Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
Best Stocks for Investing to Profit form the Metaverse and Get Rich - 29th Nov 21
Should You Invest In Real Estate In 2021? - 29th Nov 21
Silver Long-term Trend Analysis - 28th Nov 21
Silver Mining Stocks Fundamentals - 28th Nov 21
Crude Oil Didn’t Like Thanksgiving Turkey This Year - 28th Nov 21
Sheffield First Snow Winter 2021 - Snowballs and Snowmen Fun - 28th Nov 21
Stock Market Investing LESSON - Buying Value - 27th Nov 21
Corsair MP600 NVME M.2 SSD 66% Performance Loss After 6 Months of Use - Benchmark Tests - 27th Nov 21
Stock Maket Trading Lesson - How to REALLY Trade Markets - 26th Nov 21
SILVER Price Trend Analysis - 26th Nov 21
Federal Reserve Asks Americans to Eat Soy “Meat” for Thanksgiving - 26th Nov 21
Is the S&P 500 Topping or Just Consolidating? - 26th Nov 21
Is a Bigger Drop in Gold Price Just Around the Corner? - 26th Nov 21
Financial Stocks ETF Sector XLF Pullback Sets Up A New $43.60 Upside Target - 26th Nov 21
A Couple of Things to Think About Before Buying Shares - 25th Nov 21
UK Best Fixed Rate Tariff Deal is to NOT FIX Gas and Electric Energy Tariffs During Winter 2021-22 - 25th Nov 21
Stock Market Begins it's Year End Seasonal Santa Rally - 24th Nov 21
How Silver Can Conquer $50+ in 2022 - 24th Nov 21
Stock Market Betting on Hawkish Fed - 24th Nov 21
Stock Market Elliott Wave Trend Forecast - 24th Nov 21
Your once-a-year All-Access Financial Markets Analysis Pass - 24th Nov 21
Did Zillow’s $300 million flop prove me wrong? - 24th Nov 21
Now Malaysian Drivers Renew Their Kurnia Car Insurance Online With Fincrew.my - 24th Nov 21
Gold / Silver Ratio - 23rd Nov 21
Stock Market Sentiment Speaks: Can We Get To 5500SPX In 2022? But 4440SPX Comes First - 23rd Nov 21
A Month-to-month breakdown of how Much Money Individuals are Spending on Stocks - 23rd Nov 21
S&P 500: Rallying Tech Stocks vs. Plummeting Oil Stocks - 23rd Nov 21
Like the Latest Bond Flick, the US Dollar Has No Time to Die - 23rd Nov 21
Why BITCOIN NEW ALL TIME HIGH Changes EVERYTHING! - 22nd Nov 21
Cannabis ETF MJ Basing & Volatility Patterns - 22nd Nov 21
The Most Important Lesson Learned from this COVID Pandemic - 22nd Nov 21
Dow Stock Market Trend Analysis - 22nd Nov 21
UK Covid-19 Booster Jabs Moderna, Pfizer Are They Worth the Risk of Side effects, Illness? - 22nd Nov 21
US Dollar vs Yields vs Stock Market Trends - 20th Nov 21
Inflation Risk: Milton Friedman Would Buy Gold Right Now - 20th Nov 21
How to Determine if It’s Time for You to Outsource Your Packaging Requirements to a Contract Packer - 20th Nov 21
2 easy ways to play Facebook’s Metaverse Spending Spree - 20th Nov 21
Stock Market Margin Debt WARNING! - 19th Nov 21
Gold Mid-Tier Stocks Q3’21 Fundamentals - 19th Nov 21
Protect Your Wealth From PERMANENT Transitory Inflation - 19th Nov 21
Investors Expect High Inflation. Golden Inquisition Ahead? - 19th Nov 21
Will the Senate Confirm a Marxist to Oversee the U.S. Currency System? - 19th Nov 21
When Even Stock Market Bears Act Bullishly (What It May Mean) - 19th Nov 21
Chinese People do NOT Eat Dogs Newspeak - 18th Nov 21
CHINOBLE! Evergrande Reality Exposes China Fiction! - 18th Nov 21
Kondratieff Full-Season Stock Market Sector Rotation - 18th Nov 21
What Stock Market Trends Will Drive Through To 2022? - 18th Nov 21
How to Jump Start Your Motherboard Without a Power Button With Just a Screwdriver - 18th Nov 21
Bitcoin & Ethereum 2021 Trend - 18th Nov 21
FREE TRADE How to Get 2 FREE SHARES Fractional Investing Platform and ISA Specs - 18th Nov 21
Inflation Ain’t Transitory – But the Fed’s Credibility Is - 18th Nov 21
The real reason Facebook just went “all in” on the metaverse - 18th Nov 21
Biden Signs a Bill to Revive Infrastructure… and Gold! - 18th Nov 21
Silver vs US Dollar - 17th Nov 21
Silver Supply and Demand Balance - 17th Nov 21
Sentiment Speaks: This Stock Market Makes Absolutely No Sense - 17th Nov 21
Biden Spending to Build Back Stagflation - 17th Nov 21
Meshing Cryptocurrency Wealth Generation With Global Fiat Money Demise - 17th Nov 21
Dow Stock Market Trend Forecast Into Mid 2022 - 16th Nov 21
Stock Market Minor Cycle Correcting - 16th Nov 21
The INFLATION MEGA-TREND - Ripples of Deflation on an Ocean of Inflation! - 16th Nov 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

