What Are Mutual Funds

So, you want a Ferrari? So do I. How about a boat, a vacation house, or a paved path to financial freedom?  Well, there are several ways to achieve these goals, and investing in mutual funds is a great place to start.

What are mutual funds? A mutual fund is basically a pool of money that is professionally managed and invested in assets.  Professional management is an important feature to mutual funds. Most people don’t have the expertise or time to make strategic investment decisions. The fund managers are highly educated and trained to make these decisions with the goal of the best possible returns. Mutual funds will vary depending on its investing objectives. Some fund companies and managers may invest in blue chips, some in small companies, and others in international stock. There are three main types of mutual funds; stock funds, bond funds, and money market funds. Here, we will be discussing stock funds.

Mutual funds can be a great investing vehicle, however, they should not be the first investment that you make. I follow an investment hierarchy. This hierarchy places investment categories in the order that you should invest in and proceeds as follows; Step 1. Savings accounts/Money markets. Step 2. Bonds/Personal property. Step 3. Mutual funds. Step 4. Individual stocks. Step 5. Commercial real estate. Step 6. Commodities. Step 7. Rare collectibles – precious metals, paintings, and memorabilia such as a Barry Bonds autograph, er…uh, an Alex Rodriguez autograph, um, fine, a Roger Maris autograph. So, before investing in mutual funds, you should have money in a savings account/money market and bonds.

Stock mutual funds invest in a number of companies. For example, a tech-heavy blue chip fund might have holdings in Apple, Microsoft, IBM, Google, HP, Motorola, AMD, and Sony, to name a few. So, the overall performance of the fund will be based on the individual performances of the companies. Contrary to individual stocks, mutual funds will not flourish or sink based on the holdings of one company, but the performances of all of the companies combined.

To illustrate this concept, think of a stock mutual fund as a cruise ship and an individual stock as a ski boat. Both are two different vehicles but have the common goal of leaving the dock to have an enjoyable time in the rough seas. In order for the cruise ship to turn, either in the correct or incorrect direction, it takes time and a large number of individuals. As for the ski boat, it can head in either direction rapidly with just one person. So, mutual funds are less risky but are not immune to peaks and valleys. They can make you great wealth but it usually takes some time, which makes them a good tool for retirement planning.

There are many types of stock mutual funds. Large fund companies such as Fidelity, Vanguard, JP Morgan, American Century, Dreyfus, John Hancock, Janus, and Neuberger Berman, to name a few, offer all types funds for every investment objective. Most of these companies offer funds directed at a specific time to meet your goal, such as retirement.  Fidelity’s Freedom Funds are a great example. These funds use a mix of stocks, bonds, and short-term funds. The managers for these funds will invest your money more aggressively when you’re younger and will change your investments accordingly to become more conservative as you near your goal of retirement.

So, what are mutual funds? Well, everything we’ve just discussed and a lot more. We’ve only begun to explore the world of mutual funds. Other areas I will discuss with you in future articles will be Lump Sum vs. Automatic Investment, Fees, Focused Funds, and The Prospectus. So, once you’re a successful mutual fund investor, you can jump to the more risky and superfluous investments and maybe get that Roger Clemens jersey, um…or that Mark McGwire bat, well…fine, a Hank Aaron bat.

Best Investment Strategies

Lack of proper knowledge is the key factor responsible for people achieving mediocre results or losing money in the stock market. It is therefore important to study the fundamental and technical variables for best investment strategies that are responsible for the increase and the decline in the prices of the stocks in order to invest wisely.

RULES FOR BEST INVESTMENT STRATEGIES:

1. Stock Tips do not translate into money – One of the most challenging problems for today’s investors is that there is too much free information, personal opinions and advice about the stock market. Not withstanding my stock advice of course! Only a specialist in stocks, who is engaged in studying the market or is a professional consultant, will have the intricate knowledge to help you make money. So don’t pay heed to rumors, information from dubious or unknown sources, or be influenced by friends and associates, especially those who have little knowledge about the stock market. It is important to restrict yourself to very few sources of relevant data, facts and time tested principles that have proven to be accurate and profitable over time. It is unbelievable how much erroneous information is out there about the stock market, how it works and how to succeed at it. You wouldn’t believe the volume of non-sense emails I receive on a weekly basis.

