by Dr Invest
What is your real potential for long-term growth in the stock market? If you don't understand the dangers of BUY and HOLD, you will get stung in today's market. This doesn't do away with a BUY and HOLD STRATEGY, but unless there are real fundamental changes we are unlikely to see a return to the good old days.
To survive the days ahead you are going to need to learn how to mange your own investments. Over the past 12 years, the DOW has moved from 11,400 to 12,400 today. That is an average of about .83% gain per year. Today, a CD can return 1.10% per year.
Look at the HORIZONTAL LINE
What I am Illustrating is that over the years, until around 1999-2000, the market has given the long-term investor the promised returns of 10-12%, but in the last 12 years, the market has changed. The PROMISE by INVESTMENT ADVISORS of an 8, 10, or 12% return is impossible over the long-term and IS A LIE! You no longer can invest money and expect it to increase if you are using the LONG-TERM BUY and HOLD INVESTMENT STRATEGY. At this point, this kind of strategy is a BUY and HOPE STRATEGY. If you invested into the DOW index fund in January of 2000, the maximum return would have been only 10% over a 12 year period or .83% per year.
Until our own national debt problem is resolved, we will not be able to break through the DOW plateau. And most importantly, we will never see the long-term gains we once had. The market has changed and investment advisors looking backward to average in 50 years of "good times" are blind to where our market really sits at this moment.
From a technical perspective, the above DJI appears to be consolidating and either the market will break-up or break-down after the consolidation period. We had a similar consolidation pattern from 1975-85, a twenty-year period. So, this present period of consolidation could last another 8 to 10 years. If you are a baby-boomer, this could be a real baby-bummer, prolonging the period you will need to work before retiring.
The Market this Week
All markets are EXTREMELY VOLATILE at this moment. There is a possibility for a brief rally until the end of December or the first part of January. The ongoing fears of the EURO-DEBT continue to make the stock market choppy. There is a BUBBLE in BONDS and unlike the preceding years, BONDS are loosing money.
Although some head-way has been made in an agreement for austerity in Greece and Italy, there is little hope that either country can successfully meet the goals set by the EURO-TRIBE. So the expectation is that around FEBRUARY of 2012 the ongoing drag of Europe will pull the world into a double-dip recession. Look at the chart below:
Here are a chart and a graph showing the PIIGS' and the United States' indebtedness -- more specifically, their public debt and 2009 deficit relative to GDP.
Just glancing at the chart, and remembering that the PIIGS are among the weakest economies in Europe, it seems that the United States isn't in great shape either. It's just on par with Spain, whose economy is struggling.
The difference with the U.S. is that the DOLLAR in comparison to other currencies is still strong and the DOLLAR is considered a safe-haven if you want to move from a weakening currency to a stronger currency like the DOLLAR. Greece and Italy are about equal in debt, but a closer look shows Italy worse-off. Both Greece and Italy are close to collapse. I am hoping for a solution, but risking your life savings in hopes of a solution is unwise.
In Austin, Texas is a little investment firm called, Hoisington Management. Here is what you need to enter on your address bar: <http://www.hoisingtonmgt.com/hoisington_economic_overview.html> or just click on the label enclosed. When you arrive at their webpage, select: Quarterly Review and Outlook, Third Quarter. With 4.5 BILLION under management, I think they have cutting edge research. READ the THIRD QUARTER OUTLOOK for 2011. You get the benefit of a quality research paper without the $60 per month fee.
Where should I put my money in the short-term?
I am invested in three stocks, FDO, DLTR, and CATM. (Family Dollar Store, Dollar Tree Stores, and Cardtronics ATM. I am also invested at this moment in TIP and BND which are ETF bond funds. TIP is the best performing ETF bond fund at this time.
Make no mistake, I have STOP-SELLs placed on each of these stocks and bonds. If a sudden down turn occurs in the market, these stocks and bonds will sell. So my investments are actively managed. (look up STOP-SELL on investopedia) My only risk is with FDO, DLTR, and CATM. After a week of being invested in these stocks, I am not fully satisfied with the tepid growth in these stocks since their purchase, excepting CATM.
I am following specific trading rules and will not leave the market until the 6% stop-limit is reached or a profit is taken. My fears and emotions have no influence on the rules of the trade.
What is important, is that NOW IS NOT THE TIME TO BE IN THE MARKET. The present market is too sluggish to be certain of a profit. If the market does turn-down in February of 2012, you could loose 20, 30, or 40% of your portfolio.
My Suggestion, buy Certificates of Deposit
Go to GOOGLE ADVISER and select: CDs. Enter in the amount you would like to put into CDs and the length of the investment. Google will show you the best prices for CDs.
<https://www.google.com/advisor/uscd?bsp&s=1&kw=best%20CD%20rates&group=GenericRadio&q=best+cd+rates#!search&Issuer_S=__any__&Normalized+Term+Length_R=0_1001&Deposit_D=100000&CD+Type_S=Normal&Zipcode_S=78626&si=0&start=0>
This will help you select the best CDs at this time for a CD ladder. As mentioned, don't put more than $100,000 at any banking institution for FDIC purposes. Even if you get less interest, it is worth it to limit your CD to $100,000. Depending on your investment, divide it into 8 parts (placing 6 of those parts into CDs) putting part into CDs and keeping part in a brokerage account to invest should the market begin to rise. I would suggest that you have 3, 6, and 12 month CDs initially. If we are going into a double-dip recession, we will revisit the lows of 2008. When that journey downward is complete, it would be a good time to reinvest into the market.
(Note: The above article is for entertainment purposes only and not to be used to make any finanical decision.)
