Today's Market
by Dr Invest
On Friday, I had expressed my reluctance to enter a gold position because of a strengthening dollar and falling gold price. The price of gold has remained flat or what we call a sideways movement. In all fairness to gold, there has been what is called a "Golden Cross" where the 50 day simple moving average rises about the 200 day simple moving average. See the chart below:
In mid April, the 50 day SMA fell below the 200 day SMA. Gold prices also fell. Gold prices rallied in mid-August, turning into a sideways movement in mid-September. You can see the "Gold Cross" was made on September 20th. The expectation is for gold to decline in price and then resume an uptrend.
So the waiting around to get a gold position is simply to gain a few extra points by buying after gold has lost some of its previous momentum. Secondly, a "Golden Cross" doesn't always guarantee the continuation of a rally in a commodity or stock.
WIRED TO SEE SUCCESS
A Psychologist, studying the mind of stock brokers, noted that stock brokers mostly remembered their successful trades, instead of their failing trades. Perhaps, the psychologist suggested, this helps us see opportunities over risks.
2012 is a perfect year to put this theory to the test. Our feeling is that stock brokers are making money "hand over fist". The S&P is up almost 12% for 2012, and we assume that people who have stayed in the market are also up 12%.
Jeff Macke, one of Yahoo's talking heads, said that Hedge Funds on average were up only 3.9%. When you consider average, this means some were higher and others were lower. People I have been talking with are not seeing 12% returns on their investments and in fact, some people have lost value in their investments.
This discrepancy between the REAL RETURN and ASSUMED RETURN confuses the typical investor. When you hear the S&P has gained 12% for 2012, you assume your portfolio has also gained. This is not always true because your money isn't typically invested into the TOTAL MARKET.
Another problem is that most investment adviser's picks under perform the market index. When you combine this with portfolio fees and adviser fees, you can easily be spending 2% to 4% in total management fees. Throw in adjustment for inflation, which Bernanke is trying to keep at 2%, and you could possibly loose 6% of your gains. From 1995-1998 we saw 20% gains per year, but as the gains in the market decline, you could actually loose money. For example: a year where the total market gains only 6% would leave you with no gains; a year where the total market gain is only 4% would leave you with a loss of 2%.
So some of my friend's confusion is warranted. This blog is only suggesting that if a person carefully invested, using a balanced portfolio, and setting stop-loss/stop-sells on their investment positions, they could erase the costs of a financial adviser and many management fees. This could add an additional 4% of annual returns. Furthermore, this blog suggests that consulting with a financial adviser on an hourly basis is a MUST. This can be helpful in determining the best position for your portfolio and tweaking it from time to time. When you have enough experience and are seeing profitable returns in your own portfolio, you won't need the consultation any longer. But be careful, a financial adviser will want to SELL YOU SOMETHING. Be sure to make it clear, I am not moving my portfolio, I am only seeking your advice on my current investment positions. Remember his goal is to SELL, SELL, SELL. That is how he affords the expensive office, luxury lunches, and newest mercedes. He got those things from people who he sells his products. Don't buy the products, buy information. Most reputable advisors will work with you.
Gotta go! Remain patient.
(Note: the above information is for entertainment purposes only and not to be used as investment advice.)
by Dr Invest
On Friday, I had expressed my reluctance to enter a gold position because of a strengthening dollar and falling gold price. The price of gold has remained flat or what we call a sideways movement. In all fairness to gold, there has been what is called a "Golden Cross" where the 50 day simple moving average rises about the 200 day simple moving average. See the chart below:
So the waiting around to get a gold position is simply to gain a few extra points by buying after gold has lost some of its previous momentum. Secondly, a "Golden Cross" doesn't always guarantee the continuation of a rally in a commodity or stock.
WIRED TO SEE SUCCESS
A Psychologist, studying the mind of stock brokers, noted that stock brokers mostly remembered their successful trades, instead of their failing trades. Perhaps, the psychologist suggested, this helps us see opportunities over risks.
2012 is a perfect year to put this theory to the test. Our feeling is that stock brokers are making money "hand over fist". The S&P is up almost 12% for 2012, and we assume that people who have stayed in the market are also up 12%.
Jeff Macke, one of Yahoo's talking heads, said that Hedge Funds on average were up only 3.9%. When you consider average, this means some were higher and others were lower. People I have been talking with are not seeing 12% returns on their investments and in fact, some people have lost value in their investments.
This discrepancy between the REAL RETURN and ASSUMED RETURN confuses the typical investor. When you hear the S&P has gained 12% for 2012, you assume your portfolio has also gained. This is not always true because your money isn't typically invested into the TOTAL MARKET.
Another problem is that most investment adviser's picks under perform the market index. When you combine this with portfolio fees and adviser fees, you can easily be spending 2% to 4% in total management fees. Throw in adjustment for inflation, which Bernanke is trying to keep at 2%, and you could possibly loose 6% of your gains. From 1995-1998 we saw 20% gains per year, but as the gains in the market decline, you could actually loose money. For example: a year where the total market gains only 6% would leave you with no gains; a year where the total market gain is only 4% would leave you with a loss of 2%.
So some of my friend's confusion is warranted. This blog is only suggesting that if a person carefully invested, using a balanced portfolio, and setting stop-loss/stop-sells on their investment positions, they could erase the costs of a financial adviser and many management fees. This could add an additional 4% of annual returns. Furthermore, this blog suggests that consulting with a financial adviser on an hourly basis is a MUST. This can be helpful in determining the best position for your portfolio and tweaking it from time to time. When you have enough experience and are seeing profitable returns in your own portfolio, you won't need the consultation any longer. But be careful, a financial adviser will want to SELL YOU SOMETHING. Be sure to make it clear, I am not moving my portfolio, I am only seeking your advice on my current investment positions. Remember his goal is to SELL, SELL, SELL. That is how he affords the expensive office, luxury lunches, and newest mercedes. He got those things from people who he sells his products. Don't buy the products, buy information. Most reputable advisors will work with you.
Gotta go! Remain patient.
(Note: the above information is for entertainment purposes only and not to be used as investment advice.)
No comments:
Post a Comment