No Load Mutual Funds: Investment Hype vs. Investment Help
With the internet such a huge part of our daily lives, many investors have access to a wide range of instant investment information.
Whether you're into stocks, bonds, mutual funds, futures or options, there are tons of electronic investment newsletters offering to turn your small stake into a giant fortune. All you need to do is subscribe and watch your portfolio soar.
Yeah, right!
As a practicing investment advisor specializing in no load mutual funds, I have received my share of e-mails from disillusioned subscribers wanting to know how to better evaluate newsletter services.
While there are no absolutes, I can give you a few pointers that might help you make a better decision:
1. Stay away from the most obvious hype. Ads promising to turn your $10,000 into $1 million in 2 years by buying this incredible stock or hot commodity are not promoting investing - they are selling gambling. Follow the "If it sounds too good to be true, it usually is" rule.
2. Most mutual fund newsletters won't make those outlandish claims, but some of them are still pushing the truth as far as they can. So try to get a free issue or two to examine. If you can't get a sample, check if they have a trial period? How about a money back guarantee? If not, pay with your credit card. These days you're pretty well protected by this payment method even if the newsletter doesn't offer a satisfaction guarantee.
3. Consider the editor as well as the disclaimer notes. Is he or she only publishing a newsletter? Or is he also an investment advisor with a practice?
Why would that last point matter? I may be biased, but I believe that you get far better advice from a writer who also is in the trenches every day investing their own as well as their clients' portfolios. They would have far better insights as to what works and what doesn't than someone who has the theory down but no practical experience.
4. Look at the investment recommendations. Are they suggesting you buy into a certain orientation such as mid cap, small cap or large value? Or are they picking specific investments based on a variety of technical indicators?
In my no-load mutual fund practice I use specific recommendations, even for my free newsletter subscribers. They are first based on my trend tracking indicator giving us the green light and secondarily on the selection of mutual funds based on momentum analysis.
The more specific the recommendations, the better, because that allows you to follow along either just on paper (which you should do at first) or with your actual portfolio.
5. Are they recommending when to sell a mutual fund either because of gains or to limit your losses? This to me is the most important issue. If there is no plan in place for getting out, how will you ever know when to sell? This has been the greatest downfall of most publishers (and investors!) since the bear market of 2000 - not selling even if market conditions dictate it would be in your best interest to do so.
The advice of most newsletter services can make you money in bull markets. However, with the continuation of the bear market still a distinct possibility; be sure to look at any newsletter's investment advice record since 2000.
For many people investing is an emotional issue. The pendulum swings between fear of loss and greed for greater returns. If a complete methodology for buying and selling is offered in a newsletter, such as one I advocate, be sure that it fits your emotional make up.
There is no sense in following an investment approach, which may have merits, if it means sleepless nights for you. You won't stick with it for the long term - and long-term investing is essential for making your portfolio grow and prosper.
So, the bottom line is to look for a newsletter that:
- does not promise the moon,
- has a track record through up and down markets, and
- recommends an approach that not only is compatible for your investment style but also has an exit strategy so you can capitalize on your gains -- in the bank, not only on paper.
Following these guidelines may not make you rich, but it will help you avoid some bad advice.
About The Author
Ulli Niemann is an investment advisor and has written about methodical approaches to investing for over 10 years. He avoided the bear market of 2000 and has helped countless people make better investment decisions. Subscribe to his free newsletter: www.successful-investment.com
ulli@successful-investment.com
More Resources
Unable to open RSS Feed $XMLfilename with error HTTP ERROR: 404, exitingMore Stocks & Mutual Funds Information:
Related Articles
How to Find Value in No Load Mutual Fund Investing
What are you thinking when it comes to your no load mutual fund selections? Are you saving pennies and sacrificing dollars?Are you spending your time looking at expense ratios, analyzing Morningstar ratings and searching for funds with low fees and no 12b1 charges? If you are like most people, you know these things in and out. You've spent hours evaluating them, and your chosen mutual funds cost little to purchase and maintain.
