Investment Articles

Is there a seasonal pattern for investing in the stock market? Like the farmer who must plant his crops as the season turns toward spring and summer, we may benefit from the same type of seasonal thinking.

For example there is an old Wall Street saying “Sell in May and go away” and we also know that October (the onset of winter?) can be a troubling time. Does this suggest there is good reason to take a seasonal approach to investing?

From the farmer’s point of view, it is a simple fact, that there is a time to grow, a time to harvest and a time to sit idle and prepare for the next growing season. The farmer knows this and year in and year out, acts accordingly.

Perhaps as investors, we would all do well if we followed his example. The challenge for the investor is his ability to tell when a seasonal change has occurred. How can he know that the ill winds of a bear market are approaching? How can he tell if a sudden market rise is just the calm before another storm?

Unfortunately, he can’t know exactly, but he can make adjustments as the facts warrant. He most certainly should not make the mistake of investing heavily as the clouds of winter appear on his doorstep. Nor should he stay hunkered down inside his home unknowing that rough winds no longer shake the darling buds of May.

So, what is your guess about the season we find ourselves in today? The stock market has risen 80% since last April and continues to rise slowly and evenly. Is it Spring? Is it Summer? While there is no hard and true answer, we can say we are in the growing season for sure. We know for certain that the winter has past.

I think it is early summer. We have had the fast growing season behind us and now we are in for some steady growth. This does not mean we will have a lazy summer because we have lots of work to do. We have to protect our crops- water them, weed them and make sure nothing from the outside like pests and birds destroy what we have carefully tended. For our investment portfolios this means weeding stocks which are not thriving and adding to those which are showing the healthiest growth. It means staying attune to the news to make sure no “pests” from the outside or events unseen will harm our portfolios (think Greece).

We must also remember that Mother Nature can interrupt our summers with unpleasant surprises in the form of storms and tornadoes and worse. For the portfolio, we too will be subject to storms (surprising economic numbers) and tornadoes (a financial scandal?). In Florida we have to be acutely aware of the start of the hurricane season, so extra preparation is a must. Portfolio diversification and common sense can help us get through a “Category 3″ as well.

Are you hunkered down in the house investing in 0% money markets as if winter were still upon us? Please, take a look out the window. For now at least, the flowers are in bloom and summer is here and it is not too late to make some investment returns on your money.

This summer season has a way to go.

Visit http://onthemoneyradio.org for weekly commentary and money advice that covers the entire financial spectrum which also airs on my weekly radio show, “On The Money!”

Steven L. Pomeranz, CFP is a 29 year investment management veteran and host of “On The Money!” which airs on NPR station, WXEL in South Florida. He concentrates on serving high net-worth individuals and has been named one of the Top 100 Wealth Advisors 2007, by Worth magazine (October 2007 Issue), honoring America’s premier financial and wealth strategists.

What is the best type of investment? The short answer is ‘it depends’. There are a number of factors to take into consideration when investing a lump sum.

What is your investment time frame?

Your investment time frame ends when you need access to your investment capital rather than the income from that capital. In general, if you need your capital within five years, it will be best to put your money into an investment with a fixed value to avoid the risk of making a loss.

Do you need income from the investment?

Investments can produce a return by way of income (interest or dividends) or capital gain (increase in the value of the investment) or a combination of the two. Capital gain is usually only available to you when you sell the investment. Some income producing investments have a fixed rate of return (such as bank deposits or finance company debentures) and some have a variable rate of return (such as fixed interest funds or perpetual bonds). A fixed rate has the benefit of certainty of what your income will be, whereas a variable rate offers the possibility of higher returns if market conditions change favourably.

Do you want your investment to grow in value?

If your aim is to maintain the purchasing power of your capital or increase your wealth over time then your investment will need to grow in value by at least the rate of inflation. A diversified portfolio of shares or a property investment is arguably more likely to achieve this objective over the long term than a fixed interest investment.

How much do you want to invest and what other investments do you have?

Your total investment portfolio should be spread amongst different types of investments in order to reduce your risk – in other words, don’t put all your eggs in one basket.

How much risk is it appropriate for you to take?

