3 Big Lies

So much of what you hear in the financial press these days is so wrong that one most financial television and print should consider only strictly for entertainment purposes. In this article we examine more great is constantly cycled through the so-called "experts."
Big Lie # 1: Buy Large Cap Stocks that pay dividends
The idea here is that you buy "feel good stocks" such as Coke, Wal-Mart, and Microsoft. The theory is that if these companies can not make it, and that even if one can not appreciate their shares, you will earn dividends on the money. But here's the real story:
- If you are the owner of Microsoft, you have not made money for the last seven years. But you have a dividend of 0.32% earned per year.
- Your shares in WalMart have been dead for six years, but paid a 1.12% annual dividend.
- Coke lost your 20% from January 2005 until January 2006, but paid a dividend 2.3%.
- Perennial tough IBM lost more than 25% from 2001 to 2006 but eked 0.90% in dividends.
I could go on and on, but you get the idea.
You will probably never go broke investing in large-cap, but you'll never be rich, either. In fact, you will be much to do just to keep up with inflation pace.
And if you have decided to go with a large cap mutual fund, you have 5.8% annualized return over the past five-year average. Not bad, but not great. At 6% per year, even in a tax-deferred retirement plan, it will ask for your money to double. Approximately 12 years Taking inflation into account, it will take over 20 years to double in today's dollars your money!
Big Lie # 2: Buy Mutual Funds
Mutual funds are cash cows for the financial sector, but they are full of problems for investors like you and me.
Between December 31, 1992 and December 31, 2002, 10 years we have enjoyed one of the greatest bull markets in history, nearly 80% of all mutual funds underperformed the market, costing investors billions of dollars in unclaimed winnings.
And you get to pay for underperforming the market.
On top of the fees, you get capital gains tax and the occasional scandal. All in all, not a very good deal.
The other major problem with mutual funds is that just like the stock selection, it is difficult in the right sector at the right time.
In 2005, Latin America and natural resources the big winners of the year were. In the past three years have been the top performers Natural Resources, Latin America and India. Over five years, the big money made in Eastern Europe, Russia and Precious Metals. So unless you have a crystal ball and can pick exactly in each year, the right sector you will, by definition, have some or all of your money underperforming the market at all times.
The only exception in the mutual fund swamp, the group enhanced index funds offered by Rydex and Profunds. These provide an opportunity to the performance of the major stock market indexes, either long or short double, and can increase your profits if properly marketed with a proven trading system.
But, fortunately, there is a better way and this development, the mutual fund industry run really, really scared.
Exchange Traded Funds, or ETFs, first appeared about five years ago and today are to steal money hand over fist from traditional funds.
This asset class is growing nearly 300% per year and it is easy to see why.
Exchange Traded Funds offer higher performance by simply following a market like we ¡| ve already seen, 80% of mutual funds underperform the market so that ETFs are better performers right off the bat.
ETFs trade like stocks, their costs are much lower and they have zero scandals. On top of that, you can major market indexes or you can trade sectors, such as precious metals, healthcare or internationally. All in all, Exchange Traded Funds offer an excellent alternative to mutual funds and we recommend that ETFs are a part of the portfolio of each investor.
Big Lie # 3: Buy Bonds
There is nothing wrong with buying bonds, as long as you realize that they are not the safe haven of the financial press is to be them.
Sure, they are backed by the full faith and credit of the U.S. government, but they come with a host of hidden risks that should be considered by any investor, especially those in or near retirement.
The standard rule of thumb is that an investor should allocate its assets by subtracting his age from 100 and then to the mix of stocks and bonds to determine. In its portfolio using that number
For example, a 55-year-old investor from 100 and come with 45. Off his age Therefore, to distribute 55% in bonds and 45% in equities portfolio.
The theory is that the older you get, the less stock market exposure you should have, because you have less time to recover in case of a market drop would have. This is good advice if you're after a buy and hold plan.
However, the danger of this plan is that as you get more and more money to allocate to bonds, you become more vulnerable to inflation. In today's world where the average person can expect to live for 20 years or more in retirement, inflation, market risk is not your worst enemy.
10 Year U.S. Treasury Bonds currently supply about 4.4%, not great when you consider that the cost of living increased by 2.5% per year.
It will be a huge nest to participate in a livable retirement income at a fixed eggs to make 4.4% and in twenty years, inflation-adjusted bonds, your income will be reduced by more than 50%.
Another gruesome risk of bonds is interest rate risk. If interest rates rise bond prices fall, in other words, your nest egg falling in value when interest rates rise environment. That will not matter if you can hang on until the bond, but that could be ten, twenty or even thirty years from now.
What would happen if unexpected illness or financial forced you to cash in your bond before maturity? If interest rates have risen since you bought, you will lose money.
How safe is that?
The only sensible solution for an investor today is to protect, feed themselves and find a better way to his wealth and grow. There are a number of proven options available, but the absolute worst thing one can do is listen to the experts who tell you to "buy buy large caps, buy mutual funds and bonds."
Copyright 2006 Equitrend, Inc.

