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Posts Tagged ‘mutual funds’

Why You Make Terrible Investments

November 22nd, 2010

We have been talking about how most people are not confident about investing and rely on the “advice” of financial planners. Nearly all of these people end up buying mutual funds and bond funds. And, I noticed the huge numbers of people who invest in index funds. I started thinking, why are these investments so popular when they are so bad?

First, let me point out why I think these are terrible investments. These advisors are not advisors at all. They are salespeople. And they get paid about 5% to sell you a mutual fund or a bond fund. They get paid even when you lose money.

Secondly, nearly all would-be investors cannot handle watching their portfolio go down 50% or more. When they reach their pain threshold, they sell. The “advisors” always say, “It’s gonna come back. Just hold on.” It’s easy for them to say that because it’s not their money.

Dow Jones Industrial Average 1929 - 1932

Finally, the stock market is going down right now. And, I believe it is going to continue going down. Millions of retirees are going to be pulling their money out of the market. Besides that, there is a chance that we are going to have another 1929 style stock market crash. At that time, the market went down 90%.

Why do we continue to make the same financial mistakes?

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Chinese Yuan vs. US Dollar

October 7th, 2010

The Chinese Yuan continues to strengthen against the dollar. Since China let its currency float, it has appreciated 2%.  What global forces are going to continue its appreciation? Here’s my post from back in July just after the Chinese government removed its currency peg.

The Yuan Continues to Appreciate against the Dollar

As the Chinese economy grows, the Yuan will continue to get stronger. And, as the U.S. government continues to create more money and more debt, the dollar will get weaker. It’s not difficult to figure out which way the market is going.

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New Investment System 1.0 – Part 3

August 29th, 2010

Since this new investment system does not yet have much diversity, I was looking for different investments. One of the most interesting that I found was the Euro Pacific International Value Fund. A mutual fund? Yes, I am a bit surprised myself.

After writing many posts about how bad mutual funds are, why am I considering this one? Because it makes sense. It follow’s Peter Schiff’s investment approach. I read a few of his books and I agree with his investment philosophy. You can read about it here.

Why is this mutual fund a good idea?

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A Basic Strategy for Successful Investors: Managing Risk

August 17th, 2010

As Social Security begins to collapse and the millions of baby boomers begin to retire, many will wonder where all the money went. It was only last year when would-be retirees lamented,

“My portfolio is down 50%, so I can’t retire. I don’t even open up those statements anymore”

Dow 2006 - 2010

Did you see these people on the news? I remember them clearly. But now that the market has recovered, they are long forgotten. And the lesson was not learned. Most people have their entire retirement account invested in mutual funds. As soon as the market goes down again they will be in the same unenviable position.

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Are those Financial Guys just Talking Mumbo Jumbo?

August 5th, 2010

After watching those financial shows and listening to a few financial “advisors”, I have come to the conclusion that they don’t really know what they are talking about. Yes, it’s true that the words are pieced together to creates some meaning, but there is no value.

Here’s a clip from Stock Watch.

Most of the time, they say something like, “If this happens, then that will happen.” And I think, “OK, that’s nice. But it doesn’t really help me.”

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Four Ways to Invest in Gold

July 14th, 2010


So, you want to invest in gold?

Here’s what you need to do. First, you need to strike a claim. Actually, before that you should probably buy a mule and change your name to a more authentic-sounding “Jasper” or “Festus.”

Then you take a pick and begin cutting away…

No. No. No.

Investing in gold does not require you to prospect or dig a mine.

Here are four ways you can get your gold bug on without getting dirty. Or changing your name to Festus.
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Can an Octopus see the Future?

July 10th, 2010

I found this great story on Yahoo about an octopus named Paul, who has the ability to know who is going to win each of the world cup games. It sounds incredible, but it’s true. His picks have been televised on live TV. Plus, even though he is German, he correctly chose Spain over Germany. So that means he is not prejudiced.

Is this octopus really clairvoyant, or could there be another explanation?

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Another Nail in the Coffin for the Dollar

July 8th, 2010

A few weeks ago China let its currency float against the dollar. The result has been that the Yuan is getting stronger and the dollar weaker. I don’t think anyone is surprised…

Just when the dollar was in its worst shape, Greece defaulted on its debt. This had a powerful strengthening effect on the dollar. Now some people think the EU will disband, and the Euro will die a quick death. Personally, I think it is fairly likely. As soon as more global financial turbulence causes other EU countries to default (like Spain, Portugal and Italy), the strong will bail.

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Is Buy and Hold Terrible Financial Advice?

June 26th, 2010

After reading this great post at Early Retirement Extreme, I was reminded about the low quality of financial advice that most people accept. Not only do they accept it, but they actually pay for it!

Mutual fund companies make billions of dollars from unsophisticated and naive investors who buy mutual funds and hold them. What most of these would-be investors don’t realize is that each year the mutual fund managers take some of the money for themselves. It seems like a small amount, only about one percent.

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Automated Trading Destined To Beat Mutual Funds

November 19th, 2009

Automated Trading systems use computers to trade stocks and other assets. It may sound like science fiction, but computers are playing a more pivotal role in trading. Huge companies utilize computers to conduct complicated trades.

I know what you’re saying… how does that help you? All these big companies with deep pockets can invest in technology that you can’t afford.

But things are changing and advanced Automated Trading Technology will rapidly reach more investors and more self-directed investors.

There are a number of ways that Automated Trading is equal to–or better than–mutual funds as a tool for the self-directed investor. This performance should only improve over time.
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