Your age, the amount of money you have to invest, and your personal feelings about taking risk are some of the factors that will determine how much risk you should take with your investment. In general, the less risk you take, the lower your investment return will be. Make sure you know what risks are involved with your proposed investment and that the return reflects the risks.

What is your marginal tax rate?

Investments are taxed differently depending on how they are structured. If you are on either the lowest or highest marginal tax rate, some investments will be more tax effective for you than others.

Do you understand the proposed investment?

Investment products are becoming increasingly complex as different providers seek to outdo each other and attempt to increase potential returns without increasing risk. Be wary of investing in something that you don’t understand.

As you can see, the best investment for you is one that fulfills all the requirements that you have. What is best for somebody else may not be best for you. Be clear what your criteria are and then use them to evaluate a number of different options. If in doubt, get some good advice!

Liz Koh is a financial planner and the author of the best selling book – Your Money Personality: Unlock the Secret to a Rich and Happy Life, Awa Press, 2008, available from http://www.awapress.com

For Liz’s best tips for financial security, visit her website http://www.moneymaxcoach.com to receive your free e-book “8 Steps to Financial Freedom”.

Asset allocation is the primary tactic in securities investment decisions and is the fundamental element in determining the safety and benefits of securities investment. Strategic asset allocation is the most powerful means of immunization to the systemic risk. With the increasing of financial assets of China’s population, the investment consciousness is ever-increasing.

In the current macroeconomic background, the ability to accurately judge the investment value of financial assets, to seize strategic investment opportunities and to select the appropriate asset is the key to determine the future investment returns. Since the launch of the first open-ended funds in September 2001, China has a rapid development of open-ended funds. Open-ended funds gradually replace closed-end funds and become the mainstream of the fund industry. As of August 2009, open-ended funds have reached as many as 527 and the types of open-ended funds tend to be more diversified.

According to the division of open-ended funds by Galaxy Securities Funds Research Center, there are already five categories open-ended funds can be selected for investors. Facing of the wide variety, profitability uneven open-ended funds, it is a very practical problem for investors to obtain high-yield by making good use of the characteristics of the fund, a relatively high-yielding, low risk and good liquidity.

There are already many studies on how to choose funds in the micro-level. But as for how to allocate assets between different types of funds, such as stock funds, bond funds, currency funds, in the macro-level, there are few articles. Based on this, We attempt to introduce the idea of asset allocation to the allocation between different types of funds to compensate for the shortcomings of existing studies. It will provide reference on funds investment for investors. It will also provide an operational method and performance standard to create a real sense of the FOF product and to the operation of the existing set of quasi-FOF.

The idea of this paper is to solve the problem of how to allocate between different kinds of funds based on the theory of asset allocation. Select three kinds of most representative funds, which are stock funds, bond funds and currency funds. By analyzing the characters of time series, simulate the forecast model and predicate the yield of the three types of funds in the first six months of 2009. Then allocate between the stock, bond and currency funds by the optimal portfolio model of risk assets under the condition that having risk-free asset and not allowing short selling. The result proves that it’s necessary and effective to configure between the different types of funds.

More Finance Articles please visit http://latest-finance-articles.com

Being a successful investor is not hard but it is more difficult than it looks. What makes it more difficult is not acquiring the mental the skills you need, accounting and basic mathematics can be learned by anyone. What makes it difficult is the emotional or behavioural skills you need. The difficulty in mastering these skills is that the wrong approach is hard wired into our brains, making it very difficult to take the correct action.

Here are my 7 indispensable traits of a great investor:

1. The ability to seek and buy undervalued securities

At first glance this seems easy but it is not. Ignoring companies with upwards rocketing share prices while looking companies those share prices are hitting new lows is not easy. A current market example will be ignoring companies like Amazon (PE = 66) and Apple (PE = 22) and be looking at companies like the German insurance giant Allianz (PE 9) and other solid companies left behind in the current rally. This trait will result in you not being able to talk about your portfolio at cocktail parties because after mentioning your investments you will either get a blank stare or asked if you are mad and do not read the newspaper? I am immediately self excluded from hot stock conversations at cocktail parties. It does not bother me in the least as I invest to make money not to have something to talk about.

