For more years than I care to remember, I struggled with money. I don’t anymore but I understand the difficulty of not having enough. Nobody understands when you tell them you juggled last months water bill against this months utility and you are short. No, its worse than that….they don’t care.
Quick time money is money that needs to come now, today, this minute. Its important and urgent so its got to present itself quickly.
Quick time money is money created out of thin air. Its usually not a lot of money but its fast, legal and easy to get. So in the following you will not find grandiose formulas and graphs and charts on wealth generation. This practical idea will get you out of jams. Of course the best way to keep out of money-jams is to always have more than enough money in the first place. Perhaps you will find out more about what we do later. Who knows, but anyway, here is a way to put money in your pocket right this minute.
We are working on getting you $200 to $300 in a day. For somebody who is stuck, that’s not a bad parachute at all.
Now, before I tell you what I suggest you do, you should know I am clinically sane and of sound mind. It may seem counter-intuitive to suggest this to you, but its sound advice.
Go shopping.
Yes I know it doesn’t make sense yet so keep reading.
At the level you are at (in a negative money situation) don’t expect to make your first million doing just this, but the principle is sound and can definitely lead on to a career as an opportunity investor.
You will make three transactions today.
But first you will sit down with a pen and paper and write down your interests and competencies. For example, you have always enjoyed antiques. Fine, lets start with that.
In fact, if antiques are a core competency of yours, then you should stick with that until you get to higher levels. (You wont be buying any real estate any time soon, unless you research “no money down techniques” but you can definitely rely on this whenever you are in a squeeze for some money quick)
First you are going to consider supply and demand. Two important and divergent forces in which you will play the main lead. You will be the initiator, the middle man. (My favourite place of all to be)
From the supply side, you are going to identify 3 places where antiques may possibly be sold cheap, or at least below wholesale. Do such places of supply exist? You bet. Have you ever heard of a “Don’t wanner” (in plain English that’s don’t-want-her) item? Often they are considered junk by the owners of these yet to be discovered treasures.
Garage sales, deceased estates advertised in the local journal and classified ads are just three sources off the top of my head. I’m sure you could find another 10 if you tried.
But even before you go shopping you are going to haunt the local antique shops in your area. The reason why you will spend so much time at all of them is because you are going to say hi, introduce yourself and possibly mention that you may have some items for them. (Don’t worry, they will always tell you no, we don’t need any we are already overstocked as it is) its what they do. They set the tone in the negotiation 3 moves ahead. When the item is before them and they can see it, they will deal.
You are also going to spend time gauging prices, retail prices. Know that you will have to find your items at around 30% below these prices, then another margin for your profits.
There is good money to be made trading unwanted items and converting them into cash.
Even at the level we deal in, “don’t wanner” houses, boats, luxury cars and even precious stones, the dollar amounts (and there fore the profits) are a lot higher. But the compounding is amazing. If only these fellows playing the stock market knew about the percentage returns available being an opportunity investor.
My Very Best to you
Martin enjoys sharing wealth strategies and is a professional investor and CEO of http://www.opportunity-investor.com
If you would enjoy learning how to build your own money machine, follow the link above.
“Buy and hold” is one of the most heralded investment strategies promoted today. “Buy and hold” is also one of the few investment methods where you are guaranteed to lose money 2 out of every 5 years…so why do it?
Before expanding on the questionable value of “buy and hold”, it’s probably best to take a deeper look into who’s spending their millions of dollars of marketing money convincing you that “buy and hold” is the best idea and why.
“Buy and Hold” Promoters
“Buy and hold” promoters vary but I’m going to single out the mutual fund( http://www.stockrhythms.com/investing-in-mutual-funds.htm ) companies at this point since they seem to have the deepest advertising pockets and are highly visible in their promotion of “buy and hold”.
Mutual funds have a strong vested interest in having you buy into the “buy and hold” mentality since their entire business model depends upon the average investor keeping their money parked…through good times and bad.
Remember, the mutual fund companies are earning a profit from your investment even while you are accepting losses!
