TAG | Mutual fund
17
Is Your Investment Advisor Capitalizing on Your Fear?
0 Comments | Posted by Alexander Green in Alexander Green
Is Your Investment Advisor Capitalizing on Your Fear?
by Alexander Green, Investment U Chief Investment Strategist
Monday, January 16, 2012: Issue #1687
Make no mistake. Investors are petrified right now. And they’re telling their investment advisors about it.
The question is: “What is he or she doing in response?” If the answer is adjusting your asset allocation, focusing on your long-term investment goals, or doing a bit of handholding, you probably have a good one.
But if they’re preying on your emotional state with unsuitable investments or all-or-nothing advice, beware.
The story is as old as equity investing itself. When times are good, investors get complacent, take too much risk and generally regret it. When times are bad, investors become anxiety-ridden, take too little risk and generally regret it. Seasoned advisors know this and try to keep you on the right track. But less knowledgeable or less scrupulous advisors may try to take advantage of your worries.
For instance, your investment advisor may recommend that you load up on variable annuities in this uncertain environment. Not a good idea. Some annuities are right for some people. They offer tax-deferred compounding (like an IRA) and a principal guarantee. But the typical annuity is ridiculously expensive, offers mediocre insurance coverage, restricts your investment choices to so-so mutual funds, lacks liquidity and comes with enormous surrender penalties.
Too many investors learn these things about annuities after they’ve plunked for one. Hence, you’ll often hear investors complain that they are “stuck in an annuity” for several years. Investigate these insurance contracts before you invest. On the whole they are oversold, frequently misrepresented and completely inappropriate for many folks.
Another sign that you have a misguided (or unethical) investment advisor is if he suggests that you abandon proven investment principles. For example, if your investment plan is based on a broker’s economic forecast or market timing advice, good luck. You’re going to need it.
No one can accurately predict the economy with any consistency. And it wouldn’t really matter if they could. Stocks routinely rally during the bad times and sell-off during the good ones. If your investment advisor doesn’t know this, you shouldn’t be using her. If she does and is still trying to convince you to flee the market, that’s even worse.
Also beware investment advisors who are paid on a transaction basis and therefore have an incentive for you to trade more frequently. Some brokers today are telling their clients that the old rules no longer apply, that you need to jump in and out of the market and from stock to stock. For a commission-based broker, this can be entirely self-serving advice. And it is almost certain to end badly… at least for the client.
I know it’s tough to buy – or just hang in there – when the outlook is dark. But look back at history. The market was a screaming “Buy” after the crash of ’87, the bear market of 1990, the tech wreck of 1994, the Asian Contagion of 1997, the 2000 to 2002 bear market, and even during the depths of the financial crisis in 2008.
If you’re using an advisor who insists that “this time it’s different,” you might reasonably examine his experience, his ethics and his disciplinary history. And seek out more-qualified advice.
Good Investing,
Alexander Green
13
Are You Ready for The Evergreen Portfolio?
0 Comments | Posted by Alexander Green in Alexander Green
Are You Ready for The Evergreen Portfolio?
by Alexander Green, Investment U’s Chief Investment Strategist
Monday, September 13, 2010: Issue #1343
Bill Gross, the top-performing manager of the Pimco Total Return Fund, the world’s largest actively managed mutual fund, says it’s time for investors to accept and start adjusting to “the new normal.”
What’s that?
High unemployment, excess housing capacity, difficult-to-obtain credit and, not least of all, much-lower-than-historic returns from stocks, bonds, real estate and cash.
Sounds depressing. However, some investment advisors aren’t content telling their clients to simply lower their expectations. Two of them are seasoned investors Martin Truax and Ron Miller, Managing Directors at Atlanta-based Morgan Keegan & Company.
Adjusting to the “New Normal” With The Evergreen Portfolio
Truax and Miller point out that “buy and hold” investing and simple diversification haven’t worked over the last 10 years – and it’s hard to disagree. The S&P 500, for example, is no higher than it was in 1999.
Looking forward, they argue that these failed approaches won’t work over the next 10 years either.
Yet there are proven strategies that are likely to produce high returns with an acceptable level of risk. In their new book, The Evergreen Portfolio, out this week from John Wiley & Sons, Truax and Miller invite more than a dozen of the nation’s leading analysts to talk about “the new normal” and make specific recommendations about what investors should do with their money today. (They also reveal their own particular solution: The Evergreen Portfolio itself.)
The book is chock full of interesting and unconventional investment angles. That’s not too surprising when you consider who was involved in this project.
The Evergreen Portfolio: A “Who’s Who” of the Investment World
Contributors to The Evergreen Portfolio include such well-known names as…
- Rick Rule, CEO of Global Resource Investments.
- Dr. Mark Skousen, free-market economist, former Investment U Chairman and current contributing editor, and editor of Forecasts & Strategies.
- Elliott Gue, editor of The Energy Strategist.
- Frank Trotter, currency specialist and president of EverBank.
- Mining specialist Bob Bishop, the longtime editor of Gold Mining Stock Report.
- Bob Prechter, editor of The Elliott Wave Theorist.
- Richard Maybury, publisher of U.S. and World Early Warning Report.
There are many others, including yours truly. (In the interest of full disclosure, I have not received – and will not receive – any compensation from the sale of this book.)
