| |
| |
|
|
Stocks and Mutual Funds |
|
How To Beat The Mutual Fund Companies At Their Own Game
You'd have had to be living on a desert island with no TV, newspaper or internet connection to have missed hearing about the great mutual fund scandal of 2003. The issue was that some mutual fund companies allowed certain hedge funds to engage in after-hours trading, sometimes incorrectly referred to as market timing. Unfortunately, some companies have used the confusion about the term "market timing" to further their own cause. How? They have used this issue to pretty much ban all forms of trading their funds, and some companies are imposing hefty short-term redemption fees-penalties for all intents and purposes-in the name of avoiding impropriety. But the real idea behind it all is: Buy our fund and never sell it! These companies advocate a stubborn Buy & Hold philosophy despite the devastating effects that approach had on investors' portfolios during the recent bear market. Performance is immaterial to them-they want your money in their fund whether it's going up or down. With all of the negative press over the months you'd think that mutual fund companies would have cleaned up their act and started giving more consideration to the individual investor. Not so. This was brought home to me when a fund manager of an $800 million mutual fund called me to see what my plans were in respect to holding our positions with his fund (about $2 million). I explained my trend tracking methodology and he got very angry when he heard I would protect my clients' accumulated profits by selling his fund if it were to drop 7% off its highs. His blustering made it quite clear that he did not like anyone managing for the benefit of their clients; he only cared about what was best for him and his company. So, what can you do to prevent being taken advantage of? For one thing, do what your mutual fund company does - not what they tell you to do. Adopt a strategy for following trends, such as I do, and use the mutual fund manger's superior stock picking ability to your advantage by buying and holding only as long as the fund is performing well. Remember, the fund manager has one big disadvantage over you: He always "has to" be invested so that the public can purchase shares in his fund. You don't! If market conditions dictate that you are better off in the safety of a money market account because we are in a severe downtrend, then you can take your money and run for cover. He can't. He is constantly trying to adjust his portfolio to ever-changing economic conditions so that his potential losses are minimized. At the same time you are being told that his fund is the investment for all seasons. Don't fall for it! You as an individual investor are really in the driver's seat. Unfortunately, you have probably been conditioned to think that Buy & Hope is a good investment strategy, when in fact it is a losing proposition. Bottom line is, use a well performing mutual fund during strong up trends and get over to the sidelines during trend reversals. (That's exactly what I did for my clients in October, 2001, and we retained the lion's share of their profits while Buy & Holders kept insisting the emperor was wearing new clothes.) Pretty soon you will feel that you are in charge of your financial destiny and any chosen mutual fund is merely a tool to bring you closer to your goals of maximizing your gain and minimizing your losses. About The Author Ulli Niemann is an investment advisor and has been writing about objective, methodical approaches to investing for over 10 years. He eluded the bear market of 2000 and has helped countless people make better investment decisions. To find out more about his approach and his FREE Newsletter, please visit: www.successful-investment.com. ulli@successful-investment.com
MORE RESOURCES:
Stocks-Mutual-Funds - Google News |
|
|
|
RELATED ARTICLES
Dividend Paying Stocks I would like to share with the reader an article printed in the financial section of U.S. Mindset In 1960 an engineer working for a watch company in Switzerland discovered that a small crystal would vibrate at a constant rate. He found this was so accurate that it could be used to calibrate time so he took it to company management and said it would make an entirely new kind of watch that had no springs and no gears. Stock Valuation using the SMP Model Disclaimer: Please note that I do not necessarily purchase, own, or partake of any of the securities or other financial instruments mentioned in this article. I also do not take any responsibility for any actions resulting from any actions taken by anyone who reads this article. Bull or Bear? Cat or dog? Maybe Zebra. Shucks, I don't know, but my broker keeps telling me it is a bull and to buy this and that. Robert Rodriguez Weathers the Stock Market Robert Rodriguez likes to buy stocks at their lows. When there are not enough stocks hitting new lows, he closes his fund and piles up cash. E-mini Day Trading - Day Trading for Beginners - Stock Market Timing Software I mean it when I say that. While plastic silverware is fine for picnics and parties, it is totally inappropriate in a surgeon's hand with an open brain in front of him. DIY Portfolio Management Exchange Traded Funds (ETFs) are growing. Investors are choosing low annual expense and market return over high annual expense and promised performance. It Cant Be Done Wouldn't it be nice if you were only in the stock market when it was going up and have everything transferred to cash while it is going down? It is called 'market timing' and your broker or financial planner will tell you "it can't be done". What that person just told you is he doesn't know how to do it. Frog In The Pot You remember the story about the frog that was put into a pot of cold water on the stove. He was not concerned. Online Broker Trade History Not Doing the Job Let me start by saying that.. Dont Buy Worldcom! A Guide to Wise Bottom Fishing Over the past few months, several investment professionals have brought up the topic of the down-and-out company of the day and whether to buy now as a speculation. Last year, K-Mart was the big news, and everyone wanted to know whether this was a good stock play. Downdraft For the year 2000 we have seen hundreds of mutual funds lose 40%, 50% and more of their value. This does not seem right since the fund is supposed to be managed by a professional. Stock Market Diversification In one of my previous articles (Investing in the stock market -9 powerful tips), tip number one was:1. Do not spread your money too thin. Stock and Fund Dividends When is a dividend not a dividend?The latest thing "conservative" brokers are preaching these days is to buy stocks that pay dividends. Everyone likes dividends. You Wont Like This Why? Because I am going to shatter your conventional wisdom as I have many times in previous columns about the lies that Wall Street continues to tell you. This time we are going to go deeper into the economy to unearth the truth about lies the politicians are telling you. Lifestyle Funds Provide Greater Security? With the stock market stubbornly refusing to settle down and smooth out, Wall Street has been scrambling to come up with "product" they can sell to gun shy investors.One such new concept is the Lifestyle fund; an extremely diversified package designed to be the single fund in an investor's portfolio. You Don't HAVE To Be Trading As a novice trader, you'll often feel the need to trade.You may be bored or frustrated. Lies, Damn Lies and Mutual Fund Returns How many times has this happened to you? You're at a social function and the conversation turns to investing. Pretty soon, people are comparing how well their investments are doing. Where Is The Rabbit? We need a rabbit!This was a pretty horrible week for the market with two 100-point days and Friday closing on the lows.During these past few days Sir Alan told us things are looking up and the economy is basically strong. Complacency During the month of January the Dow Jones Industrial Average, usually referred to as the DOW, had an almost 1,000 point range, most of it down and the average investor has yawned and said 'so what, this has happened many times before'.Is there any reason to worry now?The terrible event of September 11 shocked investors who sold heavily and then watched the market climb back to where it was on September 10.
|
||||||||||||||