So “buy and hold” is really the greatest investment strategy available, it’s just a matter of perspective. If you like that your mutual fund company profits while the Bear Market ravages your account value, then “buy and hold” is for you!
So let’s look at some data to see how this really works.
“Buy and Hold” Facts
Between 1929 and 2002, there have been 14 Bear Markets with an average of 39% slashed off the value of stocks. During this 74 year period, it took an average of 3.5 years to return to breakeven!
Every time a “buy and hold” investor loses money in a down market, they lose invaluable time to reaching their financial goal. After eliminating overlapping Bear Markets, 41 years were spent suffering through a Bear Market or returning to break even.
In other words, “buy and hold” investors spend 2/3 of their time just to break even!
“Buy and Hold” Myths
My favorite myth or scare tactic used by investment gurus is; “buy and hold” investing is critical since you cannot afford to miss the bull run when it hits. And they go on to cite what happens to those that miss the “big days”.
Ah…good point, what does happen? If you would have invested $100 in 1926 and just left it there until 1993, your investment would have climbed to $80,000. Conversely, if you had tried to time the market and missed the 30 best months, your investment would have only been worth $1,200.
“Buy and Hold” Does Work Better?
So I’ve just convinced you that “buy and hold” does work better right? But what would have happened if you used market timing and missed the 30 best months and missed the 30 worst months? Your investment would now be worth $120,000 or 50% more than simple “buy and hold”.
Not to get too carried away but if you had avoided the 30 worst months and still managed to hit the 30 best months, your investment would have increased to an astronomical $8,600,000. Now I’m not going to try to convince you that market timing is going to hit every winner and miss every loser but I also don’t think it’s fair for the “buy and hold” advocates to represent only one side of the equation to their benefit either.
“Buy and hold” is a guaranteed method of losing money during every Bear Market. Give yourself a fighting chance by looking at a better way to invest.
“Buy and Hold” Replacement
So how do you avoid losing money every Bear Market with “buy and hold”? The simple answer is “get out of the stock market when it’s the Bears turn”. Of course, that’s usually harder to do than to say.
This is where we can help you to become a better stock market investor. Not only are we going to show you how to avoid the Bear Market losses, we’re going to show you how to profit from the Bull Market and then turn around and profit from the Bear Market.
And I’m not talking about extreme market timing, I’m talking about a conservative, time tested investment process.
A Better Investment Plan
There is a better way to position yourself for a higher probability of investment profits than extreme market timing( http://www.stockrhythms.com/market-timing.htm )or passive “buy and hold”. One that has been tested and proven with over 74 Years of Stock Market Research! Our proprietary Olympic Ring( http://www.stockrhythms.com/how_it_works.htm ) investment system has been issuing profitable trading signals, trade after trade, year after year, and we can start doing it for you too!
Maximize your returns while lowering your overall risk through the use of a highly scientific and emotion free system. And unlike the “buy and hold” investment plan, you’ll be positioned to profit from the Bear Market and the Bull Market. Now won’t that be a change!
Let us show you a better way to invest!
Call us(toll free: 877-554-4800) today to learn how we can help you earn a profit in both directions. Or download a FREE COPY of our stock market investment book( http://www.stockrhythms.com/mutual-fund-book.htm ) so you can learn from the past to earn in the future - Invest With History
———————————————-
This article was originally published at: http://www.stockrhythms.com/buy-and-hold.htm
Copyright: www.StockRhythms.com
You can reproduce this article as long as you leave this copy right statement unchanged.
———————————————-
Gary J
Sr. Managing Director
VerticalMarketing,LLC
sudha@stockrhythms.com
http://www.stockrhythms.com
When you make big, financial decisions in your life, you usually
weigh all the options and consider all consequences before you
jump in feet first, right? Making an investment is no different.
Before making an investment, you must decide which brokerage
firm or broker/dealer and stockbroker, account executive, or
registered representative to use. Before you make those
decisions, though, here are six steps you should take:
– Think through your financial objectives carefully, and
prepare a personal financial profile.