What is your real potential for long-term growth in the stock market? If you don't understand the dangers of BUY and HOLD, you will get stung in today's market. This doesn't do away with a BUY and HOLD STRATEGY, but unless there are real fundamental changes we are unlikely to see a return to the good old days.To survive the days ahead you are going to need to learn how to mange your own investments. Over the past 12 years, the DOW has moved from 11,400 to 12,400 today. That is an average of about .83% gain per year. Today, a CD can return 1.10% per year.
What I am Illustrating is that over the years, until around 1999-2000, the market has given the long-term investor the promised returns of 10-12%, but in the last 12 years, the market has changed. The PROMISE by INVESTMENT ADVISORS of an 8, 10, or 12% return is impossible over the long-term and IS A LIE! You no longer can invest money and expect it to increase if you are using the LONG-TERM BUY and HOLD INVESTMENT STRATEGY. At this point, this kind of strategy is a BUY and HOPE STRATEGY. If you invested into the DOW index fund in January of 2000, the maximum return would have been only 10% over a 12 year period or .83% per year.
Until our own national debt problem is resolved, we will not be able to break through the DOW plateau. And most importantly, we will never see the long-term gains we once had. The market has changed and investment advisors looking backward to average in 50 years of "good times" are blind to where our market really sits at this moment.
From a technical perspective, the above DJI appears to be consolidating and either the market will break-up or break-down after the consolidation period. We had a similar consolidation pattern from 1975-85, a twenty-year period. So, this present period of consolidation could last another 8 to 10 years. If you are a baby-boomer, this could be a real baby-bummer, prolonging the period you will need to work before retiring.
The Market this Week
All markets are EXTREMELY VOLATILE at this moment. There is a possibility for a brief rally until the end of December or the first part of January. The ongoing fears of the EURO-DEBT continue to make the stock market choppy. There is a BUBBLE in BONDS and unlike the preceding years, BONDS are loosing money.
Although some head-way has been made in an agreement for austerity in Greece and Italy, there is little hope that either country can successfully meet the goals set by the EURO-TRIBE. So the expectation is that around FEBRUARY of 2012 the ongoing drag of Europe will pull the world into a double-dip recession. Look at the chart below:
Here are a chart and a graph showing the PIIGS' and the United States' indebtedness -- more specifically, their public debt and 2009 deficit relative to GDP.
Just glancing at the chart, and remembering that the PIIGS are among the weakest economies in Europe, it seems that the United States isn't in great shape either. It's just on par with Spain, whose economy is struggling.
The difference with the U.S. is that the DOLLAR in comparison to other currencies is still strong and the DOLLAR is considered a safe-haven if you want to move from a weakening currency to a stronger currency like the DOLLAR. Greece and Italy are about equal in debt, but a closer look shows Italy worse-off. Both Greece and Italy are close to collapse. I am hoping for a solution, but risking your life savings in hopes of a solution is unwise.
In Austin, Texas is a little investment firm called, Hoisington Management. Here is what you need to enter on your address bar: <http://www.hoisingtonmgt.com/hoisington_economic_overview.html> or just click on the label enclosed. When you arrive at their webpage, select: Quarterly Review and Outlook, Third Quarter. With 4.5 BILLION under management, I think they have cutting edge research. READ the THIRD QUARTER OUTLOOK for 2011. You get the benefit of a quality research paper without the $60 per month fee.
Where should I put my money in the short-term?
I am invested in three stocks, FDO, DLTR, and CATM. (Family Dollar Store, Dollar Tree Stores, and Cardtronics ATM. I am also invested at this moment in TIP and BND which are ETF bond funds. TIP is the best performing ETF bond fund at this time.
Make no mistake, I have STOP-SELLs placed on each of these stocks and bonds. If a sudden down turn occurs in the market, these stocks and bonds will sell. So my investments are actively managed. (look up STOP-SELL on investopedia) My only risk is with FDO, DLTR, and CATM. After a week of being invested in these stocks, I am not fully satisfied with the tepid growth in these stocks since their purchase, excepting CATM.
I am following specific trading rules and will not leave the market until the 6% stop-limit is reached or a profit is taken. My fears and emotions have no influence on the rules of the trade.
What is important, is that NOW IS NOT THE TIME TO BE IN THE MARKET. The present market is too sluggish to be certain of a profit. If the market does turn-down in February of 2012, you could loose 20, 30, or 40% of your portfolio.
My Suggestion, buy Certificates of Deposit
Go to GOOGLE ADVISER and select: CDs. Enter in the amount you would like to put into CDs and the length of the investment. Google will show you the best prices for CDs.
<https://www.google.com/advisor/uscd?bsp&s=1&kw=best%20CD%20rates&group=GenericRadio&q=best+cd+rates#!search&Issuer_S=__any__&Normalized+Term+Length_R=0_1001&Deposit_D=100000&CD+Type_S=Normal&Zipcode_S=78626&si=0&start=0>
This will help you select the best CDs at this time for a CD ladder. As mentioned, don't put more than $100,000 at any banking institution for FDIC purposes. Even if you get less interest, it is worth it to limit your CD to $100,000. Depending on your investment, divide it into 8 parts (placing 6 of those parts into CDs) putting part into CDs and keeping part in a brokerage account to invest should the market begin to rise. I would suggest that you have 3, 6, and 12 month CDs initially. If we are going into a double-dip recession, we will revisit the lows of 2008. When that journey downward is complete, it would be a good time to reinvest into the market.
(Note: The above article is for entertainment purposes only and not to be used to make any finanical decision.)
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