2. Follow strict guidelines – Many people don’t know if they should buy, sell or hold on to the stocks and the indecisiveness shows that they do not follow guidelines. It is therefore imperative to follow a set of strict principles or buy and sell rules to help create your best investment strategy principles. Stocknod Alerts is probably the best starting point for text book stock analysis.

3. Withdraw a portion of profits – From time to time it is important to withdraw a part of your profits. The prime reason for investing in the stock market is to make actual profits and not just make profits on paper.  For example, let’s assume you have bought stocks @ $1per share and now the price has gone up to $2 per share. Based on your market analysis, there is a good probability that the price will move up. However there is no harm if you sell a part of your stock and realize the profits from them.

4. Do not buy a stock because of good dividend- Do not be tempted by the lure of getting of getting good dividends. There are dubious companies who would push certain stocks by promising a good dividend.  You might find later that the dividends are not coming and the stock prices have gone down so badly that you have lost your capital. As a general rule the more a company pays in dividends, the weaker it may be. It may have to pay high interest rates to replenish funds paid out in form of dividends. Always remember, the major reason for buying a share is to increase the amount of money invested.
5. Learn to look at stocks objectively- One major reason as to why most people fail to make money in stocks is that their decision making process of buying stocks is guided by hope or personal opinions.  Too many times I have seen personal affinity for a stock (emotions) hinder a person’s logical side of emotions and cause investors to hang on to stocks far too long. Successful investors pay attention to the market and are guided by sound principles and time tested methods that yields results.  The best investment strategies take time and disciplined effort to make the right decision but in the end it’s worth every minute of your time.

Analysis of US Economy

The United States of America is considered the largest and one of the most important markets in the world in respect of economy. It is normally controlled by consumers but often troubled by high debt levels. It is a globally accepted fact that the US has the largest economy. Let’s take a closer look at the analysis of the US economy.

After world wide survey, according to the CIA World Fact Book 2007, the US GDP is considered to be $13.84 trillion.  As a result of the quick economic growth in China, it is forecasted to overtake the US GDP within the next three decades. Of late failure in the US housing project and credit markets have caused in gradual slowdown in the US Economy.

US Economy is mainly based on freedom of the private sector. The economic freedom of the private sector is combined with the relatively low level of regulation and government involvement and a court system that generally protects properly rights and enforces contracts. The US is very rich in natural mineral resources both metallic and non-metallic and a very fertile soil for agriculture and the country is fortunate to have a moderate climate. Besides these advantages, the country has very extensive coastlines on both Pacific and Atlantic Oceans as well as on the Gulf of Mexico which helps export and import system. Besides very long coastlines, it has many rivers, great inland lakes along the US Border with Canada which provides shipping access. The vast waterways are of great help and shape the country’s economic growth over the past several years and also integrate America’s 50 individual states into a single economic unit.

Throughout the history, analysis of the US economy has shown steady growth in labor force, which is a result of constant US expansion. The high wages brings many highly skilled workers from around the world to US together with skilled workers from different parts of the world.

ANALYSIS OF US ECONOMY NEWS RELEASES

MASS LAYOFFS (Monthly)
In February, employers took 2769 mass layoff action involving 295,477 workers. Mass layoff events increased by 542 from January, and initial claims increased by 57,575. Layoff events for all industries and for the manufacturing sector rose to their highest levels on record. Thirty states reached program highs in average weekly initial claims.

EMPLOYMENT SITUATION OF VETERANS
The unemployment rate for the 22.4 million veterans of the US Ar med Forces was 4.6% in 2008. The jobless rate for the nearly 1.7 million men and women who have served in the US Armed Forces since September 2001 was 7.3%.

CHANGE IN REAL AVERAGE WEEKLY EARNINGS, JANUARY 2009- FEBRUARY 2009
Real average weekly earnings fell by 0.3%from January to February 2009 after seasonal adjustment.
US ECONOMIC  ANALYSIS FORECASTING

Prediction about the direction of the US Economy in the short and long term is crucial factors in determining federal government policies, business decisions, and Federal Reserve decisions. Several Institutions make economy predictions and analysis of the US economy including Global Insight and the UCLA Anderson Forecast.