Ken Lay, Enron & ETFs

The painful story of Ken Lay and Enron offers us many lessons about managing and investing. My personal opinion is that Mr. Lay was a good man who got a little carried away and made a few key mistakes. He should be judged on his overall career as an innovative executive and generous contribution to his community and not just the mistakes that lead to the collapse of Enron.
I first met Ken Lay and Enron style of the company, while the United States to the management of the Asian Development Bank in Manila. Manila experienced severe blackouts and Enron won one of the many fast-track contracts offered by the Philippines government to generate the capacity to quickly add nice thick margins. During 1994-1995, I help Asian developing. Energy projects at Enron
At that time, Ken Lay and Enron were both rising stars and the darlings of the investment world.
Too often, investors forget that the most important factor to consider when evaluating a company is the quality and character of the management. You can get the best products, lucrative and profitable markets and the best balance, but if management fails the whole story and the share will crumble.
A related problem is the set-up of the board of directors of a company and whether it is independent and has strong oversight of management. Another important factor to consider is the culture of the company. His economic incentives offered to management and staff closely the interests of shareholders?
Finally, it is easy to understand the business and its operations and financial transparency, so that investors can evaluate. The value and profitability of the company
Unfortunately, Enron not all four tests. Let's briefly look at each failure.
First, when I was with Enron, Mr. Lay had a strong and very capable COO Rich Kinder who made sure the trains ran on time. It was an effective partnership. Ken Lay was Mr. Rich Kinder was Mr. Outside and Inside. But it's Child was not going to wait forever to CEO and apparently for personal reasons, Mr. Lay blocked his appointment as CEO, leading to his eventual departure to the highly successful pipeline company Kinder Morgan forms become. Eventually, Mr. Jeffrey Skilling was named CEO and while he is intelligent and hard drive, he missed the character, experience and managerial skills needed for the job. In hindsight, this would have been a red flag for investors. When Skilling abruptly left the company in 2001, Mr. Lay returned to the CEO position, apparently without sufficient knowledge of the details of the financial problems and mismanagement of Enron.
Second, Board of Directors of Enron was mostly allies and friends of Mr. Lay and inadequate supervision Enron management and operation. Shareholders should see that this was the case and demanded more say in the appointment of experienced and independent directors as a check on management.
Third, the culture of Enron was very short-term oriented. Substantial bonuses were linked to demanding, but short-term performance objectives that led to the employees to make shareholder value for long-term projects that use sometimes made no sense. My perception was that for many workers, Enron was a chance to try to earn a lot of money and then go do something else. The problem was they did not their entrepreneurial activities but rather money fund shareholders with their own money. CFO Andrew Fastow was just one example of the problem.
Finally Enron trading and so-called innovative financing techniques were so complex and opaque that even experienced Wall Street analysts could not figure out how or when Enron was making money. So when questions were raised about certain questionable financial transactions, investors lacked confidence to hang by the turbulence hard and ran for the exits at the same time. Investors were without even understanding its business and the risks inherent in its activities in Enron stock piled.
Well that's my opinion what went wrong with Enron and investors in Enron, but what does all this have to do with ETFs?
First, if Ken Lay had instead of such a high concentration of Enron stock in a margin account, a balanced global ETF portfolio he may have faired better in court. One of the main charge against him was that if the stock price fell, he sold Enron stock while he stated that he buys in public.
For investors, it is logical to ask how they can be expected that the quality of management, supervisory board, the culture and incentives for workers assess and understand all the fine print in the financial statements. The answer is that the vast majority of investors have neither the experience nor the time to do this.
What if instead of buying one too many Enron stock, would just use their energy spread over a basket of energy companies by buying an energy ETF, such as the S & P Global Energy (IXC) ETF investors? Even at its peak market capitalization, Enron would at best have been. 6-7% of the basket Even better if the investor has to lock in profits or limit losses. A trailing stop loss in place
If you have the time and inclination, go ahead and do some stock selection but keep the lessons of Enron and Ken Lay in mind and puts the core of your overall portfolio in ETFs.
Carl T. Delfeld President & Publisher Chartwell Partners Carl has over twenty years experience in the global investment business with a strong background in Asia.
Author of global investor primer "The New Global Investor"
President of global investment consulting firm Chartwell Partners
Publisher of the Chartwell Advisor ETF Report and Asia Pacific Growth
Columnist on global investing with Forbes Asia: "Global Gambits"
Former U.S. Representative to the Board of Directors of the Asian Development Bank
President of the global economic strategy think tank Chartwell America
Asian specialist with the U.S. Joint Economic Committee and the U.S. Treasury
Former member of the Asia Pacific Economic Cooperation Committee USA
Former investment executive with Robert Baird & Company and UBS
Graduated from the Fletcher School of Law and Diplomacy with economics scholarship from US-Japan Friendship Commission
Exchange student at Sophia University, Japan's Ministry of Education Fellow at Keio University

