Investment Articles

When the average person thinks of investing, vintage watches rarely come to mind. The focus is usually on bonds, stocks or maybe real estate. Well, believe it or not, vintage watches are an excellent avenue for investment. Of course not all watches are equal, whether they be vintage or modern. Brands such as Omega, Patek Philippe, Cartier and Vacheron Constantin – to name a few, are well sought after brands and vintage watches from any of these manufacturers may be worth far more than a few pennies.

The prices that these brands garner are also largely due to the innovativeness and mechanics that are put into these timeless creations; and these watch manufacturers over the years, have consistently pushed the envelope in the design, creativity and the quality of their time pieces. Quality vintage / antique pocket watches are also always in demand. Where as the focus is on brands when it comes to wrist watches, this might not be the case with pocket watches as many of these somewhat ancient pieces were one-off items, made by individual watch makers at a time when very few people, but the rich, could afford to buy them and each item took skill, time and patience to create.

If you are thinking of investing your money why not consider investing in vintage and antique time pieces. You could either retail them yourself or sell them through established and reputable watch dealers. The advantage of using a reputable dealer is that they know the business, are knowledgeable about watches and have already established credibility in the market place.

This is however not the only way to invest in vintage or antique watches. You can buy and keep these watches in much the same way you would any other tangible asset. Vintage watch dealers and collectors are usually on the look out for quality pieces. You would definitely have a market if you later decide to resell.

When you decide to buy it is of course advisable to make sure that you are purchasing from reputable watch dealers. Often a quick search on Google and visiting watch forums and getting the opinions and views of others is a good way to start.

So the next time you are considering making a worthwhile investment, don’t just limit yourself to the traditional avenues of investment – consider vintage watches, they are a worthy investment option in these uncertain times.

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The state of current investments available on the traditional market is not very stimulating for those wanting to make a decent return whilst not having to take a massive risk. Now more than ever, with the rising cost of living we need our money working harder. More and more investors are turning to alternative projects to create the returns that the traditional market can simply no longer make. The Carbon Market is the fastest growing market in the world. Set to outperform anything in the traditional investment market, a carbon credit investment is the most lucrative investment available on the retail market.

The introduction of the Carbon Tax on 1st July 2012 has affected far more than the big emitters it is established to tax. Carbon Credits are a tangible asset. There are therefore many profitable, safe and ethical investments to aid people on getting involved in the ‘Carbon Rush’.

In descriptive terms; a carbon credit is representative of one metric tonne of greenhouse gas emissions removed from the atmosphere; thus offsetting carbon emissions. Growing trees in the Gippsland area of Victoria, Capital Alternatives and their Project Developers are generating carbon credits from fully accredited bio-diverse woodland. These Carbon Credits are classed as ‘personal property’ in law meaning their value is protected. Those smart investors who have the foresight to acquire them can sell them on to the big emitters for returns which dwarf more ‘traditional investments’ in the current financial climate.

Although the Carbon Credit market is global, Australian investors have a unique and rare opportunity which is cause for celebration because there is no escape for big emitters. Qantas has recently announced an increase in prices in an effort to combat the cost in offsetting their emissions. These credits can’t be made out of thin air and need to created, and this is where the opportunity lies.

There is no escaping the fact that carbon credits are going to make those in the know very happy and very wealthy, the demand is enormous whilst the supply is limited. Capital Alternatives have rare opportunities for retail investors to become involved in the Australian Carbon Credits market by creating these highly sought-after credits while the price is still fixed at $23 until 1st July 2015 when the price floats.

With such high returns and guaranteed exits, this prospect will be quickly taken up by those wanting to take advantage of this unique and very lucrative market.

About this Author
For a free report on an ethical, safe and highly lucrative carbon market which is available for a limited time visit http://www.capitalalternatives.co/au/lau.

Most of us know that any amount we earn is an income. Usually, we work in order to make money and the longer we work, the more money we have. But when we make money also because of our money, we might think that it is a business. This concept is a bit more general. If we become more specific, we should call this kind of income passive income. Passive income is not the payment for hourly work. It is the product of our labor and investment. Sometimes it is called residual income.

Passive income is the most ideal income that everybody wishes to enjoy. It is due to the fact that we earn with less effort. Our energy as human is limited. We depend on the income based on the equivalent energy we exert. We have learned in school that everybody should have some ideas about any kind of work in order to earn. Later in our life, we realize that the important ideas which we should have are the ideas for passive income.