2. The ability to stick to your investment process

Even the most time tested investment processes under-performs in some years. In fact studies have shown that they can under-perform for up to three or four years. It is exactly the reason why Joel Greenblatt says that, in spite of the spectacular success of his Magic Formula, it will never become so popular that its effectiveness will be reduced. If you follow a time tested investment process and it is under-performing, by all means re-evaluate the reasons why it is under-performing, but be very careful before changing it. You may be changing at exactly the wrong time. Think of the value investors that started investing in internet stocks just before the internet bubble burst.

3. The willingness to learn from past mistakes

This is also harder than it sounds. Losing money on an investment is a painful experience. However working through your past mistakes provides the perfect opportunity to see where you went wrong and improve your investment process.

My best example is in 2007 my largest position Lambert Howarth went into administration. It was not so much the complete loss that hurt my performance it was the fact that I allowed the position to become a too large a position in my portfolio. Especially such a small company.

I also keep an investment diary where I write a short note on the reasons for buying as selling an investment. I have also started keeping track of investment after I sold them to see in order to compare my sell decision with the share price performance after I have sold. I review both on a half yearly basis and, if appropriate, make adjustments to my investment process.

4. Have the courage of your conviction

Once you have gone through your company valuation process and completed you analysis it is time to put your money on the table and invest. If the share price is moving against the market hitting new lows it is of course a reason to be careful, and a reason to make sure you have not overlooked something, but if not it is time to buy. Irrespective of what friends, colleagues or other investors may be thinking or doing. Because of my fear that it will get even worse, I missed the March 2009 lows and did not invest. That was in spite of me watching companies I have already analysed fall to ridiculously low prices. I am talking of price to earnings ratios of less than four. I watched the companies drop to price earning ratios of four and even two and still did not buy. But I learned from that experience, made changes to my investment process and I think I will be able to buy when it happens next time. Believe me it will.

5. Have a system for managing risk

Risk management is not rocket science. But you have to think of what your tolerance for risk is, write it down, and implement it as part of your portfolio management.

Things you have to think about:

That is the maximum percentage of your portfolio you want to invest in one company? Mine is 4% as I want a minimum diversification if 25 names in my portfolio.

Will you follow a strict stop loss system? For example sell at a 16% to 20% loss irrespective of what has happened. I have developed a semi-rigid system that works for me based on valuation and portfolio weighting. Its a bit too complicated to explain here but it will be part of a future article.

What percentage of your portfolio will you invest in one industry? I have a rule of about 20% but its not something I apply rigorously.

If you use multiple investment strategies do you have a limit as to that percentage of your portfolio should be invested in each. For example if you follow a low price earnings strategy what is the maximum percentage you will allow to have room for other strategies such as low price to book companies? I do not have any limit with regards to any strategy.

6. Have the courage to sell

This point may seem obvious but it is not. I have fallen in love with a good performing company only to see the share price decline after reaching a new high. I am sure you know the feeling. In order to avoid this happening I re-evaluate the companies in my portfolio soon after the release of interim or annual results to see if there any fully or overvalued positions that have to be sold.

I also have a system in place where I review a position after an increase of 50% and 100%.Usually however this problem takes care of itself. I do not like having more than 30 companies in my portfolio. Should I thus want to add a new position I have to decide what position to sell before the new company can be added. This process results in new undervalued positions being added to my portfolio all the while at the same time getting rid of over or fully valued positions.

Also remember, the lowest risk profits in any position are made when a company moves from being undervalued to fairly valued, as this is the time when you have the largest margin of safety. Holding a security with the expectation that it will move up in price from fairly valued to highly or overvalued is risky as downside protection i.e. the amount of undervaluation is gone.

I learned the above traits over the 20+ years I have been active in investing. Some were learned with financial losses, something I hope I can help you avoid. Investing is not rocket science. It has more to do with common sense than most people realise. If you have answered the important questions and have a system in place to take care of the ups and downs you can be certain of acceptable investment returns over time.

