TIE...buy buy buy

Insiders are gobbling up shares of their company's stock, I would suggest you do it too....yea yea yea, I know steel is out of favor and material prices are skyrocketing, however, this company is at a new low, has a solid dividend, has a great track record of year over year growth, a proven management team, and provides steel to developing, developed and emerging markets


All of this works in favor and like I mentioned above insiders are buying like crazy right now which is the best sign of all and furthermore they have averaged buying 762,000 shares per year over the last 5 years!!!!


BUY BUY BUY: here is the chart

adding a link for stretch IRAs

here is a great article I just found on stretch IRAs that probably explains them a lot better than I just did in my previous post. Check it out:

http://www.advisortoday.com/resources/stretchiras.html

Stretch IRAs

First off, I want to apologize for not posting lately. The market has been crazy and since I am in the middle of it, being in the financial industry, I've had a lot of work to do and too much on my mind to post. I will try and get back into a regular routine.

I received a comment from someone that wanted to know about Stretch IRAs. So this is what I will talk about in this post.

Starting off, you may be wondering what a 'Stretch IRA' is.

A Stretch IRA is a term used to describe an IRA established to extend the period of tax-deferred earnings, possibly over multiple generations. This IRA can be opened at any time. After the owner of the IRA dies, the beneficiaries will have the longest allowable period of tax-deferral on the required distributions of the IRA assets. The beneficiaries must start taking their required distributions in a timely manner once they inherit their portion of an IRA so it's important that each beneficiary is informed of the intention to 'stretch' the IRA.

With that said, is a Stretch IRA the right choice?

If you have enough money and income to fund your retirement without dipping into your IRAs, a Stretch IRA may work for you. Many older people put all or most of their retirement savings into tax-deferred IRAs with the intention of leaving these as an inheritance for their children. What they don't anticipate is the tax burden they are placing on their beneficiaries once they inherit the IRAs. A Stretch IRA can make this tax burden much less for beneficiaries once they inherit an estate. You will, however, need to review your Stretch IRAs periodically to be sure the beneficiaries are up to date.

So, how do you set up a Stretch IRA if it is right for you?

• The first thing you must do to set up a stretch IRA is choose the beneficiaries.
• Second, talk with a Financial Advisor. The IRA must be set up properly for your beneficiaries to benefit so you should work with a person or organization familiar with IRAs when setting one up.
• Next, you need to set up separate accounts for each beneficiary. If there is one beneficiary, set up one account. If you have multiple beneficiaries, you need to set up a separate account for each and designate the percentage of the IRA in the account. When the IRA holder dies, each beneficiary can choose to have their share distributed over their life expectancy.
• Lastly, you need to review the account with beneficiaries. It is important to let them know that they will inherit a portion of IRA assets upon your death.

Despite how helpful and beneficial a stretch can be, there is a possibility of a downside to a Stretch IRA. It may not be right for everyone. If you need the money in the IRA for retirement or before your retire, the stretch arrangement will be of no benefit. The tax laws might change before your heirs have a chance to benefit from the stretch IRA and might end up with a tax burden. You must review your stretch IRA arrangements at least annually so that your beneficiaries are kept up to date.

Hope this helps. If there are any more ?'s regarding these leave a comment and I'll get to them.

Retirement planning is key and the more that you can sock away sooner, the better. Keep that in mind. The most powerful financial tool is compounding, that year over year appreciation will make your assets grow a great deal. It is then important once you have the assets and a big sum of money to plan accordingly.

ETFs

Ok, so today I'm gonna give my 2 cents on ETFs: what they are and why I think they are very beneficial.

To start off, ETF stands for exchange traded fund. It is essentially the exact same thing as a mutual fund, but it can be traded throughout the day, whereas a mutual fund is priced and redeemed or bought after the market closes.

ETFs generally make diversification pretty easy, have low expenses, and are tax efficient. Because ETFs can be bought, held, and sold cheaper than mutual funds, some investors invest in ETF shares as a long-term investment for asset allocation purposes, while other investors trade ETF shares frequently to implement market timing investment strategies. There are several advantages of ETFs, I'll list a couple below:

1. Lower costs - ETFs generally have lower costs than other investment products because most ETFs are not actively managed and because they don't have the costs of having to buy and sell securities to accommodate shareholder purchases and redemptions. ETFs have lower marketing, distribution, and accounting expenses, and most ETFs do not have 12b-1 fees (these are just another management fee mutual funds have). All in all, they are considerably cheaper. Most charge b/w .10%-.25% whereas mutual funds are usually around 1.5%, considerably more expensive.
   
2. Buying and selling flexibility - ETFs can be bought and sold at current market prices at any time during the trading day, unlike mutual funds, which can only be traded at the end of the trading day. As publicly traded securities, their shares can be purchased and traded using stop orders and limit orders, which allow investors to specify the price points at which they are willing to trade. That is beneficial b/c you can set a price on an order and if teh ETF hits that price it will be bought in your account without you having to constantly watch the price every day.
   
3. Tax efficiency - ETFs have lower capital gains, b/c they usually have low turnover of their stocks or bonds (turnover is when a fund buys/sells holdings). While this is an advantage they share with other index funds, their tax efficiency is further enhanced because they do not have to sell securities to meet investor redemptions, which occurs when an investor sells a large holding and the fund has to liquidate to generate the cash.
   
4. Market exposure and diversification - ETFs provide an economical way to rebalance portfolios and asset allocations and to use cash by investing it quickly. The majority of the ETFs out there track or mirror an index, like the S&P or the Dow, but recently actively managed ETFs have grown in popularity. There is a great website, etfconnect.com, in which you can search for ETFs of all types. ETFs offer exposure to a diverse variety of markets, including broad-based indexes, broad-based international and country-specific indexes, industry sector-specific indexes, bond indexes, and commodities. Do a search and find one that is appealing to you. For instance, if you are interested in clean, renewable energy and companies that produce that, you may look at investing in PBW, a Powershares Clean Energy ETF.
   
5. Transparency - ETFs, whether index funds or actively managed, have transparent portfolios and are priced at frequent intervals throughout the trading day.

These are some reasons I like and recommend ETFs. As always do a little research on your own and form an opinion as to whether you might be interested in them.

Sim City (Grupo Simec)

SIM = Grupo Simec = It is a Mexican company. They manufacture and sell iron and steel products. They export products to Central and South America, Canada, and the U.S. The stock is trading at $15.44/share, just off of its 52 week high of of $15.85. The annual low was $8.50. It does not pay a dividend and is strictly a growth play.

I usually don't like stocks that are near the high because I like having a lot of upside, but SIM is undervalued and Mexico is committed to increasing and improving their infrastructure. The stock also has a couple buy ratings and has most of the market share in Mexico. Its biggest clients are however the U.S. and China, believe it or not. We all know the economic boom that China is on and the amount of steel they require to build, I kid you not, a new city a week!