Those people, who are not satisfied with their present income they receive from work, should seek some ideas. There are many income ideas that we may try. Small businesses can give us an income. The problems that we always encounter are the difficulty in making a decision on what to invest, when and how to do it. In other words, we should also invest in ideas. To learn something may be costly. But the result of what our ideas can bring about is significant.

Small business like a start-up restaurant is one of the most common ideas for passive income. At first, you may handle it yourself to set it up and to make sure that it is operating well. You can gain experience as well. But you won’t have to be the one to cook or serve the customers. In fact, you may hire somebody who can supervise the operation. Investing in people is the key to a great income. All you have to consider is the credibility of the people that you are going to hire. Trusted people in your business can assure you of your income. However, if your restaurant is too small, you will really need to become hands on. In that case, your business is still at the first stage of setting up your income. If your restaurant has been inviting a lot of customers, you may invest in additional people. Investing in people is better than investing additional time. It is irrational to waste your time and energy if your restaurant profit can afford cover the overheads. Let your restaurant grow as a separate entity and keep your free time available so that you can still have some leeway to consider some more income ideas.

Retail business such as a convenience store or a pharmacy is almost the same as a restaurant. These are also some of the most common ideas for passive income. At the start-up stage, it requires your time and control. As it grows, you begin to be free. If your store is located along consumer traffic, you will surely need to invest in people who can serve all your customers. You should calculate its monthly sales against the inventory. Nowadays, it is not so difficult to do that because most stores use POS software. It will help you monitor the off take of your goods and the cash flow every day. There is no need to manually count the bills and the available stocks. Periodically, you must also make a physical inventory. But this is very seldom. Meanwhile, if your retail business is performing well, you should branch out because it is risky to depend on only one store unit. In the event that the location of your business becomes a worse environment for doing business, you might as well close down your retail outlet. However, if you have several branches, the risk is divided and reduced. Each of your store branches is considered one single portfolio. So, expanding your portfolio is one of the best ideas for passive income.

Whether your business is a restaurant or a retail store, you may still extract more income ideas from the same business. One of the ideas for passive income in retail businesses is “franchising”. When your restaurants or retail stores become successful and popular, many businessmen will be willing to own the same business or be part of it. This is possible through franchising. Individuals who don’t have any experience running a business can buy a franchise. What you should do is to provide them with the support they need.

How does franchising work? If you are an ordinary investor, you may earn an income with less intervention. Invest the required capital including the franchisee fee for a certain period of time and let the business run with the help of the principal company. From the stand point of the principal company owners, it is just the continuation of their operation. The expansion of their business is done through the investments of others. Moreover, they could earn from franchise fees because it is the name of their businesses that is working for them. A franchise last for a period of two to five years. If you want to put up a restaurant, you may compete with the big chains or join them through franchising.

Even if your business has already grown this much, there are still more ideas for passive income from your existing income. From a simple income from store sales to franchising, you may also earn an income by making your growing business listed in the stock exchange. You can make passive income through stock valuation. In franchising, it is the name of your company that is being sold. In stock market, it is the shares of your company. Both ways are beneficial because they mean expansion. In other words, franchising and stock exchange listing are the acts of selling the opportunities. Ideas for passive income do not need to come from different types. In the same business, you could have different income ideas.

Nevertheless, you can still explore some other different income ideas such as real estate investing and online businesses. In real estate, what you need is enough capital. You can get an income by renting out your property. On the internet, there are further more ideas for passive income such as web hosting, e-commerce, and affiliate marketing. Affiliate marketing is the most popular trend nowadays. Ideally, you don’t need a large capital to start an online business. Sometimes, there is no need for any amount of capital because there are some processes that are free. Examples are blogs. It is free to create a blog but you can use this for your online strategy. Articles submission is also free. Most of the time, we spend money creating a website. Nowadays, there are some cheaper websites or even for free. The cost is incurred only when you improve your strategy through the use of some softwares. Some people automate their business using some software robots or other plug-ins. If you want to publish your book, it will be cheaper to do it online. In online business, what you really have to invest is your time in setting up everything and your creativity to make new strategies. Continuous learning is also advantage.

In retrospect, retail business is not new to us. But we can create a new concept out of it if we continue to innovate. Online businesses were unimaginable before. Using effective ideas, one can create a new world, a new business, a new kind of life, and some new ideas for passive income.