Tim du Toit is the editor and founder of Eurosharelab. He has more than 20 year of institutional and personal investing experience in emerging and developed markets. Tim is based in Hamburg, Germany. More of his articles can be found at http://www.eurosharelab.com

We all know the importance of investing. But what your investment advisers and investment gurus will not tell you is: how inflation is slowly eating up your investment returns!

But first, what is inflation? Inflation is the increase in general price level of goods and services produced in a country. It does not imply that prices of all goods and services are increasing in same proportion. While Prices of some goods may rise relative to other goods and some may fall, but on an average, inflation can still be positive.

Inflation affects us in two important ways. First, it reduces the purchasing power of your income and second, it wipes out the real return you gain from your investments. Just take a look at a simple example. If average inflation this year was 5%, it means that a product that was worth Re.1 last year, can be bought for Rs.1.05 this year. This also means that the purchasing power of your rupee is reduced by 5%.

Effect of inflation gets worse when it impacts the real return on your investment. This can be best explained with a much simplified example. Assume your investment earned a 10% return this year. But if the annual inflation this year was 4%, then the real return that your investment generated was only 8% (i.e. nominal return less annual inflation). This is primarily because during the year, your money has lost some purchasing power due to inflation and a part of the nominal return will be for recovering that lost purchasing power.

It is therefore important to factor in the inflation trends in your investment decisions.

Read more for investment options that can help you to protect your wealth from eroding due to inflation. http://understandingbasicsoffinance.blogspot.com

Geetika

The Merriam – Webster dictionary defines timing as:

1. Placement or occurrence in time. (The timing of the sale couldn’t have been better) The ability to select the precise moment for doing something for optimum effect. (A boxer with impeccable timing)
2. Observation and recording (as by a stop watch) of the elapsed time of an act, action or process. Sometimes the effect is good and at other times it is bad.

Led Zeppelin probably had it right in their song, “Good Times, Bad Times, you know I had my share.”

Some people however seem to have a larger share of good times based on statements we have all heard: “That person has perfect timing,” or “Everything he touches turns to gold,” or the often used, “He just happened to be in the right place at the right time.” Those statements naturally all refer to good timing. But there are also many bad timing statements like: “It just wasn’t his time,” or “He was just in the wrong place at the wrong time,” or “Maybe next time” or “His timing was off.”

I am sure we can all recall hearing or reading about some preposterous scheme that bilked investors out of all of their investment. To those that invested, the ploy generally was described as a guaranteed way to make money. The investment returns had never been anything but outstanding. By investing your money in such a highly touted con you would find yourself in the right place at the right time. The conversation about this fraud seemed to imply that the results would be an example of having the ‘Midas Touch’. Investors flock to such schemes and tell friends and associates about their, ‘Good Timing’.

Certainly we all know that anything to good to be true probably is but for some strange reason it sometimes takes several years before the truth about, ‘get-rich’, scams is discovered. Invariably, with these schemes and unknown to the investors, the entire program is a masquerade of investing. Everything about the investing program was a scham. The perpetrators of these frauds take the money invested with them and use it to support their lavish life style.

Gullibility is often a trait of a of investors and when it comes to investing and in addition, greed seems to become proportinate to that gullibility. Failure to ask enough questions when investing one’s life savings is a serious problem and investors love to chase yield. The results, millions of dollars are lost by investors every year.

I began wondering if ‘Timing’ which can be good or bad was an art or a science. Various investment schemes seemed to have been operating as if it where both an art and a science. As I researched this topic, I found there are people with all kinds of interesting but unusual views on this subject.

The book written by Johanna Paungger, ‘The Art of Timing’, emphasizes the benefit of rhythms of the moon having a profound effect on life on earth and resultant benefits of timing activities. Who knows, possibly many investment scheme are all due to the moon being rhythmically in the perpetrator’s favor and affords them perfect timing for scamming investors out of their hard earned dollars.

Lester C. Walker, Jr. of the University of Georgia states, ‘The terms art and science are well known, much used, less well understood. Contrary to popular belief, authoritative definitions of the two are not mutually exclusive although such definitions indicate that art has primary associations of skill, manipulation, and practice, while science is more often considered as related to systematic organization and the determination of immediate and specific frames of reference. Art seems more inductive and science more deductive; art appears more often closely allied to matters of emotion and spirit while science has implications of systematic and logical reasoning.’