New Year's Resolutions That Will Bolster Your 2011 Investment Portfolio

InvestorEducation / Learning to Invest Jan 04, 2011 - 09:12 AM GMT

By: Money_Morning

InvestorEducation

Best Financial Markets Analysis ArticleShah Gilani writes: If everyone kept their New Year's resolutions, most of America would be thin, fit and rich.

That's because the three most popular resolutions tend to involve dieting, working out and improving the family finances.


Most of those promises tend to fall by the wayside before each New Year gets too far along.

But 2011 can be different - at least in terms of your finances ... that is, if you embrace the three easy-to-follow resolutions that I'm about to reveal.

In fact, if you follow these, your investing future will be much, much richer.

When it comes to New Year's resolutions, recent research found that while more than 50% of participants in a study were confident that they would achieve their goals, only 12% actually did so.
But there are moves you can make to improve your odds of success. A key one: Set goals that are easy to remember, easy to follow and measurable.
What's going to make our New Year's resolutions easy to remember and easy to follow is that they relate to the three most commonly made resolutions - dieting, exercising and counting your money.

So let's take a look at each one.

Resolution No. 1: Put Your Portfolio on a Sensible Diet
If your investing history is full of fat losers, don't blame yourself. The truth is that Wall Street has purposely held you to a carefully planned diet of sugar and baloney - with the sole express goal of fattening its pockets while rotting your self-confidence.

Wall Street has always pushed the premise that investing is complicated and that you need a broker to help you navigate the rocky shoals. When investors became more independent, Wall Street appeared to change with the times and advocate the use of mutual funds.

Truth be told, however, the underlying premise remained the same: Investing is complicated so "we" will pick the stocks and all "you" have to do is pick from the huge menu of available funds - each of them offered by Wall Street. Besides, with something like 9,000 mutual funds to choose from, the need to choose correctly in order to diversify essentially demands professional advice.

That's the baloney you've been fed. What you end up with is a bunch of mutual funds that rot your prospects for success. Why? Because while you've been taught to buy different funds to be diversified, what you haven't been told is that a lot of those funds hold a lot of the same or very similar stocks. There's too much overlap in your investments, too much fat.

If the market rises, you'll probably do okay. Most mutual funds are supposed to mimic the key market indices. But when markets rise, their performance tends to lag the actual indices. And when markets fall, or even crash, the losses the funds incur tend to be much steeper, making a recovery that much tougher.

A sensible investment diet is easy. Pick your own stocks (that comes next) to create your own mutual fund. But keep it simple. Limit your "fund" to a maximum of 12 to 20 stocks. Too many positions means that you'll have a tough time keeping track of important developments. You'll end up owning the equivalent of a Wall Street fund, leaving you to follow the herd wherever it goes.

Your investment diet should include a helping of different food groups. I'm talking about different industry sectors as well as different asset-class investments, which you can get with exchange-traded funds (ETFs). If you have 12 to 20 positions, divide them into four or five groups. Within each group you will have different positions, which might follow the same investing theme, but aren't so similar that their individual performances can only mimic one another.

As is the case with any diet, diligence is key: Monitor your progress and make adjustments when necessary. The simple idea of an investment diet is to keep your portfolio lean so you always understand the risks that you face, and know whether you are gaining, or losing.

Resolution No. 2: Basic Exercises Build Portfolio Muscle
The key to keeping your portfolio in the best possible shape is by being very selective about what you add - as well in what you subtract (something that we'll look at even more closely in Resolution No. 3).

Three basic rules should guide you in building your personal "fund:"

•Keep it simple: By that I mean only invest in what you understand.
•Don't over-invest: This is a long-term financial fitness plan, meaning you want to be able to stick to it. If you invest more than you can afford (for instance, leaving you unable to pay your monthly bills), you'll pull back and may never get going again. Understand, too, that you'll take some losses from time to time. That's normal. By taking steps to minimize those losses, you'll find that you become better able to handle them when they do come along.
•Track your progress: Spend time - at least once a week - looking at your portfolio and checking each position and any news that has or could affect your investments.
To move into profitable positions you have to exercise your mind. You have to know what's going on in the world, and with the U.S. and global economies. You have to understand the sectors, asset classes and even the individual companies that you invest in. With the companies, that includes understanding the products that they make.