About this Author
Michael F. Anyayahan is a freelance forex trader and writer. To learn more about investing, visit: http://www.forexuniverse.yolasite.com

Australia is a country looking to clean up its act. The Australian government has declared its intention to reduce net greenhouse gas emissions by 20% by 2050. This initiative has created a wealth of opportunity for those in the know with the fasted growing market in the world: carbon credits and subsequently carbon investments.

Throughout 2011 the Australian Government has introduced the ‘Carbon Farming Initiative’ as a way to drive the country towards a future in clean energy, this initiative also opens up a huge opportunity for investors and a huge opportunity is now presented.

The ‘carbon rush’ is one which is set to be the fastest growing market in the world and Capital Alternatives are market leaders in their Carbon Credit Investment. Through the CFI people have a chance to earn money by producing carbon offsets and reducing carbon emissions; within the framework of the Carbon Credits (CFI) Act 2011 the government backed project has a buy-back price at a minimum of $23 per tonne price and more than 40% above average market prices for carbon credits in Europe this year.

This means that Australian investors have a chance to undertake a highly lucrative investment in a low risk economy with a strong currency. A carbon credit investment with offers investors a safe, socially responsible and seriously rewarding prospect with:

Well thought out verification and accreditation system
New laws protecting people investing now from any future changes to legislation
Minimum government backed returns
Fully compliant with the Carbon Farming Initiative
Carbon credits classed as ‘personal property’ in law and value protected
Price paid includes all establishment and management and fees including insurance for fire or other disasters,

This investment opportunity is based on a market which has limited amounts of approved land available. Due to the nature of the project, stringent measures are in place to ensure that all land used is fully accredited bio-diverse woodland. Only land that was cleared prior to 1990 can qualify under the CFI project; therefore there is limited opportunity for investors, not everyone can be part of the ‘carbon rush’ but those smart investors who move fast and decisively can become very happy clients, gaining high returns and helping Australia to clean up its act and reach its green targets.

The nature of them being made in Australian Carbon Credits also means that investors can be assured of participating in a truly environmentally friendly project.

About this Author
For a free report on an ethical, safe and highly lucrative carbon market which is available for a limited time visit http://www.capitalalternatives.co/au/lau.

What is the process of building passive income, and how to be financially free? The starting point varies according to the profile of an investor and of an investment itself. Some rich investors begin with a careful study of the factors that may affect their investments. Others begin by familiarizing themselves about everything. However, most of us begin with nothing even a capital. So, the less money we have, the longer the process of building passive income will be.

For an average person, building passive income should start from saving money. Saving money is very simple but it is hard to do for it requires patience and discipline. This is the best way to start the process of building passive income. Some people prefer to borrow money in order to invest. As time goes by, they will realize that it is not they who are earning passive income but the creditors are, instead. Credit is actually good especially for business expansion. But anyway, very few creditors lend to beginning investors.

In order to save money, we should reduce our daily expenses by identifying things which we can do without. Sometimes, we can’t help spending because it is important. But again, it depends on us how important these things are. We must set our priorities and set aside less important ones. For those who are really serious about building passive income, no set of plans are needed as their mindset is strong. They believe that saving money is not a physical movement of coins from one place to another but a game against themselves. If they spend, they will lose. If they save, they will win.

Having saved enough money, you will then think of where to put your money in. Assuming you don’t know what to do with your money, you would look for someone to help you answer all your questions in mind. Make sure that you will not do everything that he will say. It is better to make some research on your own. You might get bombarded with a lot of information that can confuse you. Don’t forget to filter it and be objective. The safest thing to do is to know the basic of the investment you may try.

The next step in the process of building passive income is the selection of investment. If your choice is to invest in stock market, you have to call a broker. A broker is a third party company that helps investors look for sellers when investors buy. And it is also the one that helps investors look for buyers when investors sell. Brokers charge a transaction fee after a single trade. Before you trade, the broker will ask you to open a trading account. You need to sign a contract and deposit the required minimum amount to open an account with the broker. Of course, you can deposit more than the minimum. Once deposited, your money is ready to be used when you start trading. Your payment for your stock purchased is credited to your trading account. Sometimes, it is also possible to purchase stocks without opening a trading account. In this scenario, you could use your checking account to pay for your stock purchase directly after the transaction. In the advent of technology, it is no longer difficult for any broker to facilitate the trades. Using a trading platform, investors can have access to live transactions. Trading platform is a software device used for trading stock market and the like. It also acts as a broker. A broker’s role nowadays is to stand as a guarantor to your trades. It means that its name is used for trading on your behalf.