Regardless, whether ‘TIMING’ is an art or science, good or bad, it is still a word that has many contexts in which it is used. If you Google the word there are numerous usages for the word. If we stay with the investing scenario, there are so many schemes perpetrated by so many individuals, and if we use the examples as stated by Lester C. Walker, maybe a con-artist’s timing is an art while stealing so much money but becomes a science after they are caught, convicted and begin serving time in prison.

I don’t know that it matters whether we see ‘TIMING’ as an Art or a Science, because it seems to me that we put the noun ‘TIMING’ into so many different situations to describe an outcome after the fact? It seems evident that the con-artists has excellent artful timing for many years while stealing other’s money but with apprehension and conviction will now have plenty of time to develop a more scientific approach to investing.

History of the Kimberley Diamond Fields

South Africa’s first diamond was found in 1866 in the Northern Province, along the Orange River banks. Following the discovery of the diamond, there was a extensive diamond rush, with thousands of hopeful prospectors flooding the area in search of alluvial diamonds along the river’s banks as well as by the banks of the nearby Vaal River.

Within a few years, several large diamonds were found, among them one located on a farm called Jagersfontein, which later became a famous diamond mine. After a number of discoveries, the area became known as Beaconsfield, which is today a suburb of Kimberley. One year after the discovery of the Jagersfontein diamond, the Kimberley and De Beers pipes were discovered nearby Bultfontein, and similar discoveries were made at farms such as Benaauwheidsfontein, Dorstfontein and Vooruitzicht. A fifth was found 20 years later, known as the Wesselton pipe.

While the pipes were initially worked by individuals, as the depth of the digging increased a more effective solution became necessary. In 1888 the De Beers Consolidated Mines came into being, under ownership of Cecil John Rhodes, a combination of the Kimberley and De Beers Mines.

In 1897, the rights to dig the Kimberley Mines were bought by a new company – Kimberley Mining Limited (KML). They mined until 1914, using a method known as opencast pit mining. This continued until World War I, in 1914. After the war ended in 1918, the mine was simply maintained for the next 8 years. At that point De Beers Consolidated took charge, but other than a few samplings of the mine’s contents, once in the 1950s and again in the 1980s, the mine has lain dormant. In 2002, the New Diamond Corporation (NDC) took control, but without funding the dumps and the mine became available. Today the Meepo Investment Consortium, part of the New African mining operations, has the rights to both the Caravan Park Dumps and the Kamfersdam Dumps of the Kimberley mines.

Town of Kimberley

Kimberley itself was established in 1871 following the diamond discoveries, and the town’s growth was largely as a result of the various mines built in the surrounding area. The town is named after kimberlite rocks – geologic volcanic rock formations that occur in vertical pipes, and which contain diamonds. Over time, the formations erode and the diamonds are carried downstream by rivers and streams to collect in alluvial diamond deposits. Not all kimberlites contain diamonds, and of those found not all are of sufficient quality or quantity to attract interest. However the alluvial diamonds found are usually of higher quality than those found inside the kimberlite pipes – because by the time the alluvial diamonds are discovered in their riverbed locations, low quality stones have been destroyed by the river’s current and only high quality stones remain.

One of the world’s premier areas for diamond mining, the Kimberley area is known today globally by members of the industry. It is nearly 500 km from Johannesburg and nearly 1,000 km from Cape Town.

Abandoned Mine Dumps

Today, in the area surrounding Kimberley there are a number of abandoned mine dumps that may have economic potential. Three of those dumps are: The Caravan Park dumps, the Kamfersdam dumps and the Eddie Williams Oval dumps. The Kimberley Municipality owns the mining rights to these areas, which they hope to turn one day into low-cost housing. Diamond Recovery can be carried out at the plant which is secured, and has both water and electricity. There is a perfect area for disposing of tailings. Kimberley’s infrastructure means it can be easily reached by airplane, railway or other means of public transport, a great boon to mining the area.

