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index funds

Investing in Index Mutual Funds: Pitfalls of Buy and Hold

Are you overwhelmed by the options when it comes to buying (and selling) mutual funds? With over 10,000 funds out there, there are more funds than stocks listed on the stock exchanges. How do we sort through this morass to find a good selection of funds, and how do we know when it’s time to sell?

One popular choice that gets a lot of attention is investing in index funds. But even this simple solution can be confusing. Do you buy just one stock index fund and one bond index fund? If you buy more than one?

Bear Market Investing - Hedging with Mutual Funds and ETFs

In previous articles we covered the possible advantages of hedging your portfolio as another way to reduce risk. This time we will cover a method to do exactly that using only mutual funds or ETF’s that can be purchased in a cash brokerage account.

Historically to hedge you had to sell short shares of an ETF that tracks the market, like SPY or QQQQ, or to buy put options on the major indices. The problem with that is that it requires a margin account, which eliminates most retirement accounts, and many retail accounts. Plus many people have this innate fear of short selling, and are concerned that they could lose more than they invested if the markets were to take off.

Fidelity ETF - The Story with Fidelity and ETF’s

Fidelity does sponsor an ETF, but the most common way to trade ETFs at Fidelity is through the brokerage arm. Let’s take a look at the Fidelity ETF.

Many fund families have gotten into the business of creating/ sponsoring ETFs. It would seem like a natural move for them, and they did start the process back in 2003 with the Fidelity Nasdaq Composite Indes Tracking Stock (ONEQ is its trading symbol). This is a simple tracking stock, and it has no real distinctive reason for being.

Dow Theory - History of Dow Theory Stock Market Timing

One of the earliest examples of stock market timing was the Dow Theory. Dow Theory Market timing is actually pretty straightforward, but it’s complicated a little by the variations that have been added to it over the years. Here’s a quick history of the Dow Theory timing system, and where to find information on trading it today.

Fosback Seasonality Timing System

We would all like to have some edge when it comes to the markets. We have discussed some stock market timing approaches as one way to mitigate the market risk. However, one limitation almost all these market timing systems have is that they are the result of some type of backtesting or simulation. The result is that while it may look good on paper, it’s difficult to have much confidence in their real time performance until they develop something of a track record.

Investing Like Buffett - What’s it Like to Invest Like Buffett

Originally published in 2006, investing like Buffett BRK has fared better over the last 3 years, as in the 3 years 2006-2008 BRK was up about 8% total (still a little worse than a money market fund) the S&P 500 did a lot worse, losing about 29% in that same period of time.

One of the most common pieces of investment advice is to find a good investment and to simply hold on to it. Known sometimes as buy and hold investing, it doesn’t seem to be working as well as it once did. A common response of buy and hold advocates is to point to the success of some of the famous value investors. The most famous of the contemporary value investor is Warren Buffett.

Stocks vs Bonds - How Much Should You Invest in Stocks vs Bonds

In a previous article we examined whether stocks are riskier than bonds, concluding that they are, but it is also a function of how you hold bonds, whether individual bonds or bond funds. Given that there is a tradeoff of risk between stocks and bonds, the natural question to ask next is how much you should invest in stocks versus bonds. For example, the conventional wisdom is that it should be a function of your age, as we expect your appetite for risk to diminish over time.

Is Google Stock Overpriced? - How Inflated Can Google Stock Get?

Has Googles stock price inflated too far? The “fair valuation” of Google’s stock price, and whether is Google is overpriced is the topic of discussion at many a water cooler these days.

The battle of valuing Google’s stock price, whether based on earnings, cash flow, market share growth, aquisition strategy, or some other form of financial engineering is a discussion that we have little to contribute to. I would make the observation that at a current market cap of over 170 billion dollars, that it’s closer to the top than it is a bottom. To make the case that it could be a Peter Lynch ten bagger would imply that it would get to a market cap of almost 2 trillion dollars, which is a pretty rich valuation by almost anyone’s standard.

39 Week Moving Average - Does It Still Work?

There was another interesting article on Marketwatch today about the effectiveness of the old 39 week moving average as a market timing tool. You can read about it at Hulbert on the 39 Week Moving Average. The interesting thing is this was originally made popular by Doug Fabian in his old Telephone Switch Newsletter. His son, Dick Fabian, seems to have moved away from the basic tools made popular by his father, however, if you look at his track record, it seems that he would have been better served by sticking to what Dad taught him.

Seasonality

Lindsay at Wallstrip tackles seasonality….

Source: Michael Covel: Author of Trend Following

Sell in May and Go Away - Does it Work?

The first of May is upon us, and every financial journal seems to have some article about the merits of a seasonal strategy for getting in and out of the market. While there is something to be said for it’s performance long term, we’ve previously taken a look at the performance of seasonal trading with our portfolios, and adjusted it somewhat.