Let us assume now that you have already opened a trading account and all the necessary trading tools have already been provided by your broker. You can now select a company to invest in. This stage in the process of building passive income is the most important stage because your future income depends on the company to be selected. Intensive research is needed in this stage. It is recommended you read the company’s fundamentals. Such information is provided in the platform that a broker will offer you.

In stock selection, you could find a lot of good performing stocks. Since you are building passive income, the first thing you have to consider is the company’s dividend. A company that has a regularly attractive dividend is also known as income stock. Income stocks are considered safe. In reality, nobody can tell you whether or not a company is an income stock. But you can recognize it by yourself if your research focuses on dividend.

Dividend is simply a company’s profit. Usually, it is distributed to shareholders every year. It has two types. One is called cash dividend; the other, stock. Cash dividend is expressed in checks. It is directly issued to shareholders. On the other hand, stock dividend is expressed in stock certificate. However, this is not directly issued to shareholders. Stock dividend is added to your total number of shares. It does not make your pocket full at the moment. But it expands your investment. Whether a dividend is cash or stock is voted and decided in a stockholders meeting. You may also attend a stockholders meeting because your shares entitle you to vote in it. So if you wish to receive cash dividend, you may vote for it.

Not all investors are the same. Some prefer regular investment growth. Others prefer cash. If you prefer only cash dividend, you may choose another type of stock that can give only cash periodically. There are two types of stocks: secondary stocks and preferred stocks. A secondary stock is exactly the one mentioned above. A preferred stock is different in the sense that it does not entitle you to vote and to attend a stockholders meeting. But it is so called because preferred stockholders are given priority in the distribution of dividends. Moreover, preferred stocks give you fixed income regardless of company’s performance. It is issued in fixed percentage like 10% or 15%. The percentage is your guaranteed dividend. Aside from that, the dividend is only cash. So, a preferred stock works like bonds and notes. Both have pros and cons. It does not necessarily mean that preferred stocks are better than secondary stocks. In fact, dividend in secondary stocks, though sometimes much lower, can be a lot higher depending on the performance.

Investing in stock market is just among the many options to start building passive income. Stock investing could be a good starting point to learn some more. It is basic and it is the most common. Once you gain experience, you can try a more sophisticated one. You may jump to mutual funds afterward or may try to trade currencies or even futures.

The easiest option to start building passive income is through savings. When we save money, we can go to a bank any time we want to deposit. We just open an account and deposit our money. After that, we let our money earn the interest. That’s it. But remember, the easiest it takes, the least we can get.

Therefore, it is better to try what is proven and not what is easy. There is no easy way to success. We have to take everything one at a time. Building passive income is not done overnight. Sometimes, our expectation is not realized, and so we change our plans. But never change the rules of the game. There are the things which must be the first and there are things which must be the last. So, it is not actually important to narrow you’re your options. What is important is to be financially free. How to be financially free is to start building passive income. Now!

About this Author
Michael F. Anyayahan is a freelance forex trader and writer. To learn more about investing, visit: http://www.forexuniverse.yolasite.com

Traditionally silver has always paled in comparison to its counter metal, gold. However, in current times more and more investors are turning to investing in silver while giving gold a skip over. In the current scenario huge profits can be made by staying invested in it. Investing in this white metal negates the impact of inflation on your wealth assets in the long term. It is also relatively easy, even for small investors to make investments in silver as opposed to gold, which requires a higher purchasing power. Another reason why investors opt for it is to diversify their investment portfolio.

The popularity and demand for it results from many factors. The high conductivity of silver makes it a popular metal in many industries. It is greatly sought metal in industries like engineering, electronics and internet technology. The superior conductivity of silver renders copper inferior in this regard. Silver also has uses in dentistry and the pharmaceutical industry, as it is known for its toxic effect on bacteria, fungi and algae. It is also a popular metal in the jewellery industry. The sleek and cool look of the metal as opposed to the flaunty look of gold makes it an even more popular metal in the jewellery industry. Thus the demand for it comes from varied and diverse sources. Even if demand from one or two of these industries slackens the other industries will more than make up for the loss in demand. As the demand for silver does not come from a single source, it is unlikely that the silver demand will fall dramatically. The silver demand is relentless but the actual amount of silver is fast getting depleted. As opposed to gold, silver has yet to exhaust its all time high value.