Reliability of Reports

While surveying has been done of late, it is not easy to judge the reliability of the resultant report. Primarily, both tailings and waste material have been dumped together, making the grades somewhat unreliable and although samples were taken from certain areas, the grades in other areas not tested could be vastly different. Today’s successful diamond recoveries from the Kimberley tailing dumps could be indicative of poor techniques used initially in the diamond recovery plants of the previous century. Another possible explanation is that previously the material was ground too coarsely and the smaller stones were not released or that the poorer graded material was dumped along with the tailings. As an experienced investor in New Africa Mining, I would say that this material’s diamonds, through the processes of weathering, have been released and are turning up in great quantities, also increasing the number of diamonds being recovered.

Caravan Park dumps

West of the Kimberly Mine Museum, these dumps hold material originally mined from the Kimberley mine – one of the biggest mines that existed as the 19th century drew to a close – from 1871 until 1914. The diggers mined to an ultimate depth of 1,097 meters. The caravan park sits on top of material that is between 1 and 2 meters thick, and as it contains some 595,000 tons of tailings, graded 9 cpht, there are approximately 53,550 carats worth of total diamonds located in the grounds here, with the largest diamond recovered from this dump so far weighing in at nearly 23 carats. In 2005, the dumps were mined for a total of 187 days and 1,122 hours. A total of 74,800 tons were mined and 4,874.28 carats were recovered at an average grade of 6.7 cpht. Estimates are that some 42% of the original dump material exists, which means that there is extraordinary potential for mining and a great return on the investment it will require to bring these mines to a fully active working state.

Kamfersdam dumps

Some six kilometers north of Kimberley, the Kamfersdam dumps hold material from the Kamfersdam mine, first discovered in 1880 and mined until 1914, when World War I broke out. By that time it had been mined to 104 meters deep. The Kamfersdam tailings dumps are all situated next to the abandoned Kamfersdam Mine north of Kimberley. The historically head grade of Kamfersdam was 28 carats per 100 tons (cpht). The two tailings of this dump total 5.2 meters or 5.4 million tons of tailings, which means there are an inferred.63 million total carats at 12 cpht. If 1 million tons are mined here per year, there should be another 4 – 6 years in which to make use of this resource. Despite the 12 cpht inferred, it is actually quite difficult to ascertain the grade of the material located in this dump, though it can be used for now. It will be important to discover the actual grade, as well as the average value per diamond carat – especially if it is to be compared with the diamonds found in the Caravan Park dumps so that a true estimate of its economic value can be ascertained. Over the next 4-6 years,mining these dumps should be an extremely lucrative venture, well worth the investment and a reliable source of income and investment return.

Eddie Williams Oval dumps

Some 3 kilometers north of Kimberley, these are a number of dumps that have very few resources left inside and are not worth discussing much further, so this paper will refrain from providing any more details at this stage.

Paul Ekon and New Africa Mining

New Africa Mining mines and sells rough diamonds, using old mining dumps it has acquired and concentrating on future acquisition of both dumps and mines. It is structured as a holding company, whose subsidiaries own and acquire mines, providing its investors with steady and reliable cash flow. The company’s operations team is run by Deon Kotze and Fernando Garcao, who along with their experienced team have over 100 years in South Africa’s diamond mining industry.

The question is how to invest money to make money. The answer is to invest money only after asking a few questions about investment basics. Here are the questions to ask, and how to invest money to avoid scams and bad deals in general.

How to invest money, rule #1, is that there is no such thing as a perfect investment. A perfect investment would have the following features: guaranteed safe, guaranteed to make money and lots of it, high liquidity, zero costs and expenses, big tax breaks, and easy to monitor… so you always know where you stand financially. All investments can be compared based on investment basics, but no honest proposition contains all of the above features.

A scam will generally IMPLY that safety and high profits are guaranteed. Your first question before you invest money: what are the specific guarantees for safety and investment returns? If the answer you get sounds confusing or misleading, you have no need to ask any more questions. Something is rotten in Denmark, since no investment offers high safety and high profits… except scams. Now, let’s move on to some other investment basics and questions to ask. Remember, a large part of knowing how to invest money involves knowing how to avoid bad investments or those that don’t fit your needs.