Furthermore, Simec is the second-largest producer of rebar in the world and the largest steel producer in Mexico. It has global exposure with 50% of its sales in Mexico and 50% outside of Mexico, which gives it some protection against country specific downturns. Overall, it is a good sound company that is likely to be a great long-term investment due to increasing demand & increased prices for steel.

Chart is below:

I am also going to post a great story from a book I read in my next post. Check it out.

When times are tough....

This is an excerpt from the novel The Pep Talk, co-authored by Kevin Elko and Bob Shook. It features stories taken directly from pep talks given to college and professional football teams the night before big games.

In one of the National Championship games, the University of Miami was playing the University of Nebraska in the Rose Bowl. In the locker room was a unique player named Joaquin Gonzalez, who grew up in Cuba and moved to Miami. Joaquin had perfect SAT scores and was offered an academic scholarship to Harvard but decided to play football at the University of Miami. What I often do when I speak to a football team is throw the football to a certain player and ask them to speak on how they should mentally prepare for the big game. Being extremely bright, I thought I would test Joaquin and see what he would say. When he got the ball he stood up and said, "I expect Nebraska to be the toughest team we ever played. Moreover, I expect the player across from me to be equally as good. As a result, I will bring the best me, not take a play off and maintain that intensity throughout the game." He went on to say, "My sporting blood is up and I am prepared for the challenge." That spectacular young man set the tempo and the game was not close as Miami dominated and won the National Championship.

The following year, the University of Miami was on a long winning streak and was playing Ohio State for the National Championship in the Fiesta Bowl. Again, I threw the ball to who I thought was another bright player. He took the ball, stood up and said, "Ohio State does not belong in this game." "I will wipe up the field with the guy across from me." Miami lost the game and the National Championship.

People are frequently saying that things are so tough right now or asking why things happen to them. What I would now say to them is similar to what Joaquin said. "Get your sporting blood up." Tough times will bring out the best in you. Tough times are a good thing. They let you step back and really assess and evaluate your life situation and your priorities. Tough times will not defeat you, but throwing personal discipline to the wind because you think times are too tough will defeat you.

Easy or tough, the price of winning is the issue. I remember the day that the racehorse Smarty Jones died; the horse's owner was quoted as saying, "The price of love is grief." I don't really know why, but that quote really hit me. I guess I thought love was free and took it for granted. Then I realized that nothing is free, we have to pay a price for everything we desire. This is evidenced in our own lives and the lives of others around us. I challenge you to look at what you love in life and make sure that you enjoy it while it lasts, because there will come a time when you won't be able to enjoy it anymore or as much as you used to.

This last paragraph reminds me of something. A friend mentioned to me that they recently got out of a long term relationship, one in which they thought that the person they were seeing would turn out to be the person they married. They said, "I now know how someone can die of a broken heart. But that being said, I feel good feeling bad." In other words, this person's broken heart was a price well worth paying for the love he gave and received because it really showed him what he had lost and how special it was. I guess that's why people say "you don't know what you have until it's gone."

Like Joaquin in the aforementioned excerpt, expect things to be hard and then it doesn't matter. After you make the decision that things are hard, manage the decision, and decide to bring the best you have to offer. Pay the price and stay on your day to day process. Give all you got, every minute of every day. It will be difficult but if you do this...you will not be defeated!

................................

I was thinking about what to write today and it just struck me; why do I invest? So I started making a list of all the reasons why some extra money would be beneficial in the future, and realized that had I had this list earlier, I definitely would have been more diligent in saving and would be in a better position to realize some of my financial aspirations. My suggestion: make a list. For me personally, there are many reasons I could list, but to name only a few:
-for retirement
-to do things I enjoy like travel, purchase art, etc.
-for my kids, when I have them, education
-capital appreciation, just to make my money grow so I have more purchasing power
-to achieve financial freedom and be worry free

All of these are reasons, however, it's not the process as to how you get them that I want to touch on, it's the actual end goal I want to focus on, those items I listed. The actual need or desire that you want to be able to afford or buy is paramount. That is what you need to focus on.

What I am trying to get at is that you should create a list of things you want to do in life. Yes, a list. That's it. This may seem a little bit corny, but fail to pay attention to what you'd really like to do in life, and you may find yourself one day, full of regrets. It's like they say, 'if you don't write down your goals, you won't achieve them'. It's so true. Think of all the things that you would have changed if you could go back and start over again or live life just a little bit differently. If you don't constantly remind yourself of what you want then where are you going to draw inspiration from? Creating this list is a lot more fun than you may imagine. Just think about the relief you will have when you check off accomplishments that you reach.

So how does this relate to finance? It is very simple. One of my financial goals is to purchase a home. This is the largest financial decision that many people will make, for me especially since I live in Los Angeles and homes are ridiculously expensive here. However, this goal is reachable, but I have to be willing to work for it. If reaching this goal means saving that extra $50, $100, or $200 a month by not buying some DVDs or going shopping one less time, then I am willing to sacrifice that. And you have to be willing as well. This is why keeping the list handy and constantly looking at it is important.

So, get a piece of scrap paper and jot down a rough draft of things you want to do, places you want to go, and money you need to save. This will give you a great idea of what you need to do NOW to achieve them LATER. Once you have this list, you can then begin taking steps in the right direction and make that nest egg grow.

The moral: If you lose sight of your goals, you will forget about them and ultimately not achieve what you set out to.



"May the wind always be at your back and the sun always upon your face and the winds of destiny carry you aloft to dance with the stars."

I am going Long TTM, check it out, good spot to look at investing

TTM, is Tata Motors. They manufacture and market heavy, medium and light commercial vehicles, utility vehicles, and passenger cars. They have 2 business units: auto and other. The auto segment includes the business of automotive products consisting of all types of commercial and passenger vehicles. The other segment includes construction equipment, engineering solutions, automotive components, and some software operations. The Group also manufactures spare parts for vehicles, marine engines, casting, and forging. The fact that their businesses are diversified is a great sign and they can draw profits from several places. All of their plants are located in India. Most of their business comes from that country as well, however, they just acquired Land Rover and Jaguar. This will make their business and line-up of cars very strong for the future, especially when the economy turns around.

On top of that, the stock is at $13.34/share. That is the lowest it has been since December '05. The main reason for the decline in the last couple months is due to the recent acquisition of Land Rover and Jaguar. Tata had to shell out some serious cash for the two car companies and that puts their balance sheet in a less attractive position. (Whenever a company makes a large acquisition, it will trade lower in the short term b/c it dilutes their earnings and they have to raise capital. In this tight credit market it is even harder to raise money so that hurts Tata as well.) TTM pays out a dividend of roughly 2.8%, which is always a benefit to investors. The 52-week high is just above $21/share and so that gives us a good upside for some profit.

Here is the chart:

Timing the market. (Don't try this at home!)

First off, let me throw in a disclaimer (CAUTION!!) and say that neither trying to time the market nor day trading are good strategies. This is just my opinion, but if you read enough publications, as evidenced by the link I pasted below, you will see how many so-called experts are routinely wrong.

Market and timing may not mean much alone, but when you put them together they become the most dangerous phrase in investing, especially when done by inexperienced 'traders'. Market timing is the strategy of trying to predict future price movements of an investment or the market and either buying or selling based on these 'educated' guesses. The real benefit of knowing what is going to happen is that your return from buying a stock before it takes off is obviously going to be better than if you buy the stock when it is already on its way up.

The ultimate “buy low and sell high” market timers are called day traders. These day traders, who move in and out of positions in minutes or hours, are the extreme market timers. They look for several small profits each day by capitalizing on swings in a stock’s price. Most market timers operate on a longer time line, but may move in and out of a stock quickly if they perceive an opportunity.

There is controversy about market timing. Many investors believe that over time you can’t successfully predict market movements. Market timing becomes more of a gamble, in their opinion, than a legitimate investing strategy. Other investors argue that it is possible to spot situations where the market has over or under valued a stock. They use a variety of tools to help them predict when a stock is ready to break out of a trading range. (I won't get too specific but many use a technical or fundamental analysis which you can look up and learn more about if you so choose.)

Unfortunately, stock prices do not always move for the most logical or predictable reasons. An unexpected event can send a stock’s price up or down and you can’t predict those movements with charts. This is why it is illegal to have inside info; if you knew about some good or bad news before the general public, you would be able to get in or out of a stock holding and benefit immensely.

The internet stock bull market of the late 1990s is an example of what happens when investors, in the excitement of the moment, become market timers. Everyone had a hot tip about the next “big thing” and investors were jumping on stocks as they shot up. Unfortunately, most of these rockets came crashing down just as quickly as they went up and many investors held on way too long.

The disastrous result was an exact reversal of what they hoped. In the end, it was a case of “buying high and selling low.” You don’t need to know much about investing to know that’s not a successful strategy.

For most investors, the safer path is sticking to investing in solid, well-researched companies that fit their requirements for growth, earnings, income, and so on and so forth.

In summary, if you look for undervalued stocks (like AMX and AIG, which I mentioned below, and many of the large banks, yes I said banks), you may find one that is poised for moving up sharply given the right circumstances. This is as close to market timing as most investors should get and takes a lot of time and effort to pick the right stocks to invest in.

Here is a good article on this topic if you want to read further:
http://www.fool.com/investing/value/2008/05/30/is-this-the-bottom-who-cares.aspx?source=ihptclipb0000001

Gold plays

Inflation will be a huge problem in the coming year(s). A common hedge against inflation and the US dollar, which has precipitously fallen, is gold. I wanted to point out some gold plays that may interest you.

If you want direct investment in the gold index then I would recommend GLD. This is the 'streetTRACKS Gold Shares ETF'. It mirrors the GO@LD, which is the London gold index price. This is directly correlated to the gold price. Gold is trading at $900/ounce today and GLD is at just under $90/share.

To evidence the statement that GLD and GO@LD mirror each other, I have pasted in the graphs below. The top is GO@LD, again, the actual price per ounce of gold and the bottom is GLD, the etf that mirrors the gold price.

GO@LD


GLD




Looks the same right? Well, that's b/c it is! Just goes to show there is no reason to buy the actual gold. Just buy GLD.

Another play would be to own stock in gold explorer, miner, producer and manufacturer companies. Some of these are ABX, AUY, NEM, GG, GOLD, and HMY. There are several others but these are the most well known. They differ somewhat as to where they mine or own mines at and to what extent they are vertically integrated (which means whether they just mine the gold or if they look for it, mine it, and then produce bars/coins, and sell it). Check some of them out and see if owning one or a couple would interest you.

The main idea is to diversify your portfolio. The best way to do so is to own some gold in the portfolio b/c it is a hedge against the dollar and inflation. This helps b/c usually the dollar depreciates during times when the market has soured, precisely as it has done in the past 6 months or so. During the same time gold has appreciated and the GLD and gold stocks have followed.

For the record, I own AUY. I think it's a great growth play. I also believe gold as a commodity will continue to rise in price for a year or two, or at least until the inflation anxiety passes.

The Guru

Some other ideas to look at........

First, if you are sold on the fact that oil and energy prices will keep skyrocketing you might want to look into oil/energy equipment and servicers. One that I like is FTK, Flotek Industries. Their principal activities are to supply drilling and production products and services to the oil and natural gas industry on a worldwide basis. They operates in three business segments: chemicals and logistics, drilling products, and artificial lift. Check out the chart below. FTK is trading near its 52-week lows and could be a great growth play as energy continues to become more expensive.

Next, RTEC, Rudolph Technologies looks like a good buy. It is in the technology sector, more specifically, dealing with semiconductors for the solar companies. You can see the levels it is trading at below in the chart. Currently at about $9/share. The annual high is $20/share and the low is $8/share so it is a good entry point. RTECs principal activity is to design, develop and manufacture systems used in semiconductor device manufacturers. These solutions enable semiconductor device manufacturers to improve yields and reduce overall production costs. As long as energy costs keep rising, people will continue to emphasize the need for and turn to alternative energy plays. With that said, RTEC is in a great position to help service the solar panel manufacturers and to benefit for the energy crisis, for lack of a better term.

I would suggest taking a look at these and developing your own opinion. These aren't recommendations and I'm not saying "BUY BUY BUY" like Jim Cramer on CNBC, I just wanted to point out some ideas that you can start looking at to possibly spark your interest in certain investments.

As always, good luck and feel free to comment or submit questions.

Create a 'Defensive' portfolio during tough markets

The market is in pretty bad shape, but the reasons as to why are not what I want to touch on. What you should actually consider doing with your equity portfolio is what I want to elaborate on.

If you watch any of the financial shows on CNBC or MSNBC, I am sure that you have heard over and over that you should be moving your money out of certain sectors and into other more attractive or 'defensive' sectors. This is basically a cautionary move to ensure that your portfolio can weather the tough times. So where should you be moving your money from and then to?

Well, the consensus, myself included, feels that the less attractive plays are currently the following:
-Financials (the banks, brokerage houses, and savings and loans - note: if you are a long term investor a good idea would be to invest in the financials b/c many of them are at 10-yr lows and you can get a good return once they rise back to original levels down the road)
-consumer discretionary (luxury brands and the stores that manufacture products you can live without)
-small-mid cap companies (usually they unproven, don't pay dividends, and need loans to grow; during this time, credit is hard to come by and it is expensive to get loans)

And the more attractive, 'defensive' plays:
-Utilities (usually pay attractive dividends and people always need power and water)
-Energy (any of the oil refineries, oil services companies, and/or
-Consumer staples (items that people always need)
-health care (obviously people are always going to need doctor visits and medicine)
-large cap companies (many in the Dow Jones Industrial Average pay dividends and are multinational and have proven, diversified businesses with steady revenue)

So you are probably asking yourself, why these stocks outperform the others?

There are two main reasons why the 'defensive' industries tend to do so much better than the market during lean times:

1. They're reliable. These companies make the products that people buy even when their wallets are being pinched. In other words, toothpaste, toilet paper, medicine, and electricity.
   
2. They pay dividends. Dividends mean you get a steady return from a stock regardless of what the market is doing. So, all else being equal, you enjoy a head start over the stocks that don't pay dividends. Of course, when you're looking for reliable companies that pay dividends, you want to make sure your company has both paid and increased its dividend steadily over a period of at least 10 years. Only then are you getting a track record you can trust.

So these are some things to think about. Of course, another option is that if you are already invested in a stock that is taking a beating, you can 'dollar-cost average' and add to your existing investment in that company. This will not only increase your investment but also bring your cost-basis down. Check out my previous post on this topic if you want to learn more.

Some stock picks for the LONG TERM

Ok guys and gals, here are a couple picks for the LONG TERM. These would be perfect for the long term. Check what I say out, do your own research, watch the stock, and then make a decision about when or if you want to get in.

First, I love AIG at the current levels. Here's why: AIG is the world's largest insurance company and has a diversified financial service business, which includes casualty and life, asset management, and retirement services. They also have a brokerage and are a multinational company. The stock is currently around $37/share. Last June, it was at $73. To say the least, it has been killed. It also has a dividend yield of 2.2%. The current $37/share is a 10 year low. YES, you heard me right. A 10 YEAR LOW. It may go a little lower but if you get in now, you will have big gains in the long term. (I keep saying long term b/c it is important to give these huge companies that are undervalued now, time to come back and get a couple solid earnings years so that the stock bounces back to previous levels.) Here is the chart. The far left is 1998 and the far right is the present.

I also love the stock AMX, America Movil. This company is providing wireless communications services in Latin America. It has subsidiaries and equity investments in affiliated companies in the telecommunications sector in Mexico, Dominican Republic, Bermuda, Brazil, Guatemala, Nicaragua, El Salvador, Colombia, Ecuador, Argentina, Honduras, Uruguay, Chile, Paraguay, Peru, Spain and the United States. Theyhave license to construct, install, operate, and manage public and private networks and provide telecommunications services for fixed line and mobile phones in all of the mentioned countries. They are not at a low of any kind but have been relatively flat since March of '07. This stock has a ton of room for growth and since it is a preeminent telecom player in an emerging market (Latin America) I would hypothesize that it will grow and grow fast. The current price is $57/share and the 52 week high is $69/share; this proves that it is 20% off it's all time high and has a great upside. the dividend yield is almost 4%!! Here is teh 5 year chart.

So, take a look and see what you like.

Disclaimer: This is not a recommendation for everyone and the views and opinions that the author of this blog expresses are solely his and not intended to be for everyone. They are intended to be a starting point for the reader's further research. There are no guarantees in investing. I am simply trying to present an idea that I think has a positive outlook for the future.

'Socially responsible' investing.

So I asked a couple of my loyal readers what they were curious about. What they said surprised me at first but when I sat back and thought about it, what they were curious about made sense, especially in this day and age.

They were interested in Green Investing aka Socially responsible investing. This is investing in the stocks and bonds of environmentally committed companies. Generally, socially responsible investors favor companies with practices in line with environmentalism, consumer protection, quality, and diversity. These investors also avoid businesses involved in alcohol, tobacco, gambling, weapons, the military industry, and abortion. Many green companies make positive, innovative contributions to the environment. They do so by:

• using recycled products to manufacture goods
• cutting down on environmentally harmful by-products
• demonstrating a commitment to preserving and enhancing the environment, as evidenced by the products they make and the services they provide.
• maintaining clean environmental records and openly disclosing their policies and performance on environmental criteria
• making positive contributions toward actively promoting a healthier environment
• producing renewable energy products or products that try to help cure existing environmental problems
• responding positively to shareholder advocacy on environmental issues

Many companies are starting to or already involved in 'going green'. If you think that you want to invest in companies that are putting these practices into effect, do some research on them and figure out which have the best growth prospects. Some popular plays in the recent months have been the solar stocks and other alternative energy picks. People are really looking to the future and feel that alternative energy is a necessity since oil is topping $120/barrel.

There are also mutual funds and ETFs that only invest in socially responsible companies. Two of these are GEX and PBW.

If you are having a hard time identifying green companies or are just plain lazy, here is a website that has an extensive list of these companies and breaks them down by industry. http://www.sustainablebusiness.com/index.cfm/go/progressiveinvestor.stocks.

Check it out and do your due diligence before making any decisions.

Retirment Calculator

http://cgi.money.cnn.com/tools/retirementplanner/retirementplanner.jsp

This is a great tool that will let you know what you will need to save. More importantly, when filling it out, you will be able to critique your current savings plan and really see what you are saving and if it is enough. (It probably isn't)

What NOT to do when saving for retirement.

Warning: this will be a long post, I have a lot on my mind when it comes to retirement.

I think that it is safe to say that retirement is the No. 1 goal of investors. Yet, looking at the numbers, it's clear that many investors are killing themselves and their savings with unfortunate actions. Here are some mistakes to avoid if you want your retirement dreams to actually come true.

1. Killing your nest egg before retirement. I have seen a couple studies which said that somewhere around 50% of workers cash in their 401(k)s when they switch jobs. In other words, they take the money and put it into their checking or savings (and pay income taxes and a 10% penalty if they're not yet 59 1/2 years old) rather than leave it in a retirement account. That's no way to build the retirement of your dreams. Not only are you paying penalties on hard-earned income but you are relinquishing the advantage of having the money grow tax-deferred, which is really important for the long term. When you change jobs, you can transfer the money in your employer-sponsored retirement plan to an IRA, which will allow the money to continue growing tax-deferred. You might also be able to leave the money in your old plan or transfer it to the plan at your new job, depending on the plans' rules. But your best bet is the IRA. You'll have many, many more investment choices, usually at far lower costs. Nowadays, people switch jobs like crazy, so if you do change your job, don't you dare make the above mistake.
2. Spending the money you have saved too early. Cashing in your 401(k) at a young age isn't the only way for your retirement to meet an early demise. Not saving enough in the first place will guarantee that your retirement will be on life support, for lack of a better term. Of course, no one wants to be told to "save" b/c it's so boring, and so ungratifying. blah blah blah. But this is what low-savers (and non-savers) are really doing: they're spending their retirement now, which may mean they won't be able to retire at all. Buying some stupid and expensive watch that they can't afford or changing their car lease every two years. Basically, don't live outside or above your means. It takes sacrifices to make large gains in the long term but it is not as hard as you may think once you create good habits. Building a nest egg isn't a decision of whether to consume, but when to consume. Do it now, and you won't be able to do it later without having to work for a paycheck. Think about what you buy now that you can go without and you will be amazed at hom much money you could save.
3. Not knowing how much to save. I bet a very small percentage of workers have calculated how much they need to retire. But you can't get to where you want to go if you don't know how to get there. You need a plan. Just google 'retirement calculator' and you can input some numbers and get an idea of what you will need and what it will take to get there. Just don't come crying to me when it says you will need 3-5 million but based on your current savings and what not you will only have 500k. Go do this and figure out your number and achieve it!
   
4. Spending too much too fast. This is for those that are in retirement. If you've made it to retirement with enough money, you should be congratulated! You've amassed enough money to create your own portfolio and generate a paycheck for yourself for the rest of your life.....hopefully. But you can't take it too easy, because you'll receive a severe pay cut if you deplete your portfolio too fast. How much can you take out each year and be almost certain that you won't outlive your savings? 3%? 5%? 7%? Well, the rule of thumb is about 4%. That's supposedly the withdrawal rate that can sustain a mix of stocks and bonds over most 30-year historical periods, which in all likelihood is the amount of years you will live after your career. It all depends on the market return of your portfolio so if you retire on the eve of the next bull market, you can take out more. However, if you quit working right before the next bear market, then taking out more than 4% a year could have your portfolio beating you to the grave. This is why it is important to over-save just to make sure you are covered.
   
5. Disregarding asset allocation. speaking of mixing stocks and bonds, nothing can mess up a retirement like bad investment decisions, whether it's owning too much of one stock, letting emotions take over, chasing the latest fad, or letting short-term events affect your long-term strategy. The way I see it, you basically have two choices: You can be a master stock-picker like Warren Buffett and try to find a dimaond in the rough like the next Wal-Mart OR you can broadly diversify your assets. This way, you can have exposure to giants as well as to small-sized growth firms. Either way, until you've established your skill at finding great investments, keep the bulk of your assets in a broadly diversified, regularly rebalanced portfolio aka a mutual fund portfolio. That way it is low maintenance and you can leave it up to the 'pros', the portfolio managers.
   
6. Allowing the government to eat your retirement. There are many types of investments and investment accounts, and they all have their differences when it comes to taxes. Not knowing all the rules can lead to too much taxation and less money for retirement.
   For example, profits from stocks that are held for at least a year will be taxed as long-term capital gains, a rate no higher than 15%. Interest from corporate bonds, on the other hand, is taxed as ordinary income which is a rate as high as 35%, or your tax bracket. Yet many investors keep their stock investments in their tax-advantaged accounts and their bonds in regular, taxable accounts. That just doesn't make sense. Asset location can be just as important as asset allocation. Read that again b/c it's really really important. Asset location can be just as important as asset allocation..
   
7. Paying too much for help/advice. There's nothing wrong with getting financial advice. If financial advisors/consultants didn't think that investors could use ideas, feedback, and answers, and pay for them, then they wouldn't be in business. But on the same note it is important that that help should be objective and affordable. Paying too much for advice, especially if it's bad, does a lot for a broker's retirement, not yours. Of course, if the advice you received had your portfolio performing better than what you could do on your own, then the price might be worth it. Remember: it's a lot better, in my opinion, to pay 1-2% and get a 10% annualized return than do it yourself and get a 3-6% return. Just be smart about what you pay and who you get advice from. There is no harm in getting multiple opinions, but the most important thing is that you do your own due diligence and ultimately know what is best for your own financial well-being.
8. Retiring too early. If you're in your early 60s, you should plan on living at least another two decades. Can you stand full-time leisure for 20 years? Do you have enough money to live on and live how you want to? Sure, it may sound good now, but many retirees find they get pretty bored after a while. But by then, they have already severed many of their professional ties. Before you decide to retire fully and permanently, discuss a phased or gradual retirement with your employer and business partners. A lot of the successful and wealthy people that I have talked to continue to work part-time as a consultant or other position in the industry that they spent their career in. My point is only that you should explore your options before you no longer have them.

Ok, that is enough of that. I probably left a lot of topics out but that should be some food for thought.

Save, Save, Save!

Great article.

A must read. Talks about why the average investor either loses or underperforms the market.

Also, it makes a case for having a financial advisor, someone whose job it is to strictly watch over your financial well-being. Comments welcomed.

http://www.thedigeratilife.com/blog/index.php/2008/01/03/why-most-investors-dont-make-money-in-the-stock-market/

Newly added: Quotes Section

Check out the new quotes section on the right hand side of the blog. I think it is a good addition. If you have a quote that relates to finance, let me know, by adding a comment and I'll put it on the page.

Quotes section

One of the comments I received included a great quote and so I thought it would be beneficial to have a quote section. Thus, you can find this newly situated on the right hand side column of the blog. Enjoy

Most Important Investments

For the majority of people, investing in stocks and bonds is foreign, especially in a basic brokerage account. The only exposure to investments many people receive is that of a work retirement account, usually a 401(k). It's amazing, and a little bit sad, how many people that I have talked to, who do not know about IRAs and their eligibility for other retirement options.

If you are the typical employee that has a company sponsored retirement plan, you have a couple ways to invest for your future.
1-Contribute to your work 401(k).
2-Open and contribute to an outside retirement account, i.e. an IRA.
3-Open a brokerage account with a broker-dealer like E-trade, Fidelity, Morgan Stanley, Merrill Lynch etc...
4-Buy oil. (meant to be a joke but right about now that looks like a great investment)

In any fashion, I want to express how important it is to save for retirement and more importantly let you know how to go about doing so.

First off, the most important way to save, by far, is your company 401(k), if you have one. The reason for this is that, most of the time, the company matches a portion of your investment. This company match is FREE MONEY. Yes, free money. ALWAYS contribute enough to get the full company match. Always. Why would you not take advantage of free money? There is no excuse or reason. (Most of the time the company that you work for will match up to $x and then 1/2 of the next $x. Always contribute enough to get every penny from them.) The reason it is so important to take money out of each check and contribute to your retirement funds is obvious: so that you have money working for you to become financially independent later in life. Another reason is that having some money withheld and invested every paycheck allows you to continually invest and dollar-cost average (see previous post of dollar-cost averaging for benefits).

Secondly, you want to open an IRA. If you make below 100k/year and don't see yourself making above that for much of your work life, open a Roth IRA. If you make, or will soon make, above 100k, open a Traditional IRA. (I won't get into the details as to why in this post)

Now, there are many reasons for opening an IRA, but the most important is that you will be able to contribute an extra $5k/year if you are under 50, and $6k/year if you are over 50 to your retirement. This money will grow tax deferred, which means that there will not be any tax consequences when you purchase or sell securities, for a profit or loss. This is a huge advantage over a normal brokerage account in which you have tax consequences after each transaction.

Lastly, if you have extra money left after taking care of necessary expenses and fulfilling the above investments, I would suggest opening a basic brokerage account and depositing that extra money so that you have the freedom to invest it in stocks or other investments.

In summary, take advantage of the free money your employer is offering. Once you've done that, do all you can to save and invest for your retirement. Even if you only have an extra $50-100/month, save it. It will go a long way for your future.

Always remember: "A penny saved, is a penny earned." This is a priceless tidbit of information that pays off in the longterm.

Example of how a dividend can grow your holdings

I re-read my previous post and wanted to add an example of how a dividend can help grow your holdings in a stock. I thought that a real world example would make it clearer as to why dividends are beneficial. See below:

Let's keep the math simple....

You buy 100 shares of Washington Mutual when it is at $10. Your original investment is $1,000. Let's assume that the yield of WM is 10%, this means that WM pays dividends that add up to 10% annually. (Usually, dividends are paid quarterly, but they are measured in yield per annum.) Let's also assume that WM stays at $10/share for 5 years with absolutely no appreciation in stock price. This is not really realistic but helps keep my example clear. Even with the share price of WM staying flat over 5 years, you would have increased your holdings because of the compunded dividend growth, assuming you reinvested those dividends. Let me show you.

Year 1: Own 100 shares at $10.
Year 2: (after 10% annual dividend reinvested) Own 110 shares at $10.
Year 3: (after 10% annual dividend reinvested) Own 121 shares at $10.
Year 4: (after 10% annual dividend reinvested) Own 133.10 shares at $10.
Year 5: (after 10% annual dividend reinvested) Own 146.41 shares at $10.

Isn't this crazy? Even with 0% growth in the actual price of a stock, your value of investment went up from $1000 in year 1 to $1464.10 in year 5. A 46% return over 5 years with no growth in the stock OR the dividend. The best part about this is that we all know most stocks will go up over the long term as the business grows and becomes more profitable AND when the businesses become more profitable they in turn usually raise the dividend to share that profit with shareholders. That means that the original investment that you make will grow even more than my example. This just goes to show how powerful dividends are.

Once again, this example was a little extreme, but just goes to show the added value of dividends, if reinvested. I highly recommend that you take some time and research dividend paying companies. Just google dividends and stocks and there will be myriad links to sites listing some good names.

Any questions or comments that you may have are always welcomed, drop a line below.

Dividends. They are a great way to slowly accumulate wealth.

So, dividends are very important. What are they? Here is the simplest definition I can come up with: a dividend is the distribution of additional company shares to its shareholders.

A little overview: Many companies and financial organizations offer shares to generate funds for the company. The investors invest in the company through these stock purchases. The investment decisions also depend on the reputation of the company. Getting some good returns in the form of a dividend is the motive behind these investments.

The shares bought by the investors provide them the status of an owner of the company. When the company makes a profit, a certain percentage of the profit is distributed among the shareholders according to the amount of shares of the company they own. These dividends are provided in cash or in the form of additional shares. These additional shares are known as a stock dividend.

There are several reasons for providing a stock dividend to the share holders. The company may have a shortage of cash. Because of this it becomes impossible for the company to provide cash to every shareholder. On the other hand, it is also possible that the company wants to invest more money from the earned profit into the company to raise the production level, thus they issue stock instead of cash.

There are several benefits of a stock dividend. Most importantly, no tax is charged on such dividends. If a shareholder receives some kind of stock dividend he or she is not entitled to pay any kind of tax on that until the additional shares are sold. On the other hand, this type of dividend provides the shareholder with additional ownership in the company which can provide more profit in the future. These are big pluses and the main reason why investors are attracted to the long term growth prospects of high-dividend yield stocks.

Another form of dividend that is provided to the shareholders is known as cash dividend. This dividend is paid in hard cash form or by check. The rules of this type of dividend is more or less same as the stock dividend. Here also the shareholder receives a certain part of the company's profit, which is decided according to the number of shares the shareholder holds. The investor can then decide whether or not to reinvest the cash into the company, by purchasing more shares, or simplay take the cash as a deposit into the brokerage account. Most of the time, people reinvest the money as to grow their investment, especially if the company's future looks bright.

Here are some dividend paying stocks that are popular buys.

-Pfizer (PFE)
-Duke Realty (DRE)
-Bank of America (BAC)
-Sempra Energy (SRE)
-Johnson and Johnson (JNJ)
-General Electric (GE)
-Pepsi (PEP)

Obviously, there are thousands of stocks that yield dividends. I would suggest doing a google search for dividend paying stocks and go from there.

Good luck!

highly recommended article

Instead of me just writing endlessly about retirement, which I could do, TRUST ME, I am simply going to give you a link to a great article about understanding your retirement. It is short and sweet and to the point, so check it out. There are also many other fantastic articles about all aspects of money and finance that are quite helpful as well.

http://www.fool.com/retirement/retirement01.htm?source=ifltnvsnv0000001

This article is on the Motley Fool website. This site is great. There is a section called 'Caps' that I frequent. It allows you to make stock picks and track your portfolio of picks. I check this site at least once a day and everytime I am interested in a stock for purchase or out of curiosity. Many people use this and present great insight into companies that you may not have been privy to on your own.

I'd recommend taking an hour or so, if you have the time, to navigate the site and see what parts could be useful to you.

Happy Reading,

The Guru

Dollar Cost Averaging..... a very very important concept for continued growth/profit from your investments!

In short, dollar cost averaging is an investment technique used to reduce market risk through the regular purchase of securities at predetermined intervals and set amounts. Many successful investors already practice this without realizing it. Many others could save themselves a lot of time, effort, and money by beginning a plan.

Dollar Cost Averaging: What is It?
Instead of investing assets all together in a lump sum, the investor works their way into a position by slowly buying smaller amounts over a longer period of time. This spreads the cost basis out over several years, providing insulation against changes in market price.

So how do you set up your own dollar cost averaging plan?
In order to begin a dollar cost averaging plan, you must do a couple things:

1. Decide exactly how much money you can invest each month or period.
2. Make certain that you are financially capable of keeping the amount consistent; otherwise the plan will not be as effective.
3. Select an investment that you want to hold for the long term, preferably five to ten years or longer.
4. At regular intervals (weekly, monthly or quarterly works best), invest that money into the investment you’ve chosen. If your broker offers it, set up an automatic withdrawal plan so the process becomes automated.

For example: You own a mutual fund and invest $100/month into it. If the mutual fund goes up over the long term, which we assume and hope will happen, your average price per share will steadily go up. On the other hand, if the mutual fund declines for a time period of over one month, your price per share will decline.

Here are the numbers. Let's say the mutual fund share price is $50/share to start.
Purchase 1 - $100, 2 shares at $50 each
Purchase 2 - $100, 1.96 shares at $51 each (can only buy 1.96 shares b/c price has appreciated)
Purchase 3 - $100, 1.92 shares at $52 each
Purchase 4 - $100, 1.88 shares at $53 each

In this case, you would now have $400 invested in this mutual fund and you would own just under 8 shares (7.76 shares to be exact). The average price paid would be $51.50. Therefore if the mutual fund goes below that you are at a loss but if it is above that then you have gains.

Dollar cost averaging works even better when a fund decreases in value after you buy it. For instance, you buy 1000 shares of a stock at $50. It goes down to $25 and you buy another 1000 shares. At that point, you would own 2000 shares at $37.50. This helps b/c then the stock doesn't have to make it all the way back to $50 for you to break even, it only has to get to $37.50. Obviously it is useful if you believe in the prospects of a stock. If you bought a stock that has been downgraded or isn't attractive anymore, then you may just want to cut your loses.

Godspeed.

Insider buying and selling......what does it tell us?

Insider Trading

Insider buying and selling is a very, very powerful tool in helping to determine whether a company is a good investment or not. Insiders are the executives, directors, and 10% owners of public companies. They know more about the health of the company than the average or everyday investor because they run it on a day to day basis. Studies have shown that companies that have significant insider buying have beaten the market time after time. This is no accident. Insider trading tends to lead the market by anywhere from six months to a year because of the knowledge that the executives have of their business model and how well the outlook is for the future. Insiders of a corporation obviously know more about the individual company they work for, the industry/sector that that company is in, and its competitors. This information not only helps them determine how the company is doing but also how much the company's stock should be valued at.

On the other hand, insider selling has not been shown to lead to a decline in the stock price because an insider may sell stock for myriad reasons: a child going to college, a new home purchase, or any life event.

Taking this into consideration, how is it that we can profit from this? Simple. Keep up with the news and look at investment vehicles in the market that take advantage of this information. Remember: every time and insider buys or sells, there is a process that they must follow and that involves following many SEC regulations that are eventually publicized so that each one of us can find out who is doing what. One way to capitalize is to keep your eyes open for headlines in the news that say a public company's executive is purchasing a block of shares or exercising options. This could be a sign that you need to look into the transaction to get more info. Another way to benefit is to invest in a company, or a group of them, that have insider buying. NFO is a managed ETF, an exchange-traded fund which is similar to a mutual fund, that holds companies whose high level executives and directors are buying company stock. There are also proprietary products that many of the brokerage houses, Smith Barney, Merrill, and Morgan Stanley, design to allow their clients to invest in these companies.

I would suggest 'googling' insider buying/selling and seeing if you can come up with a list of companies to look into.

Here is a preliminary list:
CABOT OIL & GAS CORP
MOSAIC CO
ST JOE CO
NUCOR CORP
COMCAST CORPORATION CLASS A
LABORATORY CORP OF AMERICA
MASSEY ENERGY CO.
OM GROUP INC.
ONEOK INC.
KAISER ALUMINUM

All it takes is a little research and turning over a couple of rocks to find the right company and the right time to invest.

Comments are welcomed!

Feel free to make any comments that would help make the blog more useful, i.e. any topics you are interested in or any other info I have neglected.

Thanks.

Is there an end in sight for gold and oil prices?

The above charts show oil and gold prices over the past year. Pretty similar increase; both going through the roof. A couple questions that come to mind are, Why are both oil and gold increasing at the same time? and Why would someone want to own gold? I'll answer these below.

1- Why are oil and gold prices rising together?

Oil, Inflation and Gold

Although the prices of gold and oil don't exactly mirror one another, there is no question that oil prices do affect gold prices. If oil prices rise or fall sharply, investors can expect a corresponding reaction in gold prices, often with a lag. There have been three major upward moves in the price of gold, one of which we are currently experiencing. The first occurred in the early '70s when oil prices tripled. During the same period, gold prices rose 2.5x. The second major price move occurred later that decade, when oil prices doubled. Over the same period, gold prices rose another 2.5x. The third period has been during the last year. As the charts above show, one year ago (5/1/07) oil and gold prices were about $65/barrel and $675/ounce respectively. Today, oil is trading at just over $119/barrel and gold is just under $900/ounce.

2- Why Own Gold?

There are six primary reasons why investors own gold:

1. As a hedge against inflation. Gold is renowned as a hedge against inflation. The most consistent factor determining the price of gold has been inflation - as inflation goes up, the price of gold goes up along with it. Since World War II, the years in which U.S. inflation was at its highest were 1946, 1974, 1975, 1979, and 1980. During those years, the average real return on stocks, as measured by the Dow, was -12.33%; the average real return on gold was 130.4%. Coincidence? I think not. Today, a number of factors are conspiring to create the perfect inflationary storm: stimulative monetary policy, a declining dollar, a spike in oil prices, a mammoth trade deficit, and America’s status as the world’s biggest debtor. This has caused commodity prices to reach all time highs across the board.
2. As a hedge against a declining dollar. Gold is bought and sold in U.S. dollars, so any decline in the value of the dollar causes the price of gold to rise. The U.S. dollar is the world's reserve currency i.e. it is the medium for international transactions, the principal store of value for savings, the currency in which the worth of commodities and equities are calculated, and the currency used as reserves by the world's central banks.
3. As a safe haven in times of geopolitical and financial market instability. There are myriad problems occurring around the world, any of which could erupt with little warning. Gold has often been called a 'crisis commodity' because it tends to outperform other investments during periods of world tensions. The very same factors that cause other investments to suffer cause the price of gold to rise. A bad economy can sink poorly run banks. Bad banks can sink an entire economy. Both of which we are currently seeing, along with gold soaring. As banking crises occur, the public begins to distrust paper assets/money and turns to gold for a safe haven. When all else fails, governments rescue themselves with the printing press, making their currency worth less and gold worth more. Gold has always risen the most when confidence in government is at its lowest.
4. As a commodity, based on gold’s supply and demand. Demand is outpacing supply across the board. Gold and other precious metals production is declining. It is very difficult to open new mines because it takes a long time, making it hard to address the supply issue quickly. There is growing demand in China and India, the largest gold-consuming nations.
5. As a store of value. One major reason investors look to gold as an asset class is because it will always maintain an intrinsic value. Gold will not get lost in a market collapse. It actually becomes a go-to investment during problematic markets. Historically, gold has proved to be an effective preserver of wealth for investors.
6. As a portfolio diversifier. The most effective way to diversify your portfolio and protect the wealth created in the stock and bond markets is to invest in assets that are negatively correlated with those markets. Gold is the ideal diversifier for a stock portfolio, simply because it is among the most negatively correlated assets to stocks. Although the price of gold can be volatile in the short-term, gold has maintained its value over the long-term, serving as a hedge against the purchasing power of paper money. For these reasons, exposure to gold in one form or another, is essential to having a truly diversified portfolio.

With that said, there are several ways to invest in gold. You can buy gold mining company stocks (ABX, AUY, GOLD, NEW are a few), mutual funds of these stocks (INIVX), closed end funds that mirror the gold price (GLD), or gold bricks or coins itself. If you think that oil will continue to increase you may want to look at the US oil fund (USO).

Long term investing is the name of the making money game.

The above picture is the historic chart of the DJIA (Dow Jones Industrial Average), from 1900-present. The DJIA is an index, a group of 30 of the largest and most publicly-held corporations in the U.S. The DJIA is one of the most quoted indices and along with the Nasdaq, the Russell, and the S&P, gives a basic measure of what the market is doing on a particular day.

The stocks that currently are included are:

3M
Alcoa
American Express
American International Group
AT&T
Bank of America
Boeing
Caterpillar
Chevron Corporation
Citigroup
Coca-Cola
DuPont
ExxonMobil
General Electric
General Motors
Hewlett-Packard
Home Depot
Intel
IBM
Johnson & Johnson
JPMorgan Chase
McDonald's
Merck
Microsoft
Pfizer
Procter & Gamble
United Technologies Corporation
Verizon Communications
Wal-Mart
Walt Disney

These are all huge companies, often called, 'large-cap'. They are not the stocks that you want to trade or make fast returns on since they are slow movers. These are the value stocks that help a portfolio keep steady and avoid big swings during volatile markets (ring a bell to current conditions?). All of these companies have proven earnings, long track records of growth, and pay dividends (share profits with shareholders). This makes them attractive to investors that want stock market exposure but don't want too much volatility.

So, this explanation begs the question: Why does any of this matter?

The answer is simple. Take another look at the chart above. At first glance, you might think, 'wow, the market has always gone up despite a few hiccups'. You would be right. The single most important factor you need to know, is that since inception of the DJIA index, its annual returns have averaged about 8.5%. Yes, 8.5%. That is pretty darn good. Especially when you consider that you would have participated in the gains and losses during the good times and the bad. Now if you would have sold at all the highs and bought during all of the lows, you would be a lot richer and likewise have a bigger smile on your face, but that isn't realistic.

Lessons learned:

1- The market will go up over the long term. Keep a long term investment timeframe, especially for accounts intended for retirement and other long term goals.

2- Timing can greatly affect returns, BUT, if you stay the course and continuously invest, you will be fine.

3- Large-cap stocks, many of which are in the DJIA and S&P 500, grow slow, but are steady and safer than many other investments. Investing in stocks is inherently riskier and more volatile than other investment vehicles, but the returns are also greater. Like the saying goes, "the greater the risk, the greater the return".

That's is for today.

Homework: google the different stock market indices and get a basic understanding of them. Also, check out some mutual funds that mirror those indices. These are called index funds and are low cost investments that simply own only the stocks in a specific index. For example, a S&P 500 index fund is FSMKX, fidelity spartan s&p 500 index fund. These are very low cost options and are intended to have a return that is the same as the index.

Next time, I'll talk a little about sectors and some intriguing plays for the future.

The bottom line...........

Today is Thursday, April 24th, 2008.

The global markets, the U.S., and now foreign countries (i.e. Europe, Asia, even emerging markets) are all experiencing a 'crisis' for lack of a better term. Credit crisis. Housing crisis. Retail crisis. Call it what you want, but at the end of the day the markets have been battered and the average informed investor is about as skeptical as it gets. Hence why most are sitting in cash and not invested fully, if at all, in the stock or bond market.

This should not be the case!

Reasons as to why you should invest, now:

1-the market is trading at about 10-15% below the highs late in '07 and if you have the money to invest, you can get some great value, especially in stocks. I don't care what sector you invest in right now, even though it will make a small difference, the fact of the matter is that stocks are trading at a large discount to what they should be and if you get in now there will be big gains in the next 2-5 years. Yes, there will be volatility and ups and downs. BUT, if you have a long term attitude, there is mucho dinero to be made.

2-the 'crisis' is nearing an end, not at an end or over currently, but getting there... I could quote studies all day long but the facts are easily interpreted: the avg. recession, which we are in, lasts 10 months and drops the market 12-18%. This drop marks the half way point and since we saw the bottom in February, which was about a 15% drop depending on which index you follow, this means that we should be coming out of the recession in a couple months. That is, if history stays true to itself.

3-the Federal Reserve Board aka 'the fed' has acted fast and aggressively to cut interest rates and open the discount window to financial institutions, this has eased liquidity and helped bank balance sheets, which in turn has made investors a little more comfortable with the financials, which make up 20% of the market cap in the U.S. (To put this in layman's terms: the fed opened its wallet and told banks that it could borrow as much money as it wanted at a lower interest rate)

4- many companies have made write-downs but should be ready to make some write-ups on loans that were previously thought to be default/bad. Likewise, many companies have had lower than expected earnings and have projected a lower guidance for the upcoming year and '09, this gives them some leeway for the next few years and lowers expectations. The result of this is basically they have lower goals and can reach them easier, thus making investors more impressed even when they meet these smaller goals.

There are more reasons but these are the main ones. In one of my next posts, I won't focus on the macro-market, instead, I will look at the micro-market aka individual sectors and industries and make some recommendations about what I think will perform well in the near future.

Alright kids, that's all for today. Mas informacion manana. Your homework for today is to read at least one article on the current market. Have fun!

The Inaugural Post

Ok, so here's the deal. You, the investor, have a sum of money. You don't currently need it; so what do you do? (That is the inherent question, right?)

Keep it in your savings account? Of course you do. Unfortunately, the problem with that is that the savings, or worse yet, checking account, yields a great return of 0.7% annually, if that.

So what do you do? Invest it, and get a return, year over year of 6-10%? Of course you don't.

That is why I am here. To educate. To inform. To open your mind. Whatever you want to call it; I want people to take the initiative to want to learn about putting their money to work. Because keeping money in an account at a bank is what I call 'safely losing your money'. (take into account inflation, especially this year)

So.....

My two cents: The problem with society and mainstream America is that 90% of people have no clue. I mean if you ask someone about investing, they can of course tell you their definition of what a stock is, what a mutual fund is, and so on and so forth. But......do they really know how it can help them? Or more importantly, which stock or fund to buy? The answer is a resounding NO!

My goal is, like I said before, to get you interested by hopefully giving you an inside glance into my thought process and my commentary on market conditions.

With that said, let's get started, and good luck.