Silver has some intrinsic value that protects you from inflation and is real money throughout the process. It has a ready acceptability as a form of currency which adds still more appeal to the metal. The positive silver prices in the current economy mark a happy profit for silver investors in the coming months. In spite of the renowned volatility of prices on silver, investors are still opting to make investments in the white metal. The silver price has shown a positive trend in the silver industry, leading to enormous profits for investors.

Investing in silver can be done through purchasing stocks of silver mining companies, shares or directly purchasing physical silver in the form of silver coins, bullions and bars.

About this Author
The author is a knowledgeable columnist in silver market, mining & stocks, who frequently writes articles related to silver prices, silver spot price including tips on investment in silver. Please visit silverprices.com for more details.

Silver is one of the precious metals on the earth as well used in many industrial applications. It is next to gold in its popularity, it is also called as poor man’s gold because silver prices compared to gold. Its preciousness is invincible because of its ongoing demand and ever-increasing popularity. Those, who can’t afford to invest in gold, they can dream of storing money by investing in silver. From the market research, it is expected that the prices on silver will increase up to 300 percent in near future. However, the latest report unveiled that silver prices are hopping at 33.75 an ounce with a slight fluctuation witnessed over several years.

India and China’s net silver imports have climbed a new record in 2011. Some time ago China was the leading exporter of silver, but it has become the silver importer where up to 70% of China’s silver demand is because of increased usage industrial sectors.

China is the third most important producer of mined silver in the world. It is a key consumer of silver where the country’s largest part of silver is mainly consumed by manufacturing sectors.

Chinese silver mining has witnessed a significant growth and development in 2012 because of technological strides in exploration as well huge growth in the production. This has proved to be great for the country because it has brought a wide scope in the indigenous market.

Silver is being used in manufacturing of home electronics and electrical appliances, as well as in several kinds of silver-based solders. It’s a transparent metal where you can easily see several reasons for increasing demands in China, especially industrial and jewellery areas.

Up to 70% of China’s industrial uses include the manufacturing of solar batteries, water purification systems, cell phones, circuit boards, plasma TVs and radio frequency identification devices. A large portion of silver is also used in the production of jewellery, coins and other artefacts.

With a span of times, China has emerged as the top consumer of silver in the world as well witnessed a notable growth in 5 years. In 2011, the demand for silver soared because of ongoing demand for silver in industrial sectors as well in the domestic market, particularly jewellery industry.

One big reason for ever-increasing demand for silver is its valuable importance as a precious metal next to gold. It is considered an asset for those who are interested in getting good returns from their investment in near future.

About this Author
The author is a knowledgeable journalist in silver market, mining & stocks, who frequently writes articles related to silver prices, silver spot price including tips on investment in silver. Please visit silverprices.com for more details.

Nowadays you don’t have to search far to stumble across information on the Carbon Tax. Just picking up a picture or entering a news site gains insight into the carbon tax. The news is rife with stories of big companies having to combat their emissions and large names such as Qantas having to introduce higher prices to lessen the loss of profit due to them having to buy carbon credits. Where there are large companies losing money, there are also retail investors making money.

Operating for a number of years, we have been providing investors with sustainable, safe and lucrative projects and are now offering investors an opportunity to stake their claim in the fastest growing market in the world, the Carbon Market. With an overall value of $124 billion in 2010 and an estimated growth of up to 300%, the Carbon Market is an incredibly fast moving and profitable market to be involved in.

Unsurpassed in their Carbon Farming Initiative Investment, with offices in London, Spain, Dubai and Hong Kong, alternative investments have been offering sustainable, safe and lucrative investments for a considerable time. They have now brought their expertise to the Australian Carbon Market. With supply for Australian home-grown carbon credits being limited, yet demand from big emitters becoming astronomical, ‘ Carbon Investment is an incredibly lucrative project with guaranteed exit strategies and the knowledge that you are making an ethical choice, whilst also making an excellent return on your investment. Australia’s Government has declared it’s intentions to reduce it’s greenhouse gas emissions and has put in place a unique ‘ Carbon Farming Initiative ‘ (CFI) as a major tool in driving the country toward a clean energy future. The Carbon Farming Initiative offers landowners and investors the chance to earn money back by both producing carbon offsets and reducing emissions, guaranteeing a buy-back price. Smart investors are sensing the trend and attempting to get in early on a market which is set to skyrocket, with this investment project you too can enter this increasingly popular and profitable market with an investment which is: – Sustainable and socially responsible – Lucrative and highly remunerative – On trend and very safe, with exit strategies including a government buy back With the carbon market picking up pace like a runaway train, investment opportunities are incredibly rewarding but unfortunately limited. The time to take action is now before it’s too late.