Ask about LIQUIDITY. How quickly and easily can you get your money back if you want to cash in? What will it cost you? This is a very honest question, and the answer you get should be straightforward. You’re out to invest money to make money; not to get stuck with a loser that will cost an arm and a leg to liquidate.

The COST OF INVESTING is another investment basic you need to ask about. Most investments involve charges and fees to buy, hold, and/or sell. Many times the details are in the fine print, so make sure to ask upfront. High investment costs can turn a winner into a loser. For example, a good simple fixed annuity will pay a competitive interest rate and will have no charge to invest or hold; and no charges to cash in after just a few years. The wrong annuity contract can cost you 3% or more a year in charges and fees, plus heavy charges if you cash out in the first few years.

Be real careful when an investment promises tax breaks. Ask questions first and get it in writing before you invest money. Then, run it by your tax professional if you have one. If you don’t, take a pass. Your goal is to invest money and make money in the process. Not to take a chance and wind up in trouble at tax time.

Our last area of concern in regard to how to invest money and investment basics I refer to as VISIBILITY, or the ability to monitor your investment. After you invest money, then what? Can you track the value of your investment so you know where you stand financially at all times? Will you receive statements each quarter and at the end of each year showing the value of your investment assets?

As a financial planner, some of the worst horror stories of new clients I interviewed were brought to light when I asked to see their records for the investments they held. Sometimes their records or statements were incomplete or otherwise questionable. Sometimes, these investors could find no records at all and didn’t know who to contact to find out the status of their investment. That’s a perfect example of how to invest… NOT.

Before you invest money, sort out the investment basics covered in this article to avoid scams and other major investment mistakes. Don’t be afraid to ask the questions presented here. If you are dealing with honest people, they will be glad to answer your questions. If not, look someplace else.

A retired financial planner, James Leitz has an MBA (finance) and 35 years of investing experience. For 20 years he advised individual investors, working directly with them helping them to reach their financial goals.

Jim is the author of a complete investor guide, Invest Informed, designed for average investors or would-be investors of all levels of financial background and experience. To learn more about investments and investing and his new financial guide go to http://www.investinformed.com.

If you are like most people on the planet, you covet your positive investment returns and are scared to death that you might give up those returns in this tough market climate. I believe this is why a majority of individual investors missed some or all of the recent stock market ascent off the March 2009 lows and 60%+ move higher.

I think this is why a November 2009 survey of high net worth investors by Investment News, showed that only a slim portion of the wealthy feel in control of their financial lives, an even smaller number (fewer than 9%) enjoy thinking about financial matters and only about a quarter feel successful in investing.

So what is the secret to feeling better about your investments and protecting your portfolio from Mr. Market’s bears? The answer is to have a plan to identify and hedge your portfolio when market conditions clearly show a change in market direction may be coming.

This is where trend following shines. Trend following strategies don’t try to predict market or stock movements, instead they capitalizes on the market’s movements wherever or whenever they occur. Trend followers respond to what is happening rather than anticipating what might happen.

The goal of the trend follower is to let a new trend develop and then invest with that trend. The trend follower then holds that position until there is a reversal. The smart trend follower does not invest at the exact bottom because he/she wants confirmation that a turn (reversal) has occurred. Likewise the trend follower will generally not sell at the exact top (which is more easily identified after the fact). They sell after a clearly identified change in trend (reversal). Therefore, the trend follower is able to capture the “meat” of the trend.

Another very important point is that the trend follower is indifferent as to whether the trend is going up or down to capture his/her return…as long as there is a trend they can make money.

So how can trend following be used to protect your portfolio from the bears? Simple, in your manager allocation include a trend following manager in your allocation. During times of sustained market distress, this manager’s positive returns in a bear environment will help to hedge or offset losses elsewhere in your investment portfolio.

The amount you allocate to the trend follower then becomes a question of how much of the remainder of your portfolio do you want to hedge or protect. Best of all this strategy is not insurance or options, which you may pay for and never use (sunk costs). These managers can make money, as long as there are trends to follow, in both up and down markets. They therefore are a perfect compliment to other managers and styles in a well diversified stable of managers.