Read more US Economy Stock News blog by Ryan

Stock Market Update

This week it has been the consumer who had Wall Street rallying. While the bear market may still have the bull by the horns, at least we are making some ground in the positive direction.

Today we saw better-than-expected earnings from big consumer brands like Best Buy, ConAgra Foods Inc. and Dr Pepper Snapple Group Inc. Many of these blue chippers shot the Dow average up 174 points Thursday to its highest level in six weeks. It has surged 21 percent since hitting a nearly 12-year low on March 9. And the technology based Nasdaq is now up 0.63 percent for the 2009 year. What a turn around from a month ago.

Much of the boost can be atributed to latest Obama’s administration announcements coupled with strong demand for government debt at the Treasury Department’s latest auction also lifted stocks by helping investors set aside recent nervousness about the government’s ability to fund its economic stimulus and financial bailout programs.

Nearly every day over the past three weeks has seemed to bring morsels of good news — first from the stricken banking sector and then in the form of stronger-than-expected economic data. But Thursday, solid reports from companies selling to the consumer came as a relief to investors anxious about first-quarter earnings, which will begin reporting sometime next month.

But with the end of the first quarter quickly approaching, money managers are fearful of missing out on the recent rally, the magnitude of which usually occurs over the course of many years.

One thing that many people are beginning to believe is that the market is going to bottom in 2009. In fact many economic “experts” have released many statement this week stating that they to feel the end of this recession is near. More political hype or fact based statements is uncertain.

Some numbers to report:

The Dow jumped 174.75, or 2.3 percent, at 7,924.56, its highest close since Feb. 12. It remains down 9.7 percent for the year, however, and down 44 percent from its record close of 14,164.53 in October 2007. The Russell 2000 index of smaller companies rose 18.78, or 4.4 percent, to 445.30.

About four stocks rose for every one that fell on the New York Stock Exchange, where consolidated volume came to 6.84 billion shares, down from Wednesday’s 7.53 billion.

Bond prices jumped after Thursday’s auction. The yield on the benchmark 10-year Treasury note, which moves opposite to its price, fell to 2.76 percent from 2.79 percent late Wednesday. The yield on the three-month T-bill slipped to 0.14 percent from 0.15 percent.

The dollar rose against other major currencies. Gold prices rose modestly.

Oil reached a new high for the year, settling up $1.58 at $54.34 a barrel. 

Best Buy, the world’s largest consumer electronics retailer, said its fiscal fourth-quarter earnings fell 23 percent as it booked some one-time expenses. Stripping out those costs, results beat analysts’ estimates as the world’s largest consumer electronics retailer opened more stores, helping to boost sales. Best Buy rose $4.21, or 12.6 percent, to $37.67.

ConAgra, which owns the Healthy Choice and Peter Pan food brands, posted results that topped Wall Street’s expectations as people go out to eat less and cook more meals at home. The company also stood by its earnings forecast for the year. ConAgra shares rose $1.43, or 9.2 percent, to $16.99.

Dr Pepper Snapple Group Inc. also came in ahead of Wall Street forecasts. The company, which sells drinks such as A&W, Squirt and Hawaiian Punch, $621 million in the fourth quarter as it wrote down assets and spent heavily on restructuring and severance. But its adjusted profit was better than analysts expected. The stock rose $2.36, or 15.2 percent, to $17.87.

Meanwhile, government data indicated that the economy is still in decline, but at a less devastating pace than feared.

This type of advance would traditionally put the Dow in bull market territory (btw a bull market is defined as a 20 percent rise from a low point). But analysts are still hesitant to call the end of the bear market. This hesitation stems from a historic phenomenon known as a bear market rally that can quickly collapse in an uncertain economic environment. And rightfully so as I’m personally hesitant and questioning how long this rush will last. As I heard stated last week “”You might have stopped the flow of blood out of my body, but it doesn’t mean I’m going to survive.”

Investing In Gold Coins

It is an accepted fact that rate of returns are lower with low risk investments options and that is why low risk investments are considered rather disadvantageous. However gold coin investment on the other hand maybe considered as an exception to the rule. For most low risk investments, the investment results are unable to match inflation levels and as such it leads to the loss of money during the final profit/loss calculation, however in almost every case I can remember, investing in gold coins have always keep up with inflation levels.