About this Author
For a free report on an ethical, safe and highly lucrative carbon market which is available for a limited time visit http://www.capitalalternatives.co/au/lau

Investors tend to take part in gold trading even though knowing the risks involved in this type of trade. This is because of the opportunities it presents in increasing someone’s investments and financial portfolio. But this is only possible if you can come up with good gold trading strategies. The right set of trading strategies can provide security to your investment and even avoid the risks involved when dealing with this precious metal.

No matter how effective a trading strategy is, it will not work on all market conditions. There is a certain kind of strategy that can only work on a certain market condition. When developing gold trading strategies, you must take into account four important rules.

Study the trend

Examining the trend is one of the most effective ways to comprehend the latest news in the industry. The information you acquire can be used to forecast future market conditions like the gold price movement in the world market. Although it sounds simple, you still need to take into account various sub-factors such as the socio-political activities in intercontinental territories as well as your own. These identified sub-factors influence gold trading in a global level.

Manage Risks

There is a large amount of money involved in gold trading, and it is therefore always important to play it safe. It is a fact that risks are always present in this type of trade but it is also your job to look for ways that can lessen or even avoid them. You can do a thorough research on the market and develop a systematic plan rather than act unthinkingly. There are ways to assure yourself that your investment will produce great rewards.

Diversification of Personal Portfolio

Diversifying your portfolio is another way to manage risk since it allows you to provide balance by distributing your investment into multiple forms. Loss will have a small impact because portfolio diversification prevents you from losing everything at once. So, in event that the gold market experiences some catastrophe, you still have something stored to recover from your losses.

Enhance Your Knowledge

The best way to come up with good trading strategies is to learn from experts and professionals on dealing with this precious metal. You can benefit from gold the same as any experienced trader or investor. Although there are a lot of experts who don’t want to share their knowledge, there are those who want to give back, help or make a living by providing valuable information.

You can find valuable tips and advice from experts on how to develop effective gold trading strategies in the internet. There is a wide range of selections to choose from. Before entering into gold trading, you need to learn as much as you can about it and then learn the ways to develop effective trading strategies.

Investor and trader, John Conejos spends a lot of time studying trends and analyzing market strategies. He wants to enhance traders’ and investors’ understanding on gold and silver trading. Now you can catch the trend before momentum runs out. Visit Derivative Trading Systems and download its FREE e-book. Learn the “8 Winning Trading Strategies for Gold and Silver in 2012″ and the 3 highly valuable technical analysis strategies for greater profit when dealing with these commodities.

Investors love to imagine their decisions are based on logic and foresight. But by using inconsistent arguments, investors have fooled themselves yet again, and created what I call the “Great Paradox.”

For example, stocks have become the Rodney Dangerfield of investments: They can’t get no respect. Despite corporate earnings increasing 125 percent since 2009, many investors remain skeptical of the outlook for stocks. Bloomberg News reported recently that valuations for U.S. equities have been stuck in a remarkably long-running slump that hasn’t responded to this surge in profits, suggesting that investors don’t trust the growth to continue.

That lack of trust is evident in the low Price-to-Earnings (P/E) ratio of the S&P 500, currently less than 13 times the 2012 earnings forecast. Compare that to the average historical P/E ratio of 16.4 times. If investors valued companies in the S&P 500 according to the historical average P/E, the S&P 500 would be 30 percent higher. But no such luck.

Corporations proved their flexibility and adaptability during the Great Recession. Corporate profits have been very strong, rebounding much faster than GDP. Corporations now run leaner than they did a few years ago and will benefit greatly from any economic tailwind. Yet many remain skeptical that this profit resurgence will be sustained.

