Best of the Week
Most Popular
1. 2019 From A Fourth Turning Perspective - James_Quinn
2.Beware the Young Stocks Bear Market! - Zeal_LLC
3.Safe Havens are Surging. What this Means for Stocks 2019 - Troy_Bombardia
4.Most Popular Financial Markets Analysis of 2018 - Trump and BrExit Chaos Dominate - Nadeem_Walayat
5.January 2019 Financial Markets Analysis and Forecasts - Nadeem_Walayat
6.Silver Price Trend Analysis 2019 - Nadeem_Walayat
7.Why 90% of Traders Lose - Nadeem_Walayat
8.What to do With Your Money in a Stocks Bear Market - Stephen_McBride
9.Stock Market What to Expect in the First 3~5 Months of 2019 - Chris_Vermeulen
10.China, Global Economy has Tipped over: The Surging Dollar and the Rallying Yen - FXCOT
Last 7 days
Stock Market DOW Seasonal Trend Analysis - 23rd Mar 19
US Dollar Breakdown on Fed Was Much Worse Than It Looks - 23rd Mar 19
Gold Mid-Tier GDXJ Stocks Fundamentals - 23rd Mar 19
Which Currency Pairs Stand to Benefit from Prevailing Risk Aversion? - 23rd Mar 19
If You Get These 3 Things Right, You’ll Never Have to Worry About Money - 22nd Mar 19
March 2019 Cryptocurrency Technical Analysis - 22nd Mar 19
Turkey Tourist Fakes Market Bargains Haggling Top Tips - 22nd Mar 19
Next Recession: Finding A 48% Yield Amid The Ruins - 22nd Mar 19
Your Future Stock Returns Might Unpleasantly Surprise You - 22nd Mar 19
Fed Acknowledges “Recession Risks”. Run for the Hills! - 22nd Mar 19
Will Bridging Loans Grow in Demand and Usage in 2019? - 22nd Mar 19
Does Fed Know Something Gold Investors Do Not Know? - 21st Mar 19
Gold …Some Confirmations to Watch For - 21st Mar 19
UKIP No Longer About BrExit, Becomes BNP 2.0, Muslim Hate Party - 21st Mar 19
A Message to the Gold Bulls: Relying on the CoT Gives You A False Sense of Security - 20th Mar 19
The Secret to Funding a Green New Deal - 20th Mar 19
Vietnam, Part I: Colonialism and National Liberation - 20th Mar 19
Will the Fed Cut its Interest Rate Forecast, Pushing Gold Higher? - 20th Mar 19
Dow Jones Stock Market Topping Pattern - 20th Mar 19
Gold Stocks Outperform Gold but Not Stocks - 20th Mar 19
Here’s What You’re Not Hearing About the US - China Trade War - 20th Mar 19
US Overdosing on Debt - 19th Mar 19
Looking at the Economic Winter Season Ahead - 19th Mar 19
Will the Stock Market Crash Like 1937? - 19th Mar 19
Stock Market VIX Volaility Analysis - 19th Mar 19
FREE Access to Stock and Finanacial Markets Trading Analysis Worth $1229! - 19th Mar 19
US Stock Markets Price Anomaly Setup Continues - 19th Mar 19
Gold Price Confirmation of the Warning - 18th Mar 19
Split Stock Market Warning - 18th Mar 19
Stock Market Trend Analysis 2019 - Video - 18th Mar 19
Best Precious Metals Investment and Trades for 2019 - 18th Mar 19
Hurdles for Gold Stocks - 18th Mar 19
Pento: Coming QE & Low Rates Will Be ‘Rocket Fuel for Gold’ - 18th Mar 19
"This is for Tommy Robinson" Shouts Knife Wielding White Supremacist Terrorist in London - 18th Mar 19
This Is How You Create the Biggest Credit Bubble in History - 17th Mar 19
Crude Oil Bulls - For Whom the Bell Tolls - 17th Mar 19
Gold Mining Stocks Fundamentals - 17th Mar 19
Why Buy a Land Rover - Range Rover vs Huge Tree Branch Falling on its Roof - 17th Mar 19
UKIP Urged to Change Name to BNP 2.0 So BrExit Party Can Fight a 2nd EU Referendum - 17th Mar 19
Tommy Robinson Looks Set to Become New UKIP Leader - 16th Mar 19
Gold Final Warning: Here Are the Stunning Implications of Plunging Gold Price - 16th Mar 19
Towards the End of a Stocks Bull Market, Short term Timing Becomes Difficult - 16th Mar 19
UKIP Brexit Facebook Groups Reveling in the New Zealand Terror Attacks Blaming Muslim Victims - 16th Mar 19
Gold – US Dollar vs US Dollar Index - 16th Mar 19
Islamophobic Hate Preachers Tommy Robinson and Katie Hopkins have Killed UKIP and Brexit - 16th Mar 19
Countdown to The Precious Metals Gold and Silver Breakout Rally - 15th Mar 19
Shale Oil Splutters: Brent on Track for $70 Target $100 in 2020 - 15th Mar 19
Setting up a Business Just Got Easier - 15th Mar 19
Stock Market Elliott Wave Analysis Trend Forercast - Video - 15th Mar 19
Gold Warning - Here Are the Stunning Implications of Plunging Gold Price - Part 1 - 15th Mar 19
UK Weather SHOCK - Trees Dropping Branches onto Cars in Stormy Winds - Sheffield - 15th Mar 19
Best Time to Trade Forex - 15th Mar 19
Why the Green New Deal Will Send Uranium Price Through the Roof - 14th Mar 19
S&P 500's New Medium-Term High, but Will Stock Market Uptrend Continue? - 14th Mar 19
US Conservatism - 14th Mar 19
Gold in the Age of High-speed Electronic Trading - 14th Mar 19
Britain's Demographic Time Bomb Has Gone Off! - 14th Mar 19
Why Walmart Will Crush Amazon - 14th Mar 19
2019 Economic Predictions - 14th Mar 19
Tax Avoidance Bills Sent to Thousands of Workers - 14th Mar 19