It is an established fact that we human beings are attracted towards gold since time immemorial. Gold coins are the ultimate personification of the God of Wealth because of the value of gold combined with the shape and physical allure of gold coins. To sum up gold coins are not only good for long term investment but also carries with it that emotional appeal that reduces the risk of its devaluation under any…I said any economic crisis.

The lowest risk options are government bonds issued by the Department of Treasury. Of course, there is one set drawback with these vehicles of investment and it is that the return on investment is based on a fixed rate of interest that is set by the government. The investment interest rate is generally adjusted to stay at par with the rate of inflation that means that you barely make any profits from the investments. As compared to this, investing in gold coins is both a low risk and high rate of return investment option. This is primarily because of two reasons – First gold rarely loses value and secondly gold coin becomes a collector’s item when it becomes old enough and, obviously, in this case the value of gold coin increases. For example, in one case I read, there is a collector who has bought an American $20 double eagle gold coin that was sold for a whopping $7,590, 020 at an auction! The coin was introduced for the first time in 1933 and the auction was held in 2002.

You will probably agree that investing in gold coins is a very lucrative option amongst all other investments under the present economic turmoil. The gold coin carries the value of gold and as already mentioned the value of gold coin increases with the age. So if you are a little gun shy after the last 12 months of watching your stock investments plummet then I would strongly encourage you to look into investing in gold coins.

Read more on Pros and Cons of Investing in Gold

Pros and Cons of Investing in Gold

Investment and Gold always goes together hand in hand and always yields good results for the investors. Majority of the people in the world choose investing in the yellow metal as their first preference. The reason for this are manifold – First the highest liquidity benefit and secondly there is always a market for gold, where you can dispose it anytime. Gold is by far the safest investment as the price of gold seldom fluctuates like you typically see in stocks.  Below I try to breakdown the pros and cons of investing in gold.

Many people in the earlier days used to purchase gold ornaments in order to make investment. Now because of the price and depreciation of the value of gold and the irrecoverable price in designing the ornament, a majority of the people have lost their interest with investing in gold ornaments. So, because of those factors people have started to purchase gold biscuits as an alternative investment. The prime disadvantage in regards to this was the safety factor. Of course, it could not be guaranteed for the 100 percent safety of the yellow metal because of robbery. Now this disadvantage is overcome by gold futures.

The gold futures or bullion trade is part of commodity futures market. You can enter into a contract of specified days in order to buy or sell for the future. When the contract is signed, the actual transaction takes place at the prevailing rate and the difference of buying and selling is considered to be the profit of the transaction. In addition, it has a unique margin trading system where as you are not required to pay the whole amount at one go. It simply means that you pay only 5 to 10 percent of the value. Keep in mind that in the contract you can specify that you are not willing to take possession of the product and you can notify that you would settle the difference, if any, in cash.

As a matter of fact a lot of people believe gold investment is one solid investment that they can rely on. It is important to understand that every ounce of gold flirts with the $1,000 mark, and is more than likely going to rise as the current economic crisis stabilizes. This is an obvious reason why you should take into consideration purchasing gold now, while the price is still low, in order to try and make sizeable profits from your investment when the market peaks.

You should definitely think about making gold at least a portion of your investment portfolio.  And, if you hold on to your investment for three to five years and watch as the market stabilizes and heads for growth, the value of gold will increase and you could easily end up with a sizeable return on your investment. The truth is that in the current economic situation investment in gold is by far the safest bet in comparison to any stock in the market.

In order to increase your confidence level in gold investment, some pros of investing in gold are mentioned below:

- The average gain of gold is more than 200% over five years.
-Accepted fact that investing in gold coins historically have always outgained inflation.
- It should be also taking into consideration that the market hasn’t even reached its peak and gold prices is expected go up to more than $3,000 or even $5,000 per ounce over the next couple of years.

Please visit my blog frequently as I will further outline the pros and cons of investing in gold.

Gregg Andreski

Profile:
Gregg Andreski is a recognized personal finance writer based in Austin. He has been successfully involved in the investing markets from mutual funds to real estate and has started and managed his own businesses. He earned a Bachelors Degree in Communication Design/Marketing from Chico State University and went on to work at a highly recognized National Laboratory. While there, his interest in the investment markets grew. Gregg enjoys spending time with his wife and daughter. He is also an accomplished guitarist.