On the other hand, bonds have performed extraordinarily well in recent years – so well, in fact, that many (myself included) see limited remaining upside. There’s not much of anywhere for long-term bond prices to go other than down, since those values run directly inverse to interest rates, which are currently nearly as low as they can be. Meanwhile, despite a worsening fiscal government outlook, U.S. Treasury bonds have done so well over the last 30 years that they have outperformed stocks. The last time that happened was prior to the Civil War.

Still, investors have poured billions into bond mutual funds over the last five years, and have removed billions from stock mutual funds. According to data aggregated by TrimTabs, investors have removed money from U.S. stock mutual funds in each of the last five years, including approximately $100 billion last year alone. Meanwhile, investors have added money to bond mutual funds in each of the last six years, including more than $110 billion into bond mutual funds last year. Investors seem to think that bonds will continue to appreciate indefinitely; at the same time, they distrust that current corporate earnings will continue. They have fallen into the Great Paradox.

Call me crazy, but I believe fundamentals matter. As Warren Buffett observed, “In the short term, the market is a popularity contest. In the long term, the market is a weighing machine.”

There’s no reason to think stocks won’t perform well in a slow-growth economic environment and even better in a good environment. And unlike for bonds, being a strong performer isn’t an anomaly for stocks. For those with a sufficiently long-term perspective, clinging to bonds isn’t a position that makes sense. As Jeremy Siegel, finance professor at the University of Pennsylvania’s Wharton School in Philadelphia, told Bloomberg News, “The rally in bonds is a once in a millennium event, but it’s absolutely mathematically impossible for bonds to get any kind of returns like this going forward whereas stock returns can repeat themselves, and are likely to outperform. If you missed the rally in bonds, well, then that’s it.” (1)

Why are so many people tempted to keep favoring bonds and avoiding stocks, ignoring solid reasons to do the reverse? One reason could be herd mentality. As my colleague Benjamin Sullivan observed, many investors follow the crowd, buying overvalued stocks when the financial media and Main Street are optimistic about the market, and shunning stocks when prices ebb, despite the fact that it makes more sense to buy low and sell high.

Think about it. Should you buy stocks when everyone thinks the world is ending – say in March 2009, when the S&P 500 closed as low as 677 – or when everything is Pollyannaish – say in October 2007, when the S&P 500 closed as high as 1565?

Though the timing is difficult to pinpoint, one should to try to buy near the height of pessimism and sell or reduce close to the height of optimism. As legendary investor Sir John Templeton once said, “Bull markets are born on pessimism, grow on skepticism, mature on optimism, and die on euphoria.”

Investors may also be tempted to let past performance overly determine their expectations for future behavior. However, while it’s smart to glance in the rearview mirror from time to time, looking only backwards and ignoring the path ahead will inevitably lead to messy smash-ups.

No one can forecast exactly what the market will do in the short term. But there’s no reason for the excessive pessimism that investors seem to apply only to stocks. This summer, Burton G. Malkiel, a professor of economics at Princeton, wrote in The Wall Street Journal: “We have abundant evidence that the average investor tends to put money into the market at or near the top and tends to sell out during periods of extreme decline or volatility. Over long periods of time, the U.S. equity market has provided generous average annual returns. But the average investor has earned substantially less than the market return, in part from bad timing decisions.” (2)

Uncertainty is frightening, and it isn’t surprising that investors are tempted to cut and run at the first sign of trouble. Investors have clearly lost confidence in stocks in recent years. But post-recession, it seems many investors have gone a step farther than caution. I suppose two bear markets during the same decade are enough to make investors jumpy. Meanwhile, investors pile into a bond market with limited upside and considerable downside.

Warren Buffet made the following analogy: “I’m going to buy hamburgers for the rest of my life. When hamburgers go down in price, we sing the ‘Hallelujah Chorus’ in the Buffett household. When hamburgers go up, we weep. For most people, it’s the same way with everything in life they will be buying – except stocks. When stocks go down, you can get more for your money, but people don’t like them any more. That sort of behavior is especially puzzling.” It’s not only puzzling; it’s costly.

Hockey legend Wayne Gretzsky put it best when he said, “I skate to where the puck is going to be, not where it has been.” The puck has spent the last five-, 10-, and 30-year periods making money for bond investors. I suspect the next five, 10, and 30 years are going to be in stocks’ end of the rink.

Sources:

1) Bloomberg, “Say What? In 30-Year Race, Bonds Beat Stocks”

2) The Wall Street Journal, “Don’t Panic About the Stock Market “

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