5 Tips To Guarantee Trading Success (1)

Do you have experience trading or even if you do not, here are some tips that I have learned from one of the roughest schools in life. Which school would that be? Why would the school of hard knocks. Yup, the lessons were painful and expensive, but got into the lesson very well. So hopefully these tips will save you the pain and financial lessons I had to endure.
1.Trading is simple, but it is not easy. If you see yourself having a future in this sector, forget about "hope" and stick to your stop loss.
2.When you open a trade, looking for signs that you were wrong. If you see them, then get out before you stop loss is executed.
3.Don opens a box just because it is cheap. The only reason to open a position if the underlying value looks like a decent move to make out.
4.good trading should be boring to do over and over again. Just the same If there's one thing I guarantee on the market, it's that 'thrill seekers' or adrenaline junkies get their accounts grounded in little bits and pieces.
5.The watershed when amateur traders turn into professional traders when they stop searching and hoping for the "next great technical indicator" and start managing their risk on each trade.
By Brian Lee
Learn how to make 100% annualized return!

How to Protect Yourself Against Penny Stock Scams

Many people have been subject to penny stocks scams. They hear about the next big hot penny stock in message boards, e-mails, faxes, and other people who claim that such and such penny stock will go through the roof. So they listen and put some money in the penny stock. Then, lo and behold, they see their investment crash and they wonder what went wrong. Then they go to other people's fault, when in fact, they have no one to blame but themselves. Here are three ways to protect against penny stock scams yourself.