Investment Philosophy:
He has become an accomplished freelance investment writer with a focus on keeping it simple for people of all income levels. His followers attribute his advice for their success in controlling their financial future. Gregg continues to consult at the laboratory while focusing on answering the financial concerns and questions of investors. Gregg Andreski and his partners are value investors. When evaluating potential investments, they look for three things, good business, good people, and a good price. Like many successful gurus, he and his partners seek to achieve superior long-term performance by acquiring equity securities in understandable business with strong balance sheets, run by capable management, and trading at less than intrinsic value.

Jon Stewart Brings Down Jim Cramer

Jon Stewart Interview with Jim Cramer -Not often does a fight live up to the hype, but it most certainly did last night on the Daily Show as Jon Stewart hammered Jim Cramer last night in a much anticipated meeting between the two “entertainment” hosts. What has been built as “war of the words” over the past two weeks went into full blown Defcon 1 as Jon Stewart repeatedly chastised the “Mad Money” host for putting entertainment above journalism.

Once Cramer came out for the interview, Stewart wondered: “How the hell did we get here?” Cramer, his sleeves characteristically rolled up, said he was a “fan of the show.” But the humorous tone quickly changed as Jon Stewart hammered on the unethical behavior of Jim Cramer and the manipulation of stocks via his TV program and the loose teachings of how to legally take advantage of the markets and among other unethical trading to fly under the radar of SEO’s guidelines on short selling stocks. 

Jon Stewart had clip after clip of documented footage of Jim Cramer speaking about the duplicity of the market. “Roll reel 210″, “Roll reel 211″, “Roll reel 212″ Jon repeated as he lambasted Jim Cramer and his manipulation of the markets. In case you missed last night’s showdown, I’ve included the hightlights below:

Interview Part 1

The Daily Show With Jon StewartM – Th 11p / 10c

For his part, Cramer disagreed with Stewart on a few points, but mostly acknowledged that he could have done a better job foreseeing the economic collapse: “We all should have seen it more.”

Cramer said CNBC was “fair game” to the criticism and acknowledged the network was perhaps overeager to believe the information it was fed from corporations. Jim went on to blame most of everything on being lied to by the CEO’s of the companies he was touting or had interviewed.

“I, too, like you, want to have a successful show,” said Cramer, defending his methods on “Mad Money.” He later added: “Should we have been constantly pointing out the mistakes that were made? Absolutely. I truly wish we had done more.”

Cramer insisted he was devoted to revealing corporate “shenanigans,” to which Stewart retorted: “It’s easy to get on this after the fact.” Come on Jim! Aren’t you supposed to be an expert- I thought you would know better harped Jon Stewart? 

Interview Part 2

The Daily Show With Jon StewartM – Th 11p / 10c

At one point, Cramer sounded the reformed sinner, responding to Stewart’s plea for more levelheaded, honest commentary: “How about I try that?” said Cramer. “I’ll do that.”

Interview Part 3

The Daily Show With Jon StewartM – Th 11p / 10c

By the end, the two-segment interview went far beyond its allotted time. Comedy Central said the on-air version would be cut by about eight minutes, though the entire interview would be available unedited at the DailyShow.com.  Just in case you missed it please do me a favor and watch this segment in its entirety as upon viewing you will hope to hell that you never see Jim Cramer on TV again. Jim Cramer is finished after this invterview. No doubt about that and will be banished from TV, as I can’t see any network taking a chance on him after this lambasting, and rightfully so. Good riddance to Jim Cramer and his Mad Money. Now how about an indictment please.

For the full Jon Stewart Daily Show Interview visit DailyShow.com

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Free Investing Tips – Time to Invest in Blue Chip Stocks?

Free Investing Tips: Gregg Andreski

Okay, read carefully. This free investing tip could produce large gains. The falling market coupled with the flimsy economy has uncovered a unique opportunity. I am about to provide you with a significant investment tip. With this information you’ll be the envy of your peers.

Right now is an amazing time to set aside some money for what could be a lucrative investment in…

Blue chips — all of them! That’s right. Blue chip stocks are currently undervalued and are at lows that haven’t been seen since the Dolphins made Hootie and the Blowfish cry in 1996. Although it’s extremely difficult for investors to predict when the market will bottom out, there’s no disguising the fact that these blue chip stocks are on sale. Not just a Nordstrom 1/2 yearly sale or a Bed Bath & Beyond 20% off coupon, but a frightening Circuit City-esque clearance.

