10 Investing Ideas for 2008: How They’re Doing Now.

You know those “Best Investments of 2008″ articles that appeared at the end of 2007/beginning of 2008? Ever wonder how those investments are doing now? And what changes you should make now?

Well, if you answered “yes” to both of those questions, then you should check out Jonathan Burton’s current in-depth article on MarketWatch.com.

Back on November 12, 2007, Jonathan wrote “Ten investing ideas for the next 12 months”. Now, seven months later, he looks back to see what happened. And what investors can do now.

He checked-out areas from Treasury Bonds and Large Caps to International Markets and Financial Services.

For instance, he saw that large and midcap Growth Stocks performed better than Value stocks. And that Technology stocks are among the top performers over the past quarter.

He also warns that although Energy stocks have shot up recently, right now they’re more speculative. And he basically says stay away from Financials.

To help investors find winners amongst these stocks, Jonathan also lists a few investments in most areas that you might want to look at.

So, if you’re trying to create some wealth, you should check out this article to see what’s happened, and what you can do now to put your portfolio in a better position in the near future.

The Start of a Recovery? Check out the Small Caps.

I don’t have to tell you how volatile the stock market is right now. Add in all that angst around sky-high old prices, the housing/real estate debacle and rising job losses, and the economy seems to be heading even lower.

And if you’re an investor (which you might want to consider if you want to create some wealth), you’ve probably made major changes to your portfolio in order to ride out this drop in the market.

But things might be looking up. Yes, up.

How can I say such a thing? Well, according to an interesting article on yesterday’s NYTimes.com by Paul J. Lim, something interesting has happened recently that historically has led to a turnaround in the economy.

And that is the Russell 2000 Index of small caps has jumped 12.7% since mid-March.

That’s 12.7% in about 3 months!

I don’t know about you, but I’d take that percentage gain for the year and be happy right now.

According to the article, when small stocks rally during an economic slowdown, that has often indicated that the economy would get better, soon.

The article goes into a much more in-depth look at what this can all mean. So, if you’re looking for a clearer perspective on what might be happening, check it out here. And let us know what you think.

Buy & Hold: A Sure Way to Wealth?

I spend a lot of time reading about building wealth because it’s one of my passions. But very rarely do I give any time to thinking about that old tried-and-true strategy of Buy & Hold.

Yeah, remember that? You create a plan. But your stocks/funds/bonds. And then hold on to them for the long term.

Not every exciting. But then, it’s not supposed to be. And today, Andrea Coombes reintroduced me to Buy & Hold with a great article on MarketWatch.com.

Andrea confesses to being a Buy & Holder. Most of her portfolio is in 2 retirement accounts. And no matter what the market does, she doesn’t change her allocations. And in those accounts? Just a routine mix of low-cost U.S. and international stock mutual funds and a bond fund. That’s it.

And she writes about finance for a living? Does she know something we don’t?

Andrea figures that no matter what the market does in the short term, the average historical returns will benefit her. Plus, she sees stock-market trading as little more than a guessing game, unless you devote a ton of time to it.

So, what are her 3 requirements for being a prudent Buy & Hold Investor? A diversified plan, of low-cost index funds, for the long term. Read more

Fund Managers That Don’t Invest in their Funds: Unbelievable.

I know stockbrokers who don’t invest in stocks. But I’ve never heard of a mutual fund manager who didn’t invest in his/her fund.

But, according to an article by Joanna Ossinger on TheStreet.com today, based on research from Morningstar, a lot of fund managers don’t invest in their funds.

In fact, according to the June issue of Morningstar’s the FundInvestor, 47% of U.S. stock funds have zero manager ownership. Even worse, 61% of foreign-stock funds, 66% of taxable-bond funds, 71% of balanced funds and 80% of muni-bond funds have no manager ownership.

What’s going on here? You would think that managers would invest in their own funds. Unless they don’t believe in their funds. Or do they know something we don’t? Mmmmmm, that’s something to think about.

Morningstar’s Russel Kinnel says that there are only 2 good excuses for a manager not owning a fund he/she runs:
1. if the fund they’re managing is a single-state muni bond fund and the manger doesn’t live in that state, because the manager won’t benefit from the tax breaks
2. foreign managers of foreign-stock funds are sometimes barred from owning U.S. funds Read more

Dollar-Cost Averaging: More Shares @ a Lower Price?

We all know that investing is always risky. But in crazy markets such as the one we’re in now, it’s as risky as ever.

So, what can you do to cut down on risk while still being invested in the market?

Well, one thing you can do is use an investing strategy called Dollar-Cost Averaging.

With Dollar-Cost Averaging, you invest a fixed amount of money in a certain stock or fund at regular intervals. This way, when your stock/fund goes up in price, you’ll buy fewer shares. But when it goes down in price, you’ll buy more shares. The idea is that over time, you’ll own more shares and you’ll pay a lower average price per share.

This will help you reduce the risk of investing by letting you accumulate shares at a lower average price while also taking the emotion out of investing.

Here’s an example of the difference between Dollar-Cost Averaging and a one-time lump sum investment in the same mutual fund. Both investors have $1200 to invest. The lump-sum investor buys $1200 in shares of a mutual fund on Jan. 1. The Dollar-Cost Averaging investor invests $100 in the same mutual fund on the first day of each month of the year.

Source: Charles Schwab

In this example, the Dollar-Cost Averaging Investor bought more shares at a lower per share price than the Lump-Sum Investor. As you can see, this Dollar-Cost Averaging strategy can be pretty beneficial in a volatile market like we’re in now. So, what do you think? Is Dollar-Cost Averaging something that you’ll consider? Let us know.

What is T. Boone Picken’ Right Now?