– Talk with stockbrokers at several firms. Schedule a meeting
with them face to face at their offices, if possible. Ask them
about their investment experience, professional background, and
education.
– Determine whether you need the services of a full service or
a discount brokerage firm. A full service firm typically
provides execution services, recommendations, investment advice,
and research support. A discount broker generally provides
execution services and does not make recommendations regarding
which securities you should buy or sell. The charges you pay may
differ depending upon what services are provided by the firm.
– Understand how the stockbroker gets paid. Ask for a copy of
the firm’s commission schedule. Firms generally pay sales staff
based on the amount of money invested by a customer and the
number of transactions done in a customer’s account.
More compensation may be paid to a stockbroker for selling a
firm’s own investment products. Ask what “fees” or “charges”
you’ll be required to pay when opening, maintaining, and closing
an account.
– Find out about the disciplinary history of any brokerage firm
and stockbroker by calling 1-800-289-9999, a toll-free hot line
operated by the National Association of Securities Dealers, Inc.
(NASD). The NASD will provide information on disciplinary
actions taken by securities regulators and criminal authorities.
Your state securities regulator also can tell you if a brokerage
firm or stockbroker is licensed to do business in your state.
Don’t skip this important step! If you do business with an
unlicensed securities broker or a firm that later goes out of
business, there may be no way for you to recover your money,
even if an arbitrator or court rules in your favor.
– Ask if the brokerage firm is a member of the Securities
Investor Protection Corporation (SIPC). SIPC provides limited
customer protection if a brokerage firm can’t pay their debts.
Also ask if the firm has other insurance that provides coverage
beyond the SIPC limits. SIPC does not insure against losses due
to a decline in the market value of your securities. For further
information, you can call SIPC at (202) 371-8300.
Remember, part of making the right investment decision involves
finding the brokerage firm and the stockbroker that best meet
your personal financial needs. Don’t rush. Do the necessary
background investigation on both the firm and the stockbroker.
Resist those who urge you to immediately open an account with
them.
So much is being written about the emergence of “Quantitative Funds” and why this type of investment is becoming popular among both individual and professional investors. Eleanor Laise, in her Wall Street Journal article titled “Stock-Picker Jobs Going to Computers” wrote that “investors are attracted to quant funds for their non-emotional, disciplined method of investing. It is a well known fact amongst investment professionals that “investor psychology” is the most difficult variable for anyone to manage. Our fear and greed most often get in the way of good judgment and a well thought out investment strategy.” One method of developing a quantitative portfolio includes adding alpha to the investment screening process. Although the idea of alpha is thought to be complicated and only for the technically inclined, it’s available for any investor and now easier than ever to utilize. With this strategy readily accessible, it makes sense to build a portfolio of long-term investments and then augment the return by actively trading a portion of the portfolio using technical analysis and portfolio management.
The real question is not if it can be done, but how can it done. Specifically, how does an investor, be it individual or professional, utilize the power of portable alpha? Before the “how to” can be understood, one must appreciate what alpha is and what investments are available that make utilizing portable alpha easy.
What is Portable Alpha?
According to Lawrence C. Strauss, in his Barron’s Online article titled “Does Low Volatility Mean Lower Returns” alpha “the money-management industry’s buzzword du jour refers to the measure of a stock’s performance beyond what the market provides. But how to calculate Alpha and more importantly how to compare various investment alternatives simultaneously using the same definition of Alpha has been a difficult problem for investors to solve.” Alpha, in its purest sense, is the measure of a fund or portfolio’s risk-adjusted return relative to the market. A positive alpha value, such as 1.0, means that the fund or portfolio outperformed the market by 1.0%. The higher the alpha value, the more incremental gain is awarded for actively managing the investment by choosing securities that outperform the market, as compared to merely accepting the market return.
Portable alpha is “portable” because it can be applied across various asset classes. If a manager or individual investor increases a portfolio’s risk-adjusted return relative to the market (alpha) by investing in securities that have little or no correlation with the market, then that manager has created portable alpha. Portable alpha is a powerful investment tool because it can provide investors with greater diversification in their portfolios, lower risks and greater total returns as compared to conventional asset allocation.