Expense Ratios
Mutual funds and brokers are always preaching not to buy any fund with a high expense ratio. That is the annual costs of the fund to pay for trading of stocks within their portfolio, salaries, rent, telephone, analysts, etc.
I Love You, Warren Buffet
Sometime around 1980, can't remember exactly, there was a flight of money from many countries to Switzerland. The clock makers had so much money pouring in that the banks took interest rates to zero and even for a period of time were actually making you pay ½% interest to them to put your money in their banks.
Ignore Stock Market Talking Heads
You should ignore analysts on TV, the radio, the newspaper and all other TALKING HEADS when it comes to investing! What stocks do they talk about? - The same old group, every day of every year - Why? Because they don't know any better, they are sheep like the general public, repeating what every economic textbook says and every other economist tells them to say. Everyday, the same companies are highlighted on the evening news -WHY?They aren't going anywhere.
Diversification
Wall Street's watchword has always been diversification, but what does it mean and why do they say it?The standard Wall Street definition is flexible because each broker or financial planner will vary the portfolio based on your age and income. They say that the younger you are the more risk you should take and the older you are the less risk.
Stocks Options Trading
Let's assume that you want to make some serious money and you have chosen to take things into your own hands rather than depend upon a "professional trader" to make your trading decisions. This is usually only recomended if you can afford to lose the money that you are trading with, and you appreciate the fact that there is much more upside potential with this added risk.
Perfect Storm
Having lived aboard a sailboat for 2 years I was stricken when I saw the movie "PERFECT STORM". I know these are things you want to avoid at all costs.
The Bottom?
Every day I hear someone on CNBC proclaim that "this is the bottom" and you should get in there and buy all those "bargains". "The valuations of the DOW stocks are a steal.
Understanding the Bulls and the Bears
If you've ever flipped on the television to CNN Financial or paged through the finance section of your local newspaper, you may have seen or heard references made to "the bulls and the bears." If you didn't know what was meant by those terms, you're about to find out.
Successful Trading - Establish Your Risk Level
Before you embark upon a journey of trading stocks or futures, and before you make any trades, you MUST determine and establish your risk level. Traders that fail to do this are usually doomed from the start.
Quality Investment Information: Standing Firm In the Face of Opposition
THERE'S SOMETHING TO BE SAID FOR standing firm in the face of opposition. Interestingly, most of the best stock decisions have come at times when the mainstream is saying precisely the opposite.
Stops Make Money
During the day I watch CNBC-TV, the stock market channel. Fortunately, I keep the sound muted or I would be hollering at the dumb "experts" being interviewed.
Rebalance And Diversify
The stock market has not been very kind to your investments lately. Your broker knows this so you may have received a call from him suggesting it is time to 'rebalance and diversify' your portfolio.
Prospering with Mutual Funds: How Anyone can "Afford" an Investment Advisor
Recently I was invited to appear on a live CNNfn television show to discuss my article "How to evaluate Load vs. No Load Mutual Funds.
How To Pick A Mutual Fund
Mutual funds by definition are a mixed bag of stocks, bonds and a little cash. Their price per share is the NAV, Net Asset Value of the total amount of money in the mutual fund divided by the number of shares.
The Golden Goose is Sick
It is finally catching up with them. The brokerage companies I mean.
Commoditizing the world
Let's discuss commodities; with the latest Enron situation, it is important to understand the way things work. A commodity is anything useful, especially a transportable agricultural product or mining product.
Option Trading Basics
Options trading can increase the profits you make when trading Stocks if you understand how to use them and know what you are doing. Options can be a very useful tool that the average investor can use to enhance their returns.
How to Short Stocks? How to Make Money when Your Stocks Go Down by Shorting
The stock market can present you with a lot of hot stocks every day. Many of them are new technology stocks that come from the nanotech, biotech, voip, healthcare, homeland defense or internet sectors.
Patterns
The Law of Chaos is the theory of random unpredictable action applied to the cosmos, mathematics, mechanics, almost everything. Those who believe it will definitely think the stock market is in chaotic state at this time.