Ever wonder what the really successful investors invest in? I mean the really super super successful investors?

Well, I just read an article today on TheStreet.com about T. Boone Pickens, the world-class investor and one of the top hedge fund managers in the universe.

Seems that Ol’ T. Boone picks some darn good investments. In fact, in 2005, his hedge fund BP Capital returned about 300% for its investors. And T walked away with $1.4 Billion in pay! Yeah, that’s BILLION.

OK, so what’s in the old man’s portfolio?

According to Stockpickr, some of the stocks he owns include:
• Titanium Metals (TIE)
• Denbury Resources (DNR)
• Occidental Petroleum (OXY)

The article gives a nice snapshot of these investments, such as their price-to-earning ratios (P/E), P/E-to-growth ratios (PEG) and yields.

If you want a quick insight into what one of the best investors is putting his money into, check out the article. And let us know your take on the pickens of T. Boone.

Lazy Portfolios for Lazy Investors.

This market is tough enough to invest in if you’re an experienced, educated, involved, active investor.

But what if you’re a PASSIVE investor? One of the 95 million in the U.S. who doesn’t take an active role in managing his/her portfolio? What do you do them?

How about investing in a “Lazy Portfolio”?

What’s a “Lazy Portfolio” you may ask? Well, it’s an already-built portfolio of funds/stocks/bonds/etc. that you just invest in – passively. You don’t have to time the market or actively invest. You just put your money in and let it ride.

That’s the premise behind the portfolios that Paul B. Farrell wrote about today on MarketWatch.com.

Paul put the idea out there that in a bad market, such as the one we’re in now, investing in a passive “Lazy Portfolio” just might be a good idea.

To prove his point, he highlighted 8 portfolios created by a wide range of people – from super successful investment managers to top brokers to an 8-year-old second-grader! Read more

Lock in Stock Profits with Trailing Stops.

If you’re like most stock traders/investors, you trade or invest in stocks to make a profit. But how can you improve your chances of making a profit?

Well, one way is by using “trailing stops” in your stock trading.

I bring this up because today I read a great article on InvestmentU.com by Floyd G. Brown about trailing stops.

So, you might be asking yourself: what is a trailing stop? And why should I use it?

According to Investopedia.com, a trailing stop is a stop-loss order set at a percentage level below the market price – if you have a long position (you want the stock price to rise). As the stock price moves up, the trailing stop price moves up at the same percentage level as was set in the beginning.

For example, if a stock is trading at $10 a share and you have a 10% trailing stop, the stop-loss would be set at $9 ($10 x 10% = $1. $10-$1 = $9). If the stock moves to $12, the trailing stop (stop-loss) would be set at $10.80 ($12 x 10% = $1.20. $12 - $1.20 = $10.80). By using trailing stops in this example, if the stock drops from $10 to $9, the stop-loss order kicks in, your broker sells your stock and you have a loss of only 10% or $1. Read more

Inflation and Stocks: What’s the Deal?

I believe that if you really want to create and build wealth, you have to have a plan where your money is growing steadily in both good times and bad.

One of the things that I always thought was deadly for stock investments was inflation. For me, inflation was bad for stocks and good for bonds. And with inflation higher than it was last year, I’m concerned about what rising inflation can do for my stocks.

So, when I saw an article by Paul J. Lim on today’s NYTimes.com, I had to read it.

And as for my belief that “inflation is bad for stocks and good for bonds”, this article proved me wrong – to a point.

It said that inflation is “not necessarily” bad for stocks.

In fact, it said that in the 23 years between 1926 and 2007 when inflation was more than 4% (that seems to be the magic number), stocks returned an average of 6.9% while long-term government bonds returned a measly 2.8%.

The article goes on to give a pretty detailed analysis of what happens to stocks when inflation is low or high, and whether it’s moving up or down.

It uses 1980 to show us how even with high inflation, stocks can still do well. Extremely well in this case. In 1980, the Consumer Price Index rose more than 12%, but stocks gained an average of 32%. The reason? It could be because the year before, 1979, inflation was higher at more than 13%.

Very interesting.

If you want a good primer on the effects of inflation on your portfolio, check out the article. And let us know what you think. Inflation just not be the portfolio killer that I always thought it was.

Asset Allocation to the Max for Your Retirement Portfolio

For me, my retirement portfolio is the most important one I have because it’s what I’m going to have to live on later on in life. So, I keep a pretty close eye on it and have it set-up in what I think is a good way.

But then I read an article by Roger Nusbaum on TheStreet.com today that suggested a much different retirement portfolio than I have. This one had a really detailed Asset Allocation.

In fact, Nusbaum’s piece was about an article in Barron’s this past weekend that featured a suggested portfolio by Mohamed El-Erain from Pimco, a major investment management service. Usually, I don’t write about an article based on another article, but this information was so interesting I just needed to share it with you.

It’s extremely detailed, much more than I’ve ever seen. And El-Erain really gets into specific investments in each asset class. So, what kind of allocation does he suggest? Here it is:
• Domestic Equities: 15%
• Foreign Developed Equities: 15%
• Emerging-Market Equities: 12%
• Private Equity
• Domestic Bonds: 5%
• Foreign Bonds: 9%
• Real Estate: 6%
• Commodities: 11%
• Inflation Protected Bonds: 5%
• Infrastructure: 5%
• Special Opportunities: 8%

Yeah, I know, it doesn’t add up to 100%. It’s just 91%. There’s no % next to Private Equity. But thru subtraction, I’m going to guess that it’s 9%.

The one thing about this portfolio is that only about 30% of it would be in domestic stocks. That’s a lot different from what I’m used to seeing. But I’m willing to consider and continue researching the suggestions El-Erain makes in his asset allocation. What do you think about this? Let us know.

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