The best way to keep informed is to avoid becoming overwhelmed. Pick three sources of market information that you can rely on as a regular information source. I like to read The Wall Street Journal, or the business section of my local newspaper. I also get online and check out Bloomberg.com, which consistently features superb market news and stories. For other research - or for checking the prices of my stocks - I use both Google Finance and Yahoo! Finance because they are simple, fast and free.

By all means, pick the market-information sources that you are comfortable using. Just make sure that you're getting global business and economic news, market-specific news that covers different asset classes of investments and a source to look up the prices and headlines that pertain to your specific positions.

Use the global news to get a "big-picture" view of the best investment opportunities - as well as a look at the looming risks that you want to avoid. If your understanding is that emerging markets are strong (which they are), look into which markets are doing well and what analysts are saying about their future prospects. Nothing is a sure bet, so pick three or four different ETFs that give you exposure to three or four different emerging markets.

Use market news about different asset classes to pick three or four good investments that should continue to do well as long as their prospects don't change radically. For example, maybe you're reading about gold, or commodities, or bonds. If you have an opinion and a reasonable expectation to believe in what you understand, then add three or four positions that reflect your expectations about the future. If you think gold or other commodities are headed higher, then look for ETFs that track what you think are good investments and get in on them.

Perhaps, as I do, you believe that bonds have had a good run and aren't going to be such hot performers going forward - or that they may actually be a downright bad investment. Well, guess what: You can actually take a position on either side of the market in just about anything these days, thanks to conventional ETFs and their so-called "inverse" counterparts.

For example, I like commodities and I don't like bonds. So I would pick three or four stocks, or ETFs, that track different commodities and one, such as the ProShares Short 20+ Year Treasury ETF (NYSE: TBF), that would make me money if bonds actually go down in price.

The third piece of your portfolio should be all about corporate stocks. Pick three or four companies that your research demonstrates are not only doing well right now - they will continue to do well.

Personally, I like the high-tech sector for 2011, so I would pick two tech stocks. I also like energy stocks and stocks that have good dividends. To combine those two ideas, I'd look for a stock in the energy sector, like ConocoPhillips (NYSE: COP), that features a good dividend yield (currently about 3.2%).

But because I'm also conservative and afraid that the markets could be volatile, I'd also buy an ETF that would go up in price if the market went down - in other words, I would "hedge."

That's how I would create my personal "fund." It would consist of:

•Three or four positions related to global players or the emerging markets.
•Three to four positions related to different "asset classes."
•Shares of three to four good companies - stocks that I've chosen based on trends that I've read about and researched and that I can easily follow.
•And perhaps two positions that I use as a hedge.

Resolution No. 3: Track Your Results
Once you resolve to follow a lean investment diet and exercise good judgment about which positions to add and take out of your personal fund, don't forget to reward yourself.

The best way to make money is to not lose it. So always have "stop-losses" in place when you take any position. A small loss that you can handle will keep you in the game. Big losses destroy more than your finances, they destroy your confidence. Keep losses small.

Don't forget, you can have all the right picks and make a lot of money and then watch it all disappear in a market panic or crash. It happens. So, always take some profits when you have them. Don't be greedy. Sure it's nice to make 200%, but 20% is also beautiful - especially in cases where you make it quickly. And, if you take a whole bunch of 20% gains, your portfolio will eventually grow 200% and a lot more.

When you take profits and reinvest them as you rebalance your portfolio and always have stops in place, you will be constantly growing your personal fund and fortune and still sleeping well at night.

Following a lean investment diet while exercising good judgment in creating your personal fund and counting your money are the three resolutions that you can easily keep for 2011.

Happy New Year.

[Editor's Note: Shah Gilani, a retired hedge-fund manager and renowned financial-crisis expert, has made some astounding market calls. Take his forecast for the 2009 U.S. economy. He predicted a steep decline in both the economy and the stock market - followed by a steep rebound in stocks. And that's just what happened.

Not long ago, in a Money Morning exposé, Gilani warned that high-frequency traders (HFT) were artificially pumping up market-volume numbers, meaning stocks were extremely susceptible to a downdraft.

When that downdraft came, Gilani was ready - and so were subscribers to his new advisory service: The Capital Wave Forecast. The next morning, because of that market move, investors were up 186% on a short-term euro play, and more than 300% on a call-option play on the VIX volatility index.

Now Gilani has crafted a stock-market strategy for the New Year. It's worth a look. If you like what you see, take a close look at his Capital Wave Forecast advisory service. You'll find it was time well-spent.]

Source : http://moneymorning.com/...

Money Morning/The Money Map Report

©2010 Monument Street Publishing. All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Monument Street Publishing. 105 West Monument Street, Baltimore MD 21201, Email: customerservice@moneymorning.com

Disclaimer: Nothing published by Money Morning should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investent advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication, or 72 hours after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Money Morning should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Money Morning 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