joetaxpayer wrote:

- quote -


The above post was July 6, 2007.

The XLE is now $58.40 up 1.62%
The S&P now 1414 up 10.99%

It would appear that when a sector gets the masses' attention, and
investing in it seems to be a no-brainer, that's the very time to bail out.
Anyone in that sector for these 6 months lost a chance at 9% return.
Which speaks to why market timing is riskier than the buy and hold (for
the market, not individual stocks)

JOE

"Paul Michael Brown" <pmb[at]his.com> wrote
E
- quote -

An amateur's list, unapologetically biased towards value
investing, indexing and asset allocation based on historical
performance:

Motley Fool site, www.fool.com (free sections only; articles
tend to repeat the same principles, but are applied to the
mutual fund, stock or stocks du jour that is under study).

Graham applied,
http://www.ndir.com/cgi-bin/stingyne...ingy+Investing

Obviously I google from time to time for financial topics of
personal interest. For example, googling for {"dividend
growth stocks"} turns up this somewhat fragmented yet
interesting and clearly Graham-influenced site:
http://dividendgrowth.ca/pages/old_site/index.html

www.Fidelity.com and www.Vanguard.com publish free articles
regularly at their sites and I manage to peruse many of
them. (I am a long-time Fidelity customer. I have never been
a Vanguard client but know many who are. I admire Vanguard's
emphasis on indexing.) Naturally both push their own
products. Yet they're not idiots at either of these places.
They know their arguments must be cogent. Both tend to
promote saving for retirement in a systematic way and sound
asset allocation principles. I compare these sites to, for
example, USAA's site (investing and banking sections in
particular), and think Fidelity's and Vanguard's
publications (again, tinged with advertising) are a Mother
Lode of pretty good information about financial planning.
Or, since USAA Investment Co. does not tend to offer too
much by way of index funds, perhaps it's inevitable that its
articles do not discuss the merits of indexing.

I often seem to end up at the articles at www.cnnmoney.com
(and similar big media financial sites).

www.finance.yahoo.com (and subsections) has links to many
timely articles on various investing topics as well as
current analysis of, for example, how a stock is faring
against its competition. Finance.yahoo.com has a very good
investing education center not with articles per se but more
like encyclopedic reports. A good place for the newest
newbies. But then this is now seguing into my belief that
one does not need a regular newsletter to get a handle on
safe investing practicing. I have more than a dozen other
sites bookmarked (like Yale Economist yada Robert Shiller's
data site; a few bond yield curve sites, notably
smartmoney.com 's--love it) and go to them often as well as
refer people here to them often.

Of course, I did not discover Graham on my own but rather
through this very newsgroup. So again, people should lurk at
online financial fora. If one is lucky, one will be able to
separate the wheat from the chaff (not chimps from men; we
already went over how little they differ). One may meet
community service minded folks who double as Socratic sages.

To clarify my original post on newsletters: The person who
brought this up surely was trying to emphasize for fee,
stock (or mutual fund) picking newsletters that by their
nature concern attempting to time the market. Else one
wouldn't need the regularity of a newsletter.

One of my points is that the information available on the
internet, when taken as a whole, tends to act as a free
newsletter with less bias and so arguably superior
information compared to 'for fee' newsletters.

- quote -

Please shares the URLs for your favorite free sites. I'm sure the newbies
would appreciate it.

Douglas Johnson wrote:
- quote -

Yes. But, a mixture allows flexibility on part of the investor.

- quote -

Sure, someone could easily calculate the appropriate weighting for a
number of sector funds for newbys to invest in that would approximate a
broad market index.

- quote -

That should work if a newby has some discipline, but sometimes a person
has to actually make an investment to maintain interest.

- quote -

I am not sure that market prices are a product of rational thought. Two
companies could be doing equally well but vary in market valuation by
over a factor of two. The weak EMH may be correct, but a little
examination of the oil industry gives one more information about how
profitable the oil industry will be (depending on the hurricane
season).

--
Ron

"Ron Peterson" <ron[at]shell.core.com> wrote:


- quote -

But won't the performance of such a mixture of sector funds approach the
performance of a broad market index? We're discussing newbies here. You're
asking them to put together an appropriately diversified selection of sector
funds to minimize risk?

I think Tad's original advise to invest in a broad market index as a benchmark,
then run paper portfolios against it is excellent. I have about a half a dozen
paper portfolios running. They are very enlightening -- a good, cheap, reality
based means of testing investing ideas. A newby can get a good investing
education and not pay too much for it.

- quote -

If you don't need to be a genius to know it, then the whole market knows it, and
has priced the sector appropriately. (I can't believe I'm making an EMH
argument, but there it is.)

-- Doug

joetaxpayer wrote:
- quote -

That seems fair to me, if XLE is up more than 10% over the S&P, then
XLE is a big winner.