There is a lot of pessimism out there right now about what lies ahead for the economy and stock market. Yet, unlike most investment advisors, Truax and Miller don’t try to convince the reader otherwise. They are convinced that excess consumer debt, weakness in housing, and rampant government spending are creating a very tough environment for investors.
Their advice – and the investment advice of their contributors – is to face up to this new reality and start managing your portfolio effectively to deal with it.
Why You Need to Read The Evergreen Portfolio
The Evergreen Portfolio is written for:
- Investors who want a thorough understanding of “the new normal” and hard-hitting advice about how to protect your assets even in inflationary or deflationary times.
- Businesspeople and other professionals who have been successful in their careers but need a solid foundation for investment success.
- Investors who are unhappy with the performance of their brokers and money managers and want “untainted” investment advice.
- Investors who are overwhelmed with too many investment choices and want an uncomplicated approach to the market.
I’m a contributor to The Evergreen Portfolio, so perhaps I have a positive bias. But the book is the distilled wisdom of more than 15 seasoned investment pros and a thoroughly enjoyable read, full of unconventional ideas and unusual insights.
There will be fortunes made and lost in the months ahead – and, like most readers, I intend to be on the winning side. The Evergreen Portfolio is a survival guide for those who want to protect and build their wealth in the tumultuous years that almost certainly lie ahead.
Good investing,
Alexander Green
P.S. The Evergreen Portfolio is available at bookstores nationwide and is currently discounted 28% on Amazon. For further information on the book, click here.
26
Timing the Market: If Only You Knew What Mark Hulbert Knows…
0 Comments | Posted by Alexander Green in Alexander Green
Timing the Market: If Only You Knew What Mark Hulbert Knows…
by Alexander Green, Chief Investment Strategist
Monday, April 26, 2010: Issue #1246
For over a decade, I’ve been telling readers that timing the market isn’t just unhelpful… it actually hurts performance.
Now the evidence is even more definitive…
Sure, it’s easy to look back and see exactly when you could have been in or out of the market for maximum performance. That’s the beauty of hindsight.
But when you look ahead, things get a whole lot cloudier. So if you’re even thinking about jumping in or out based on some guru’s system or “market outlook,” listen up…
Trying to Time the Market? Don’t Do It!
The Journal of Financial Economics, an academic journal, recently published a new study – “Measuring Investor Sentiment With Mutual Fund Flows.”
Using easily available public information published by the Investment Company Institute, a mutual fund trade organization, the researchers focused on investor exchanges out of stock funds into bond funds and vice-versa.
This led to an interesting discovery…
- The research shows that market timers, as a group, have god-awful instincts. In fact, you could hardly find a better investment system than to do EXACTLY THE OPPOSITE of what they’re doing.
- The researchers built a hypothetical portfolio going all the way back to 1984 and switched back-and-forth between the S&P 500 and 90-day T-bills. They did the mirror opposite of what mutual fund flow figures showed switchers were doing.
- Over the next 25 years, the portfolio produced an annual return of 12% – 1.6% a year better than merely buying and holding the S&P 500.
To put this in concrete terms, buy-and-holders turned a $10,000 initial investment (with dividends reinvested) into $118,639 over the period.
Those who did the opposite of mutual fund timers, however, turned the same $10,000 into more than $170,000. (Most fund switchers, on the other hand, did about as well as someone betting on black or red at the roulette wheel.)
That’s not the best part, however…
An Impressive Performance… For Serious Contrarians Only
What makes these numbers even more impressive is that the contrarian portfolio took on far less risk than being fully invested in stocks. After all, it was invested in riskless T-bills nearly half the time.
I’m not actually recommending that you follow this strategy, incidentally. For one thing, past performance – as every investment prospectus reminds you – does not guarantee future results.
Plus, 25 years as a portfolio manager and investment writer have proved to me that the overwhelming majority of investors lack the emotional discipline to invest contrary to the crowd. (So when the chips are down, you may still be out.)
As Mark Hulbert, editor of the independent Hulbert Financial Digest, concludes, the average investor “would be far better off if he never engaged in market timing.”
The Oxford Club doesn’t. And it shows in our results…
A Top Five Ranking for 10 Years Running
Of course, every newsletter editor brags that his investment letter gives superior returns. The industry bears an uncanny resemblance to Lake Wobegone, where “all the women are strong, all the men are good-looking and all the children are above average.”
It’s worth noting, however, that Hulbert ranks The Oxford Club Communiqué among the top five letters in the nation for risk-adjusted performance over the past 10 years.
That allows us to give entirely honest answers to the two most commonly asked questions:
- “How has your investment advice worked out?” – Beautifully.
- “What do you think the market will do next?” – We haven’t the foggiest notion.
Good investing,
Alexander Green
Editor’s Note: Are you trying to time the stock market? Don’t! There’s a better way to tackle the investing process: let some of the best, most successful analysts in the business do the work for you.
The Oxford Club’s pragmatic, “market neutral” approach has generated consistent, impressive results for many years, based on real facts, information and numbers that matter, not arbitrary stock market indicators or timing.
For more details on how you can profit from the stocks in The Oxford Club’s Communiqué portfolio, please visit this link. You’ll see why the Hulbert Financial Digest has ranked the Communiqué in the top five investment newsletters over the past 10 years and get the latest investing ideas, insights and recommendations that can make you money for the next year and beyond.