An author, Certified Public Accountant and Personal Financial Specialist, Jeff Diercks has helped high net worth and institutional investors grow their investment assets in both up and down markets for over a decade. Mr. Diercks is regularly featured in the mainstream media as a specialist in trend following investment strategies. For a powerful guide to investing called “Make the Trend Your Friend”, visit http://www.intrustadvisors.com.

Investing, in its simplest form is about finding investment ideas, analysing companies and making decisions. Your investment returns can be improved by improving any one of the three activities. In this article I want to give you some ideas on how to improve your decision making. It is something I started a few years ago that has helped me immensely. Give it a try. It may not only, improve your your investment returns but other areas of your life as well.

I have always been an avid reader of anything written by Peter Drucker (1909 – 2005). His ideas on business and management has always been miles ahead of current thinking. At least once a year I try to read an article he wrote called Managing Oneself which is an excerpt from his book excellent book Management Challenges for the 21st Century. In the article Peter describes a technique on how to discover your strengths through the use of feedback analysis.

“Whenever you make a key decision or take a key action, write down what you expect will happen. Nine or 12 months later, compare the actual results with your expectations. I have been practicing this method for 15 to 20 years now, and every time I do it, I am surprised.

The feedback analysis showed me, for instance-and to my great surprise-that I have an intuitive understanding of technical people, whether they are engineers or accountants or market research-ers. It also showed me that I don’t really resonate with generalists.

Feedback analysis is by no means new. It was invented sometime in the fourteenth century by an otherwise totally obscure German theologian and picked up quite independently, some 150 years later, by John Calvin and Ignatius of Loyola, each of whom incorporated it into the practice of his followers.”

I have successfully used this technique to evaluate and improve my investment decisions. Each time I make an investment I write down the answers to the following three questions:

1. What is my reason for buying?
2. What is the security worth?
3. How did I calculate this value?

Don’t write a long story just one or two lines. As I have found that, the longer the reason for buying (the more complex the investment case) is the lower my returns usually are. The simplest investments arguments are usually the most profitable. When I review the investment in my portfolio, after a price decline or receipt of new information, I look at the reason for buying. If the reason is no longer valid I seriously consider selling.

Also when selling an investment I refer back to the purchase decision and add the return on the investment (in total and per year) as well as the reason for the profit or loss. Every six months I compare my decisions with the results. A profit does not automatically equal a good decision. A good decision would be one where the reasoning behind the decision proved to be correct. Was your thinking process that led you to the buy decision correct?

For example a profit made through a completely unexpected buy-out of the company would not equal a good decision whereas buying because you thought a security is undervalued and then profiting from a buyout would be a good decision (the undervaluation made the company an attractive buy-out candidate). I urge you to give it a try, you will be surprised at your findings.

I for example found that:

I am a very bad coat tail investor i.e. buying a security because someone else bought it. I am uncomfortable holding the investment and tend to make bad sell decisions. Either too soon or too late, after a gain has evaporated. Also, if I do too much analysis on an idea I lose my objectivity. I tend to fall in love with the company and tend to see price declines as a reason to keep on buying. Something that has cost me dearly.

That said I am still not 100% sure what my correct amount of research is. But I am sure I am moving in the right direction. Using check-lists as I described in the article What does your checklist look like? is a step in the right direction for me. I also add securities I have sold to to a virtual portfolio as I realised that I often sell investments too soon. I review this “sold” portfolio six monthly to evaluate the quality of my sell decisions. I do this for only up to a year after the investment has left my portfolio as thereafter the investment case may have changes and I have stopped following the company. This has helped my returns a lot as it has, objectively, confirmed my mistake of not letting winners run.

In summary

We make hundreds of decisions every day, some more important than others. If the quality of important decision in our lives can be improved, even only slightly, it can make a huge difference. This is of course also true of your investment decisions. I urge you to put a system in place to improve your decision making. It will show great dividends in your life sooner than you would expect.

Tim du Toit is the editor and founder of Eurosharelab. He has more than 20 year of institutional and personal investing experience in emerging and developed markets. Tim is based in Hamburg, Germany. More of his articles can be found at http://www.eurosharelab.com