--
Ron

Elle wrote:
- quote -

I believe in being diversified, but overweight in certain types of
stocks. There are no certain investments except treasury bonds and then
that depends on the rate of inflation.

Some of my non-energy stocks have high capital gains and I don't sell
those because they are as profitable as the energy stocks and I don't
want to pay capital gains.

I am currently 38% invested in energy stocks. It's probably a little
high, and I have many sleepless nights worrying about when ethanol will
replace oil. :-)

--
Ron

Ron Peterson wrote:
- quote -

I don't know that I'd be that sure.

XLE at $57.47 at the close
S&P closed at 1273.96

Let's check back at year end.
JOE

(note : XLE is the energy spider, an ETF containing the S&P energy
components)

"Ron Peterson" <ron[at]shell.core.com> wrote
- quote -

Since you're interested in educating newbies, I think it
might be instructive to them to know whether you are putting
every last cent of your investments into energy stocks. If
not, why not?

Maybe you should also clarify that shell.core.com is no
relation to the oil company. ;-)

Douglas Johnson wrote:
- quote -

It has been found that sectors that do very well in one year aren't
likely to do as well in the next year. Therefore, one should take some
money out of the best performing sectors and put them into the others.

If an investor has a capital gains in an investment that he has sold,
by having a mixture of investments, he may sell those funds in which he
has a loss to reduce his effective capital gains for the year. The
investor can re-invest the money in an different but equivalent fund to
avoid the wash rule.

- quote -

I meant the risk compared to individual stocks.

- quote -

An individual sector fund will be more risky than a broad market index,
but a mixture of sector funds can approach the risk of a broad market
index.

I don't think one has to be a genius to know that energy stocks are
going to be the next big winner in the next 6 months.

You're right that newby investors tend to buy the last winner, and
that's why they need to be educated.

--
Ron

"Ron Peterson" <ron[at]shell.core.com> wrote:

- quote -

Why do they need to rebalance? And most broad-market index funds are pretty
tax efficient anyway.


- quote -

How do sector funds reduce risk for the newby investor? Sector funds are
inherently more risky than a broad market index unless someone has special
genius into what sector is going to be the next winner. A newby investor is
much more likely to buy the last winner.

-- Doug

Elizabeth Richardson wrote:
- quote -

OK, I am a value investor who thinks that stocks have an intrinsic
value which determines the price at which one should buy or sell.
Estimating that intrinsic value is the what is needed to be a stock
selector.

The alternative is to be a technician(chartist) who by way of changes
in price and volume of stock trades can guess which way the stock price
is going to go.

There are other ways to invest, but I am only restating what I meant.

--
Ron

"Ron Peterson" <ron[at]shell.core.com> wrote in message
news:1152140788.492474.42530[at]l70g2000cwa.googlegroups.com...
- quote -

Huh?

Elizabeth Richardson

On Wed, 5 Jul 2006 18:06:56 -0500, Ron Peterson <ron[at]shell.core.com> wrote:
- quote -

If a ape can pick stocks on par with "investment professionals", I
cannot see why some newbie investors cannot do better than the stock
market (even for purely random reasons). After all, the stock market's
performance is the average of all investors performance (plus their
fees), so some are better than average and some are worse.

What is mostly needed for not being guaranteed to be below average, is
to not trade too much.

i

"Tad Borek" <borekfm[at]pacbell.net> wrote
- quote -

By definition of "newbie," I would have strong concerns
s/he knows the implications of "market risk," "broad market
index fund," etc.

- quote -

I can see a newbie taking your advice right this instant,
even though she does not know a single tenet of "finance
theory." S/he watches the broad market stay flat for the
next six months. Meanwhile the gang at a certain other
financial advice forum berates her/im choosing index funds
when s/he could have had an easy 5.3% return via six-month
CDs.

Newbie scratches his/her head, and says, uh, Mr. Borek?

Did this person learn a lesson?

Unfortunately that lesson might be not to listen to you!

Now you do not want that. Neither do I. Because I know for
the greater part the investment principles you preach are,
face it, the ones I preach.

- quote -

Yikes, are you not concerned about the fair probability that
said newbie will actually pick a stock or specialized mutual
fund that beats the index!

- quote -

The point of the six months is to become educated (or at
least to begin building a knowledge base so as to weather
near term, short turn downturns with confidence, etc.)
through reading of others' experiences, market history and
behavior, etc. Six months is indeed an unsuitable timeframe
for running one's own experiments.

Here we are, responding to a thread started I suspect by a
bona fide, newsletter-promoting troll. How smart can we be?
;-)

Tad Borek wrote:

- quote -

That seems reasonable to me.

- quote -

The investor is guaranteed to not do better than average and can't
rebalance his investments or minimize taxes.