Out of the 500 companies in the S&P, 193 have an earnings-based price to earnings ratio of 10 or lower for the past year. Only 36 S&P 500 companies had that distinction in 2007. But you don’t even need to look at the P/E ratios. Simply conduct some basic stock research either via your favorite dartboard or better yet, your computer. Just listen to the names; it reads like a who’s who list of super companies; Ebay, General Electric, MasterCard, Dell 3M, Oracle, Microsoft, Southwest Airlines, Cisco, and Disney.

This free investing tip doesn’t stop with just those companies. As of March 9, Apple was trading at $83 per share compared to $189 last may. Sony is currently $19 per share compared to last June when it sold for over $51. Just check out the blue chips and pick your favorite.

Now, I’m not saying that these stocks can’t continue to stumble and post losses, but, when was the last time you were able buy a new $35k BMW for $14k on the lot? A $5k Hawaiian vacation for $2k? Or, a $700k house for $300k? Well, um, see California for that last one.

Even President Obama is noticing the unique opportunity. Following the day where the Dow Jones fell almost 300 points, he stated, “What you’re now seeing is profit and earning ratios are starting to get to the point where buying stocks is a potentially good deal, if you’ve got a long-term perspective on it.” U-S-A! U-S-A!

So again, this free investing tip could prove to be a lucrative investment move for your portfolio. Blue chips are drastically discounted at rarely seen prices. Put on your flannel shirt, turn up the grunge music and invest like it was 1996 — at your own risk of course.

For more free investing tips read Gregg’s latest article on Short Selling Stocks

March 2009 Free Hot Stock Picks

Crazy overall market strength now, undervalued stocks galore.  Lots of birdie opportunities everywhere on my free hot stock picks watchlist, 100+ stocks I’m trying to narrow—remember, I truly excel at shorting into strength…especially when that strength looks temporary…as I did with MBLX (Metabolix, Inc) yesterday, to only a little degree of success. To recap MBLX, I shorted 2000 shares at $6.25, looking for it to fail from going green on the day and come back a bit towards the morning low of $4.60…didn’t quite get there, I covered at $6.03ish because it showed it couldn’t break below $6…which was really the main technical support out there, took a healthy gain of $400+ as did my hot stock picks subscribers. No matter whether they have small losses or small gains, if the stock doesn’t do EXACTLY what we expect it to, then pull the trigger.  I will keep you posted on MBLX.

Here are a few other free hot stock picks to add to your watchlist :

 

Yadkin Valley Financial Corp (NASDAQ: YAVY) is just like any other failing financial, it’s been in a death spiral for the past 2 months dropping from $14 to $3, now up from $4 to $7 in 1 day, potential short although there’s no resistance until $10.

 

 

Gladstone Investment Corporation (NASDAQ: GAIN) is just like many of the crappy financial companies spiking, this one surged $1.26, or 50%.

 

Asset Acceptance Capital Corp (NASDAQ: AACC) is a debt-related company that has stair-stepped its way up from $3.50 to $5.12 over the past 3 days…potential short.

 

 

Bronco Drilling Company, Inc (NASDAQ: BRNC) has had 2 stair steps up from $3.75 to $5.50 in 2 days…was my #1 potential short, but now its just one of many Penny Stocks up 50% in a few days…no shares to short anywhere.

Ascent Solar Technologies (NASDAQ: ASTI) is a debt-related company that has stair-stepped its way up from $3.50 to $5.12 over the past 3 days…potential short.

 

 
The Steak n Shake Company (NYSE: SNS) is actually a solid potential buy as the stock broke out of a multi-month base above resistance at $7…kinda reminds me of SFLY, probly $1 of upside, low risk, but I need to see more of a breakout to get me excited.

 

Direxion Financial Bull 3X Shares (ETF) (NYSE: FAS) is the way to go if you think this is a bottom in the financials…strong buy but could move down slightly before bouncing up. 

 

For more information on Short Selling Stocks you can read the lastest post by our resident in house Short expert Gregg Andreski.

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