There are other varieties of alpha, but in all cases a positive alpha value indicates that the fund or portfolio manager has “beaten the market” through fund or stock selection. Alpha Advisor Service, LLC uses a weighted alpha factor which places more emphasis on recent price movement as opposed to past activity. The purpose of doing so is to pinpoint stocks and funds whose positive momentum is building rather than those that have reached the peak of their uptrend.
Investments That Facilitate Using Portable Alpha
Applying portable alpha to your portfolio can be accomplished by using trade-friendly investment funds provided by ProFunds, Rydex or Fidelity. These companies provide a wide variety of mutual fund selections, including index, sector, bond, precious metals, and international, which can be traded frequently, most without penalty, early trading fee or commission. Some of these companies offer funds designed for hedging strategies. Or for the slightly more aggressive, a few of these companies provide leveraged funds which are designed to outperform their benchmark index through the use of leverage. Exchange Traded Funds, which come in as many styles as mutual funds, also provide an easily-accessible tool for adding alpha to a portfolio.
Many analytical sources provide statistical profiles of investments, most of which are mathematically accurate. The predominant short coming in these tools is that they do not consistently analyze all alternatives. Bond investments will be measured using benchmarks unique to bonds while small cap stocks will be measured against the Russell 2000 etc. To select the best investments, using a level playing field by which to measure portfolio returns is the most attractive.
How to Utilize Portable Alpha
The first step towards utilizing portable alpha involves developing an asset allocation strategy specifically tailored to personal investment objective, risk tolerance and time horizon. Determine how much of the portfolio should be strategically allocated to specific asset classes such as stocks, bonds, sectors, international investments, precious metals and cash. Assign a percentage of investment dollars to each class, and then prepare to fill in the asset class with an appropriate selection of investments.
To select the best investments for each asset class, rank the investments by alpha score from highest to lowest. Then pick the top one or two options for investment within each asset class. Put in place a trailing stop loss on each investment at a reasonable level and watch its performance. If the price violates your watch level, sell the investment and replace it with the next most highly ranked alternative from its class. If no alternatives are available with a positive alpha, hold those dollars in cash until such time as a candidate presents itself. Don’t invest those dollars in another asset class; hold them until a candidate in the particular class becomes available.
This approach satisfies the buy and hold dogma that is unfortunately so engrained in the minds of today’s investors. It supplies adequate diversification while at the same time providing a level of return that’s in line with market expectations. Hopefully, by this point recent market activity has convinced most investors that the idea of buying a stock or fund and holding it indefinitely is no longer the optimal investment strategy. Human nature has a tendency to result in buying and selling at the worst possible moments, minimizing gains and maximizing losses. That’s why the development and implementation of a disciplined investment strategy is so advantageous to today’s investors.
Taking this approach one step further and evolving from a strategic allocation to a tactical or dynamic allocation is the easiest way to generate excess investment returns within a buy and hold strategy. Tactical allocation is predicated on the belief that not all asset classes perform in the same manner and that investment cycles do exist. With so many index funds and ETF’s that mimic the performance of market indices and style-box investments, analyzing the alpha scores of these investments is the quickest way to determine where to increase or decrease a portfolio’s allocations.
Today, with so many internet-based trading platforms available through brokerage firms and banks with minimum fees and almost no trading commissions, active personal investing makes more sense then ever. Affordable high-speed internet connectivity, computers, cell phones and internet brokerage accounts coupled with powerful mathematical statistics such as portable alpha are negating any excuses for experiencing unacceptable investment returns.
Justin Lenarcic
Alpha Advisor Service, LLC is designed specifically for those investors seeking to utilize portable alpha. Our twice-weekly newsletters analyze over 1700 securities including stock, ETF, and mutual fund investments ranking those with the highest alpha values. To further aid investors, we provide “Buy Recommendations” and “Sell-Limit Watches” in addition to five model portfolios. If you’re interested in portable alpha and want to incorporate it into your investment portfolio, try our 30-Day FREE Trial and see for yourself how easy and rewarding it can be.
