years. And he’s looking forward to us staying in one for a while. Why? Well, when you check out the article, you’ll find out that he sees great opportunity in Bear Markets.

As I was reading it, I found out that one the greatest investors of all time, Warren Buffett, seems to love Bear Markets. This year, during the Berkshire Hathaway annual meeting, Buffett stated that as an intelligent investor: “If a stock [I own] goes down 50%, I’d look forward to it. In fact, I would offer you a significant sum of money if you could give me the opportunity for all of my stocks to go down 50% over the next month.” Read more

Don’t Declare Bankruptcy.

I’m sure that you’ve read the articles that talk about how Barack Obama wants to pass laws that make is simpler for certain citizens to wipe away their debts. But beware of bankruptcy – no matter how simple it is – because it can hurt you for decades.

Yes, decades!

If you want the inside scoop on this, read Lauren Tara LaCapra’s article on today’s TheStreet.com. In it, she shows you how bankruptcy – even a simple one – can really effect your life.

I guess this whole bankruptcy discussion began back in 2005 when new laws made it tougher and more expensive to file for Chapter 7 or Chapter 13 personal bankruptcy. And Chapter 11 is no picnic, either. But now, Obama wants to give a “fresh start” to about half the people who declare bankruptcy – military families and those hit with medical bills – but making it easier to wipe out their bills.

One thing B.O. doesn’t seem to be looking at is the long-term effect of going bankrupt. According to Lauren, it can take over 20 years for bankruptcy filers to reach the same financial status as their peers who did not declare bankruptcy.

So, the “fresh start” just might not be so “fresh” by the time a bankrupt person can get back on his or her financial feet again.

If you’re thinking about filing for bankruptcy, please check out this article before you go any further. And let us know what you think.

Entrepreneurs: Take Your Personal Money Seriously.

I read a great article on today’s NYTimes.com about how many entrepreneurs keep a close 8 on every dollar that runs through their business, but are lax in managing their personal finances.

The author, Paul B. Brown, relays the advice he found on a few other sites, like the one written by entrepreneur Ben Yoskovitz – Instigator Blog.

According to Ben, a lot of entrepreneurs have goals of making tons of money with their businesses, but don’t plan personal financial goals for themselves. Many don’t have pension plans. Others don’t have financial plans. And some don’t even have savings plans.

How did Ben discover this? Well, as an entrepreneur himself, for years he only focused on his business and neglected everything else.

So, what can an entrepreneur do?

Well, according to the Times article, there are 4 things that can help you focus as much on your personal finances as you do your business finances.

1. Don’t be so optimistic about your investments. The optimism that helps you become a successful entrepreneur can hurt you as a personal investor. Read more

Are Savings Bonds A Good Deal Now?

The headline on the article on MainStreet.com read “The Savage Truth: Don’t Buy Savings Bonds”. It shocked the heck out of me.

Why? Because, I thought that U.S. Savings Bonds were at least a nice, safe, OK investment.

But according to the article, there seems to be a few things about new bonds that might not make them a smart investment right now.

And although I don’t want to see unpatriotic, I do feel like I have an obligation to share with you any ideas that might affect your finances - so you can make your own decisions.

Now, according to this article by Terry Savage, older bonds seem to be a good deal. But the newer bonds, like Series EE, carry low fixed rates that can’t keep up with inflation. In fact, the EE bonds have a fixed rate of just 1.4%. And if you buy them before November 1st, they’ll have that rate for the next 20 years until they reach maturity. If you hold these bonds for the full 20 years until maturity, they’ll reach their “face value” and provide you with an effective yield of 3.6%.

I don’t know about you, but waiting 20 years for a 3.6% return doesn’t rock my boat. And then, after you redeem the bonds, you have to pay federal tax on the interest you earned.

But if you own older EE bonds or Series I bonds, you might have a great deal on your hands. If you’re thinking of cashing them in before they mature, find out what their guaranteed base rate is by going to TreasuryDirect.gov.

In any case, if you own savings bonds or are thinking of buying some, please check out Terry’s article to get an in-depth look at how savings bonds work. And then you can decide if they’re a good deal for you or not.

Bear Market Investing Basics.

I read a good, short article yesterday about how to profit during a Bear Market, which we’re in right now.

The piece, by Keith Fitz-Gerald on the terrific MoneyMorning.com site, lists the 5 Keys to Bear Market profits.

According to Keith, these secrets are:
1. Don’t buy a stock if its fundamentals don’t match it’s price
2. Don’t overpay for a stock, even if you think it’s a “bargain”
3. Look for companies that are keeping their prices stable or even increasing them, and still keeping their customers
4. Look for companies that have new research coverage by analysts
5. Look for companies that pay good dividends

These seem to make total sense to me. And they seem to be the same basic parameters that we should always be looking for - no matter if we’re in a bear or bull market. But honestly, a lot of us don’t follow these basics. And we then pay the price for it.

Check out Keith’s article. Then look at your portfolio to see if you’re following these keys. You just might see something that you want to change in order to better position yourself for profits in this market.

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