Market Oracle FREE Newsletter

Stock Market Trend Forecast March to September 2019

May The Investment Force Be With You

InvestorEducation / Learning to Invest Jun 30, 2009 - 07:54 AM GMT

By: Steve_Selengut

InvestorEducation

Best Financial Markets Analysis ArticleInvestment markets got you down, Bunkie? Been blown away by derivative stun guns? When will portfolio market values move back to 2007 levels--- and then what will you do about it?


It's time to overthrow the evil Masters of the Universe and deactivate their weapons of financial destruction. Let's outlaw the brainwashing that has changed how average investors look at and value their investment portfolios.

It's time to exorcize the Wall Street demons and return to stocks and bonds--- and to QDI, "the Force" for long-term investment portfolio security.

Speculating is complicated, even for financial rocket scientists. What most of us want (or would certainly settle for) is simplicity, stability, and reasonable growth in our productive working capital.

A return to plain vanilla investing strategies with operating procedures that minimize risk and encourage understanding of the financial markets needs to become part of our financial force field.

As bad as things have been since this black hole appeared, investment models true to fundamental concepts, simple strategies, and disciplined operating rules have probably bettered the market numbers in at least six important ways:

One - Higher lows during market downturns: Equity portfolios managed using basic principles of quality, diversification, and income (the QDI) and disciplined profit taking rules should not fall as much in market value as most mutual funds or poorly diversified portfolios.

Constant cash flow, even if not reinvested, places a floor under market values, and investors feel better when their values fall less than the market averages. In soundly managed programs, buying activity slows as prices rise--- increasing "smart cash" for buying at lower levels later.

Two - Moves to cash or other sectors before bubbles burst: Disciplined profit taking automatically moves dollars from overheated sectors to cash or undervalued sectors during rising markets. This process creates capital that can be used to lower the average cost of remaining positions or to take advantage of new opportunities.

Investors feel better when no profits have been left on the table.

Three - Maintenance of planned income streams during financial crises: Most financial plans focus so strongly on growing market values that they lose touch with the need for planning a dependable retirement income. They rely on selling equity fund units or inflated indices for cash flow, instead of generating stable income with less exciting cash producing staples.

Steadily increasing annual income can be placed on "cruise control" through the use of the cost basis asset allocation methods contained in the WCM (Working Capital Model). How many would-be retirees are searching for jobs because of improper income planning?

Four - Faster movement to new all time market value highs: When investors have a reasonable understanding of the various cycles impacting their investment portfolios, they develop valid expectations about the market value "performance" of their portfolios.

They are less likely to initiate knee-jerk or panic driven transactions and more likely to take advantage of the new opportunities that lower security prices always create. Additionally, higher quality securities invariably are in the first group to regain popularity with investors as good news reports begin to dominate.

Five - Steady growth in working capital in all market environments: Working capital is measured in terms of cost basis instead of market price. As a result, all income generated from interest, dividends, and realized gains grow working capital regardless of the direction of market prices.

A treasury bond generates the same income at $85 as at $115. Most closed-end municipal bond funds (CEFs) maintained their 5% to 7% tax-free cash flow throughout the financial crisis--- in spite of their reduced market values. Similarly, short-term profits on high quality securities have been growing working capital since the current rally took hold in March.

Six - Annual growth in realized "base income" in standard portfolios: WCM portfolios are income machines by design. No security is ever purchased if it does not produce regular dividend or interest payments; at least 30% of all base income should be reallocated to income-objective securities.

Similarly, every dollar of capital gains income, and net portfolio additions are partially allocated to income producers--- and the use of a cost based asset allocation formula insures annual income growth.

Few financial professionals begin their careers with any encouragement to become comfortable with individual equity securities and the surprisingly large variety of individual, relatively uncomplicated, and generally safe(r) income producers available for their clients.

Financial products are far more lucrative for their institutional employers and, as a result, the incentives for brokers and advisors to sell products is pretty much irresistible. Few pros can afford to be one with "The Force".

The Dark Side of investing beckons like a Siren's song, luring the majority of professional advisors away from the safety and simplicity of QDI. Institutional propaganda, projections, predictions, and hype have the same affect on unsuspecting boatloads of speculators who most often become shipwrecked on the derivative rocks.

Investors and their professionals need to re-evaluate their product orientation and plot a global escape from the Dark Side of investing.

Contact the "Skywalker" foundation for emotional and financial support while making the transition--- and may the force be with you.

By Steve Selengut
800-245-0494
http://www.sancoservices.com
http://www.investmentmanagemen tbooks.com
Professional Portfolio Management since 1979
Author of: "The Brainwashing of the American Investor: The Book that Wall Street Does Not Want YOU to Read", and "A Millionaire's Secret Investment Strategy"

Disclaimer : Anything presented here is simply the opinion of Steve Selengut and should not be construed as anything else. One of the fascinating things about investing is that there are so many differing approaches, theories, and strategies. We encourage you to do your homework.

Steve Selengut Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules