Got some hot stock tips for me?

[ken_xman]

Look at:
1.Transamerica Growth Fund- All equity asset allocation fund.
2. Evergreen Asset allocation fund- has more int. exposure
3. AIG SunAmerica- Asset allocation fund, all equity

Individual stocks have more risk than you realize.

[Bill Verburg]

Originally posted by pwd72s
No more than 4% of the equity side of a portfolio should be in a single stock...just my opinion. Here's another weird stat to consider. There are over 7,000 mutual finds out there...some load, some no load, some with high fees,some with low fees...all claiming they hold the key to success. Guess what? With all the MBA's doing analysis, with all the computer programs they have, with all their monitoring of all the world's markets, their reading of corporate quarterly reports...less than 5% of these funds beat the total market index. And the names of the 5% that do outperform the total market index change in any given year. I'm supposed to analyze a single stock among all the offerings? Nope...Everybody is looking for the next Microsoft, and I'm sure such a company is out there, along with countless thousands of others that will fail. As soon as you have a sure way to pick only the winners, let me know.

Until then, I'll rely on my home analyst Cindy...she spends spare time on financial posting boards. Then from time to time, she'll get naked, smear herself with wood ashes, go out back among the trees, and study chicken entrails. And damned if she doesn't beat most mutual fund managers...year after year.

BTW, I'll also add that we're nervous...partly age related, but other factors as well. we're 40% equities. The rest is cash or treasury issues. At least for the time being.

Paul has given you some very good advice. Except for the chicken part

Some basic principles[list=1][*]keep costs low[*]diversify among asset classes[*]diversify among assest sizes[*]diversify among assset types, I prefer a vlaue bias[*]have a written asset allocation plan[*]rebalance at least annually, semi annually is better, to keep to your written asset allocation plan.[*]your appropriate asset allocation is dependant on your age and financial condition and goals(long and short term)[*]don't take unnecessary risk[*]learn as much as you can about Modern Portfolio Theory and risk management[/list=1]

A moderately aggressive asset allocation might go something like this
of your total portfolio
*US stock 50% split 25% large cap, 12.5% mid cap, 12.5% small cap all w/ a w/ a value bias. The US stock allocation by itself might look like
22 18 10 = 50% of US allocation
12 10 8 = 30% "
10 6 4 = 20% "
*Foreign Stock 15% split similarly to the US stock allocation
*Bond/short term 30%
*Real estate and other diversifiers 5%

This should certainly be modified to suit you particular situation

[turbo6bar]

If this were my $20k,

1) $5k in VTSMX
2) $3500 in BFK.B
3) Remainder in 28-day treasury bills

#3 goes in play once the equity market realizes we are entering a recession. Bargain hunt for the best beat down long-term holds.

[competentone]

Originally posted by pwd72s
No more than 4% of the equity side of a portfolio should be in a single stock...just my opinion. Here's another weird stat to consider. There are over 7,000 mutual finds out there...some load, some no load, some with high fees,some with low fees...all claiming they hold the key to success. Guess what? With all the MBA's doing analysis, with all the computer programs they have, with all their monitoring of all the world's markets, their reading of corporate quarterly reports...less than 5% of these funds beat the total market index. And the names of the 5% that do outperform the total market index change in any given year. I'm supposed to analyze a single stock among all the offerings? Nope...Everybody is looking for the next Microsoft, and I'm sure such a company is out there, along with countless thousands of others that will fail. As soon as you have a sure way to pick only the winners, let me know.

That is overall good advice/opinion if your goals on investing is "preservation of capital."

If you do decide you want to seek extreme growth, and can tolerate the risks on the possibilities of loss of your capital, then you won't follow the "safe" rules about investing.

If you look for investments with virtually no risks, then you have to be ready to settle for investments that give you virtually no return.

There is also room for both speculative trading and conservative investments if someone wants both in their life. (You can own both a Porsche 930 and a Dodge Caravan and not be living a contradictory life.)

Of course, if you think that before you can make any investment decisions that you must first find some "sure way to pick only the winners" you are approaching the topic with the wrong attitude.

The key is to understand the risks; know what has to happen for an investment in a specific position to pay off, and know the opposite, what can happen that would cause you to lose money. Know yourself, what you want, what risks you are willing to take.

When making an investment decision, you are trying to predict the future; there will be knowable variables (like the history of the specific investment you are considering) and unknowable ones. The "unknowables" are not all just "wild gambles." You can come up with "probabilities" on the chances of specific unknowable variables happening.

Sometimes you may make a decision to put money in a position with a high probability for losses if you know there are very high return potentials if certain improbable, but possible, things happen. In such speculation, you actually expect losses -- this is very much the case if you purchase options for a speculative position in the underlying security.

And don't listen to the people with the MBAs; they're almost all idiots! (Which explains why most of them can't outperform the indexes.)

[Bill Verburg]

You need to understand MPF, risk management, eficient frontier etc.

Here is an example of managing risk through asset allocation for various time frames

[turbo6bar]

Hard, if you want to speculate, here's an interesting one:

http://globaleconomicanalysis.blogspot.com/2006/11/mortgage-brokers-synopsis.html

Go to the end of the blog entry, Kevin Kerr's Resource Trader Alert, and his supposed track record:



Sign up, try it for a year, and tell me what you think.

[competentone]

Originally posted by Bill Verburg

That looks like something some MBA dreamed up! I don't see anything in that diagram that could help me determine anything about making investment decisions!

But then I look at businesses and investing from a "common sense" angle. I just ask questions like: What is a company making? Who are they selling it to? How much are they making on each sale? What sort of people are running the company? Do I trust what they say? Are other investors putting a reasonable valuation on the company (through the market stock price)? Etc, etc.

I'll let others get whatever value they get out of all their complicated charts and graphs!

[svandamme]

FORGET ABOUT STOCKS, BLACK JACK IS THE WAY TO GO
I HAVE MADE A KILLING IN VARIOUS CASIONO'S TO THE POINT WHERE I'M NOT ALLOWED TO GO TO ANY CASINO ANYMORE
MY SECRET TACTICS COULD BE YOURS , ALL I NEED IS 20 000 USD
AS A CONSULTANT FEE, AND FROM THERE ON I GUARANTEE YOU WILL MAKE A KILLING ON ANY BLACK JACK HIGH STAKES TABLE OF YOUR CHOOSING!! DON'T MISS OUT LIKE ALL THOSE OTHERS WHO LOST EVERYTHING IN STOCKS!!!

[jluetjen]

I never really "got it" in regards to investing until I had an absolutely top-notch FI prof at BU during my MBA. (Disclaimer, I'm not an investment advisor, financial analyst or anything like that, but a salesman. So any investments that you make are your problem, not mine!) OK, Long story short....

1) Unless you have essentially unlimited time and access to information, stay away from individual stocks. (Unless you like to do it as a hobby, but then you'll need to include your losses as the cost of the hobby). The best bang for the buck as far as risk and return is index funds (for example an S&P500 Index fund). Just keep an eye on the costs so that you're not paying too much.

(Exception, if you work at a company which has a discounted stock purchase plan based on the lower of either the 1/1 or 12/31 price, with immediate vesting of your purchase and no black-out periods, buy as much as you can. Even if you sold the stock immediately after receiving the shares, you'd have made 2x the discount off the bat. Just make sure that you don't have too much of your investments in that one stock, so bleed some off periodically and roll it over into your other investments.)

2) When it comes time to diversify, look at adding some small or medium-cap index funds, or foreign index funds. You can also look into REIT's for a real estate component.

3) As you get closer to needing to use the money (ie: retirement age for a lot of people) start to shift the percentages so that you start to have a growing share of your investments in bonds so that you'll be less at risk for changes in the market.

Given the amount of energy and resources that go into investments nowadays, it reminds of a quip made by the aforementioned professor describing the "Chicago School of Economic" attitude towards stock picking:

If you see a $20 bill on the floor, don't bother to bend over and pick it up since it probably isn't real

I've come to the same conclusion about investing. An example of why the "average" guy can't really get ahead in the long run:

A number of years back I bought a "Nordic Track" ski machine for excercising (Great machine BTW, I'm on my second one now 15+ years later). I needed a part for the machine and found that they had excellent after sales customer service to compliment their presales service. I researched the company (CML Group) and they had good financials and things like an expanding product line and were advertising on TV constantly. They were also opening up new in-mall stores. So; Good product, service, financials, growing company. I bought about $1000 worth of shares for my portfolio at 21 1/8 in February of 1994 and watched them going up. I recently happened to find this review of the company from another investor from about that time.

When Alan B. Bond bought a Nordic Track fitness machine three years ago, he liked the product so much he bought the company. Well, actually, Bond, the president and chief investment officer of Manhattan's Bond, Procope Capital Management, picked up shares in CML Group Inc., the company that manufactures Nordic Track. CML, which also owns the Nature Company chain of retail stores, was one of Bond's picks for the BE roundtable. As for its performance? It was a muscle-bound success, spiking 70%, from $23 to $39.

"It's always good to have experience with the product," says Bond. Millions of health-crazed Americans like Bond have helped make Nordic Track one of the hottest-selling fitness machines. Even cheaper clones couldn't knock this CML product off balance. Not surprisingly, Acton, Mass.-based CML hopes to repeat its U.S. success in Europe.

Here's what another investment article from that time said:

Names like the CML Group Inc., which makes the Nordic Track. We see orders for their exercise equipment increasing at a rate of about 60%. And I think they're probably goind to exceed most analysts' expectations in the coming year. Both CML and Stride Rite are selling at below-market multiples, which is new for me.

Great minds think alike!

I'm a buy and hold kind of guy and things were going well. After not checking the stock for a few weeks prior to my wedding, I picked up a newspaper during my honeymoon and checked the stock. The stock was down around 9 7/8!

What!!!!!

I did some searching and discovered that the patient on the Nordic Track ratchet mechanism had expired. How was I to know that? I figured that I (and other individual investers like myself) are just there to be left holding the bag for the professionals. I eventually sold out at 10 1/4 in November '94. It's lucky that I did. Here's (as Paul Harvey used to say) the rest of the story...

In 1998 the CML-Group sold off Nordic Track and filed for bankruptcy protection, its stock price plunging. CML's days as a darling of Wall Street were over. The television ads that sold millions of Nordic Track machines no longer worked. Their stock, which had once hit $30 now trades on the OTC market for $0.35

A few years later I was sitting in a meeting with the treasurer of my company and we were chatting about investing and I mentioned my experience. He said "CML? That's Charles M. Leighton. He's got a nice big sail boat moored up in Salem". I figure that I paid for some of the deck hardware on that sailboat.

But if you want to do it the hard way and pick individual stocks, be sure to get a good education in portfolio management, risk management and the other stuff mentioned above before you sink your life's savings into it.

[pwd72s]

Sounds like some here may already be aware of this posting board. Cindy has a "favorites" list of financial websites, but she hangs out here a lot:

http://socialize.morningstar.com/NewSocialize/asp/AllConv.asp?forumId=F100000015&csection=VanguardDiehards

Keep it simple:
"Perhaps investing isn't as complex as it seems. One of the simplest strategies around -- putting money into just three index funds -- beats the performance of most money managers. "There may be better investment strategies" said John Bogle, founder of The Vanguard Group, "but the number of strategies that are worse is infinite." (MarketWatch article)

[Bill Verburg]

I don't see anything in that diagram that could help me determine anything about making investment decisions!

Then you are chum for the financial industry sharks, You have my sympathy


Successfull investing for the amateur is all about asset allocation that will maximize gain while minimizing risk. The curves show what is called the "Efficient Frontier" and you should easily be able to see what ratio of stocks/ bonds to own as shown by the mixes illustrated for different decades, at one end is 100% stock the other 100% bond and in between in 10% increments are mixtures. Once you know the ratio that has been shown to max gain while min risk then it is only a matter of choosing the vehicles to invest in.

[pwd72s]

Originally posted by Bill Verburg
Then you are chum for the financial industry sharks, You have my sympathy


Successfull investing for the amateur is all about asset allocation that will maximize gain while minimizing risk. The curves show what is called the "Efficient Frontier" and you should easily be able to see what ratio of stocks/ bonds to own as shown by the mixes illustrated for different decades, at one end is 100% stock the other 100% bond and in between in 10% increments are mixtures. Once you know the ratio that has been shown to max gain while min risk then it is only a matter of choosing the vehicles to invest in.

Couldn't agree more...also, asset allocation should change as you get closer and closer to retirement age. There is always the possibility of unforseen major events that can wreak havoc in the markets and the economy...

[Bill Verburg]

Originally posted by pwd72s
.also, asset allocation should change as you get closer and closer to retirement age. There is always the possibility of unforseen major events that can wreak havoc in the markets and the economy...

thats right and allocation changes w/ age and financial condition, re-balanceing does what Joe suggested " buy low , sell high"

If your target allocation was say 70/30 last 1/1, and if you re-balanced in July you likely had something like 60/40 because of the May correction, so you sell 5% of the bonds and buy stock low to get back to 70/30. Now in Dec. stocks have had a good run, time to re-balance, sell 5% of the stock and buy bonds to get back to 70/30, this completes the virtuous cycle by selling high.

good luck

[competentone]

Originally posted by Bill Verburg
Then you are chum for the financial industry sharks, You have my sympathy....
Successfull investing for the amateur is all about asset allocation that will maximize gain while minimizing risk....

I'm not sure why you're giving me your sympathy -- or how you can figure that I'm "chum" for the financial industry sharks -- I'm up over 1000% in my Roth IRA over the past three years. I haven't had as spectacular gains in my regular brokerage account since I tend to trade less, looking for things to hold for at least a year so I can sell with a long-term capital gains rate, but my gains there exceed the "fund manager's" averages many time over.

All the gains are from trading individual stocks. I have had some losses too -- I took a $25k loss in the Roth earlier this year -- not fun to do since the loss can't be applied against gains; it was in an OTC stock -- and it really sucked too since I could have taken a gain on it in 2005, but I got too greedy and held too long!

You seem to be suggesting that only people in the financial industry can understand business and investing. Sorry, but I don't share that view.

In fact, the suggestion that individual investors somehow "need" the financial industry -- and all sorts of complicated formulas -- to help them make their investment decisions in-and-of-itself is a red flag that should make investors extremely cautious.


A person may choose to turn his money over to someone else to manage, but one should not be "intimidated" into thinking that one "needs" an expert to make investment decisions.

If someone tries to tell you that you can't understand investments, but that they can, I say you should run, not walk away from anyone giving such advice.

Most of the financial "experts" out there are primarily interested in lining their own pockets and have worked hard to spread the myth that they are somehow "essential" for anyone who wants to make money investing. They continually attempt to instill "fear" in the public about how "dangerous" investing is; and how they "make it safe" for the individual investor.

Successful investing/trading is not easy and not without risks, but it is something an individual can do if he has reasonable intelligence, plenty of common sense, and a willingness to put the effort in that is needed.

[sammyg2]

Buy high, sell low

[Bill Verburg]

Originally posted by competentone
I'm not sure why you're giving me your sympathy -- or how you can figure that I'm "chum" for the financial industry sharks -- I'm up over 1000% in my Roth IRA over the past three years. I haven't had as spectacular gains in my regular brokerage account since I tend to trade less, looking for things to hold for at least a year so I can sell with a long-term capital gains rate, but my gains there exceed the "fund manager's" averages many time over.

All the gains are from trading individual stocks. I have had some losses too -- I took a $25k loss in the Roth earlier this year -- not fun to do since the loss can't be applied against gains; it was in an OTC stock -- and it really sucked too since I could have taken a gain on it in 2005, but I got too greedy and held too long!

You seem to be suggesting that only people in the financial industry can understand business and investing. Sorry, but I don't share that view.

In fact, the suggestion that individual investors somehow "need" the financial industry -- and all sorts of complicated formulas -- to help them make their investment decisions in-and-of-itself is a red flag that should make investors extremely cautious.


A person may choose to turn his money over to someone else to manage, but one should not be "intimidated" into thinking that one "needs" an expert to make investment decisions.

If someone tries to tell you that you can't understand investments, but that they can, I say you should run, not walk away from anyone giving such advice.

Most of the financial "experts" out there are primarily interested in lining their own pockets and have worked hard to spread the myth that they are somehow "essential" for anyone who wants to make money investing. They continually attempt to instill "fear" in the public about how "dangerous" investing is; and how they "make it safe" for the individual investor.

Successful investing/trading is not easy and not without risks, but it is something an individual can do if he has reasonable intelligence, plenty of common sense, and a willingness to put the effort in that is needed.

Well aren't you special

[competentone]

Originally posted by Bill Verburg
Well aren't you special

Let me guess, you're in the financial industry and are "incensed" by my comments.

[lendaddy]

The one joy of being broke is that my account needs no managing

[Bary Mukalkiner]

GE

Very well run, very well diversified. Like a mutual fund without all the fees and BS.

About 12% a year, even through the 'crash' in 2000

Fool Disclosure: Yes, I own GE

[trader220]

12% a year in GE what not counting the last 3 ?