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2010-08-28T17:22:03Z

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Do you have an Exit Strategy? Why not?

2010-07-23T21:49:20Z

Do you have an exit strategy for each of your investments?

Knowing when to get out of an investment is much more important than knowing when to get in.

Here is an article discussing why having an exit strategy is pertinent to your portfolio.

Good News – 12b-1 Fee Changes Coming Soon

2010-07-21T23:32:18Z

The Securities and Exchange Commission (SEC) voted to revamp the 12b-1 fees charged by mutual funds.
Originally, the 12b-1 fee, adopted in 1980, was to cover the cost of sales and distribution costs of mutual funds. In 1980 the total cost of 12b-1 fees was a few million; today (2009) it brought mutual funds 9.5 billion dollars. About two-thirds of mutual funds charge these fees.
Mutual funds have been increasing 12b-1 fees but at the same time touting they have no one-time sales load. Unfortunately, 12b-1 fees are charged year after year and eat into returns. They can be as high as 0.75% of a fund’s assets per year.
The new proposal is capping the fees at 0.25%. Funds will have to report how much goes to brokers as ongoing sales charges and separately list costs for marketing and other services.

Vanguard, too.

2010-05-09T15:20:19Z

Vanguard has joined the no fee zone. Their lineup of 46 ETFs are available for no commission trading. Also, their commissions on equity trades have been lowered; the amount depending on your total assets with them.

I am a big proponent of Vanguard because of its philosophy of low costs for financial products.

Visit Vanguard for the details.

Good News for Trend Followers and ETFers

2010-02-07T21:43:13Z

One of the big costs of trend following and ETF investing at regular intervals is commissions. That may be going away.

Fidelity has offered commission-free trading on certain iShares ETFs. This is great because now you can invest in ETFs at regular intervals like mutual funds but without incurring commissions. Since ETFs generally have lower expense ratios this is a big plus for investors. Schwab has a similar offering for eight Schwab ETFs.

Want your own asset allocation? Instead of a 60% stock/ 40% bond balanced mutual fund at 0.60% expense ratio, do 60% IVV (S&P 500), 40% AGG (U.S. bonds) at a combined 0.15% expense ratio, a savings of 0.45% per year.

Finally, something good for investors.

2009 Renewable Energy

2010-06-19T21:25:27Z

An update on wind power and solar power generation.

The total of new wind generation for 2009 came to 9,922 megawatts, enough to power 2.4 million homes according to the American Wind Energy Association (AWEA). I recently was near Palm Springs, CA – what a site. There were hundreds of wind turbines everywhere. Also, near Lincoln, Illinois there is a big wind farm, too, though most of them were not turning. 2008 new wind generation was 8.4 megawatts.

The total solar energy generation in the U.S. was nearly 400 megawatts. Helping was in October, 2009, Congress extended a 30 percent investment tax credit for solar installations for eight years. The legislation gets rid of a $2,000 cap for residential installations and allows the utilities to take advantage of the tax credit.

We’ll see how 2010 does.

2009 Asset Returns

2010-01-01T19:58:01Z

2009. What a year.

TLT, which lead the pack last year, was dead last this year. It is almost as if last year’s return chart was turned upside down.

Stock Symbol	%Total Return	%Yield	Description
AMZX	66.65	7.37	Alerian MLP Index
PFF	33.55	8.58	Preferred stock index
JNK	31.33	12.56	High Yield bond index
FFRHX	25.62	3.10	Bank loan fund proxy
VTI	21.76	1.96	Total U.S. Stock Market index
SPY	19.04	2.10	S&P 500 index
VNQ	18.95	5.48	REIT Index
VBINX	18.83	2.69	60% stocks 40% bonds
VWINX	16.04	4.38	40% stocks 60% bonds
GLD	14.25	0	Gold Bullion
VBMFX	7.74	4.04	U.S. intermediate bond index
TIP	7.02	3.38	Treasury Inflation Note index
MBB	4.10	3.40	Mortgage backed securities
	3.2		Stable Value Index
	1.7	1.7	1 yr CD certificate of deposit
VMMXX	0.53	0.06	Money market mutual funds
	0.26	0.26	Passbook rate APY
SHV	0.11	0.58	Short term Treasury Bonds
	0.11	0.01	Money market savings account
TLT	-15.25	3.91	Long Term Treasury Bonds

Returns are before taxes.

Distributions are reinvested.

7 day or 30 day SEC yield is used when possible.

BSR Alerian MLP index was delisted. AMZX substituted.

Home Prices Oct 2009

2009-12-31T15:44:16Z

U.S. home prices from 1988 to Oct 2009.

What does this mean to me?

In many areas of the country, housing prices are stabilizing or increasing. Individually, San Francisco and Phoenix led the rise while Las Vegas and Detroit dropped.

Mutual Funds minus 2000

2009-12-27T18:37:36Z

More than 2,000 funds were liquidated or merged out of existence in 2009, the biggest downsizing of the fund industry in years. The polyglot of funds were mostly failures but some, although good, just didn’t gather a following. Many of the funds were target funds which are supposed to last until you retire.

Merging and liquidating funds is a way to make poor performers disappear so only the good ones survive. This makes the mutual fund company look better since their average return increases. This act is called survivorship bias.

For example, let’s say that there are three funds (A, B and C) in a given category. Fund A has a five-year annualized total return of 12%; Funds B and C have five-year annualized total returns of 8% and 4%, respectively. The average annual total return for the fund category would be 8%. But, if the loser, Fund C, were to be liquidated or merged into either Funds A or B, it would disappear and make the five-year average annual total return for the fund category 10%.

Regardless of the reason, survival of the fittest still remains the modus operandi.

Sentiment Indicator turning Bearish

2009-12-16T18:45:40Z

The Investors Intelligence Advisors Sentiment (IIAS) index, which gauges the stock advice of about 150 newsletters and other paid market-advice outlets, said the portion of positive stock advisers jumped to 51.6% in the past week, the highest since December 2007. That is approaching the 60% reading scored in late 2003 and early 2004.

Bears fell to 19.8%, the first time since October 2007 that the percentage fell below 20%.

A parallel with October 2007 is notable because the S&P 500 hit a peak that month and then tumbled for 17 months, losing nearly two-thirds its value by the time it hit a March low.

Since mid-July, the S&P 500 has jumped 17%. It’s up 54% since hitting March lows.

Analysts frequently use stock sentiment gauges as contrarian indicators. When positive sentiment gets high, a lot of cash has already moved from investors’ savings into the market, leaving less available cash to drive stocks higher.

The IIAS survey is taken once a week, on Friday, and the results published Wednesday.

Typical use of the IIAS indicator is this: if less than 40% of advisors are bullish, then that is often seen as a positive. After all, the trend followers are likely to be incorrect at important reversals. Meanwhile, a reading between 41% and 54% is considered neutral. Survey results of over 55% bulls tend to be bearish and warn of an eventual market top. If the number of bears is below 20% that is a cause for concern that there are too many bulls which is also indicative of an intermediate market top.

“What positive sentiment means is that stock advisers have been recommending people buy stocks, minimizing their cash holdings, presumably,” said John Gray, an editor at the Investors Intelligence stock research service.

The drop in the portion of bearish advisors and a rise in the portion of bulls pushed the gap between them to 31.8. That’s the widest positive margin since late 2007. But it’s still off levels reached above 40 in October 2007.

What’s this mean to me?
According to the IIAS The market is heating up and due for a pullback. Don’t be afraid to take profits. But don’t rely on just one indicator, either.