1. Take information that you see on message boards with a grain of salt.
Message boards are a double-edged sword. On the one hand, they can be. Be a great source of information On the other hand, message boards to gnaw the beginners. Been fertile ground for the wolves These wolves are known as "pumpers". They will throw important sounding terminology at you and come across as to make sure that this is the next penny stock to invest in. Sometimes these "pumpers" are none other than those paid by the hyped penny stock company to artificially inflate the price Available through word of mouth. To use when making your final decision. Use extreme discretion when deciding what information
2. Ignore all mail, email, or fax a penny stock hypes.
A penny stock promoted through unsolicited e-mail, email, fax would label themselves as large red letters spelling SCAM. Do you know people who are all talk and no action? Penny stocks that promote themselves via spam are all talk and no action. The sole purpose of spending is to create the price of the penny stock blow. Artificial height Then the people who promote the stock will sell their shares at a profit thus driving the share price down so those who have recently invested in a negative loss. What makes the situation worse is that the same people who recently bought will hold in the hope of having the stock price to rise again, but 9.9 times out of 10, the stock price will continue to fall and they will suffer a greater loss.

3. Do your own research and personal responsibility.
If you happen to stumble on a penny stock that shows promise, do not take it at face value. Do your own research on this penny stock. What kind of services or products to the offer? How is their cash flow already in recent years? Do they have the bankruptcy recently? Take a look at their quarterly statements. In other words, you and you alone must take full responsibility for any action you take when it comes to money in penny stabbing to take supplies.
Follow these three guidelines and you will do well in protecting yourself against penny stock scams.

Investing in Stocks: To Hold or Sell Yesterday's Winner?

Here's the problem. You bought a stock many years ago that is now worth 10 times what you paid for, but in the last 5 years rate seems to be super glued to the wall. You've always been a proponent of "buy and hold" and this file seems to bear out the wisdom of that strategy. But now you're not sure - maybe it's time to move on to something else.
The question you keep asking yourself the same question thousands have asked before - when I know that this powerhouse has run out of gas and it's time to sell?
Here's needed some help with both sides of the coin:
1. "Buy and Hold" does not mean "till death do us. "Every investment strategy consists of three basic components:.. Buying, spacious, and selling Obviously, you buy and hold parts worked well, the stock was a good choice and has significantly increased in value, despite what probably some volatility along the way. It seems like you've gotten out of the "growth" phase of the Security With the lackluster performance of recent years, the stock may have matured and simply will not repeat its past performance as Paul Simon would say.. "Time to to sell, Nell. "
2. Is there a dividend yield is high enough to preserve the security? Figure out your dividend yield based on your original purchase price. If the 5% or more, which is not a bad annual return for a high security with a future appreciation potential. A company that has a record of dividend increases is more reason not to sell.
3. You know if the price decreases not above move, bragging of your average annual return. If you are up 200% on a stock of more than 5 years, boast an average 40% average annual return makes for a good story. If you're still an increase of 200% in 10 years, in all likelihood someone a better story.
4. Something overheated has a cooling off period. After a long run, the weekly closing price of a share sometimes within a few percentage points below the average volume. According to technical analysis, as this takes time, the stock can easily form a new base price. With an increase in the volume, the stock may "break out" and continue to rise. In the event that the share price falls (especially in the latter stage bases), since this is a danger sign could mean institutional money is moved away from the stock.
5. No matter how much you want, you can not change society change. Change in business fundamentals, management and business strategy can all affect the price of a stock. Sometimes it's a change for the better, sometimes not. You have to realize that nothing you can do will change this change. Sentimentality does not have much space in the stock market. If the foundations are not what they used to be, then that's the way it is. Look at yourself in the mirror.
6. Tell the truth - this is really all about the capital gains tax? We all like to play with ourselves, psychological games so do not be ashamed to admit it. If you add your net worth on paper, it looks higher than before tax after tax, right? Unless you plan to die with all your paper profit on the "step up" in basis to receive, recognize the difference between a game and reality.
If you're on the fence about whether to hold or sell, take the time to explore your options and decide your best course. Indecision will get you nowhere.
Glenn ("Chip") Dahlke, a senior contributor to the Living Trust Network, has 28 years in the investment business.
He is a Registered Representative of Linsco / Private Ledger and a principal with Dahlke Financial Group. He is licensed to securities transactions with persons who are residents of the following states: CA. CT, FL, GA, IL. MA, MD. ME, MI. NC, NH, NJ, NY.OR, PA, RI, VA, VT, WY.