- quote -

One can make an immediate comparison against historical data by just
graphing a stocks performance against various averages or other stocks.

- quote -

The newby investor usually isn't starting with a whole lot and can
afford a little risk. Or, the risk can be reduced by investing in
sector funds.

- quote -

In that case investing becomes very similar to gambling.

- quote -

It's better to find a more objective way to value stocks than the stock
price otherwise the investor will have no way of measuring progress.

--
Ron

Elle wrote:
- quote -


How about this approach...let's say the newbie is going to pick
individual stocks, using $X. By definition that newbie is willing to
expose the $X to "market risk" - the risk of investing in stocks,
generally - and simply hopes to improve on it thorugh good stock picking.

So stick the $X in a broad-market index fund and earn that market
return, while learning about how difficult it is to "beat the market".
If the market goes up 25%, they haven't missed out, and if it drops
25%...well, finance theory predicts that a diversified portfolio would
have dropped a similar amount.

The index fund account also creates an easy benchmark for the horse
race. Take an imaginary $X and begin paper-trading it on the same day
using your proposed method of stock-picking. Compare the value of your
index fund account to your imaginary paper-traded account - who won the
horse race?

My belief is that most people begin trading live money too soon, before
testing the premise that they can "beat the dartboard." I think it takes
a lot longer than 6 months to decide whether an approach is working or
not, unless the things you're trying to exploit happen on very short
time frames. To me a good gauge of this is trading frequency. If someone
is turning over their entire portfolio very quickly - say, once a month
- then by definition they're trying to capture extra returns based on
extremely short-term predictions. So it says something if the method is
not working after six months. In contrast if you trade less frequently
because you're trying to capture an effect that you expect to come to
fruition over multi-year cycles, it's going to take a lot longer to see
if your method has any merit.

-Tad

Blind Broccoli wrote:
- quote -

There is a little disconnect between the Fed rate and long-term
interest rates, so look at the 10 year bond rates once the Feds stop
playing around to get an idea of interest rate directions (usually more
predictable than the stock market).

Laddering should a technique to keep bond cash flow adequate to meet
your needs. As interest rates go up purchase longer maturities to fill
out the ladder.

--
Ron

"Blind Broccoli" <blindbroccoli[at]yahoo.com> wrote
- quote -

To me, long term bonds "might" make sense, "[v]ery roughly
speaking," because it's quite possible that within the
coming year, interest rate rises are going to stop their
relatively rapid rate of increase (of the past two years or
so). Long-term bond yields are still generally higher than
intermediate term bonds. So a person with not more than five
years to live can increase his/her fixed income by locking
in a long-term rate for the remainder of his/her life.

As a quick gage, consider Vanguard's intermediate and
long-term, investment grade bond funds. Their yields are 0.5
percentage points apart according to Vanguard's site, at
around 5.66 and 6.16%. Like you seem to be saying, in this
odd interest rate environment, for me or anyone with a life
expectancy over say 10 years, I'd rather bet that shorter
term rates continue to rise and not lock my money in on even
intermediate term CDs etc. right now. The roughly 0.5%
points difference //right now// is not enough to justify the
risk that rates will continue to rise. To me. Not
necessarily so to someone with a much shorter life
expectancy.

Also on my mind these days (because of another thread and
some recent personal experience) is how much hybrid stocks
(see Quantumonline.com) behave like long-term corporate
bonds. "Long-term" for hybrids is typically over 20 years
(assuming the hybrid issue is not called). Using hybrids one
can increase the yield even further, with high grade ones,
up to around 6.8% (higher with lower, but still not junk,
ones). But, again, I would suggest hybrids only to someone
with a life expectancy less than about five years and, it
occurs to me now, does not expect to need much, if any, of
the principal.

Is one percentage point or so difference enough
justification for a person with say around five years to
live to go long with bonds? Maybe. It is, after, all,
ballpark about 6.5%/5.5.% or about 18% more income each
month. I wouldn't rule it out as at least a fraction of the
portfolio of a person with a short life expectancy.

"HW "Skip" Weldon" <skip5700removethis[at]hotmail.com> wrote in message
news:s1kka2td96mjf98gkqisgkb5pl4ol1g80e[at]4ax.com...
- quote -

you. I have enjoyed your posts and humor very much here over the years. What
I was trying to ask was, "*if* one was of the opinion that we were in an
inflationary environment where the Fed rate was going to continue to rise as
a consequence of that, what would be appropriate and inappropriate
investments for those conditions?"

I would add to that, *if* one believed that the Fed was tightening too much
and there was a recession coming a little ways down the road, what would be
appropriate investments under those conditions?

Best, BB

P.S. Thanks to Elle for her recommendations re: long term bonds except I
don't even know why she thinks they are worth having even for a person with
a short life expectancy since the yield is close to that of intermediate
term bonds.