Investment Articles

Diversification based on your age is often cited as critical yet this is extremely fraught with misconceptions. Diversification is absolutely critical to a good investment plan but it should be based on a number of factors, not just your age.

Age based diversification is just another way of saying, “I think I am going to live a long time” or “I don’t have much time left.” Or it’s like a batter coming up against Nolan Ryan or Greg Maddux with either an “oh well” attitude or an “I can hit this guy” attitude.

Some of the keys to diversification are:

• Term: are your investments for the long-term, short-term, mid-term or a mix?

But don’t confuse these “terms” with how long you will be investing; rather they are terms that describe how long you typically expect to hold a position (stock, ETF or fund). If you are going to trade daily then long-term positions are not very likely. On the other hand if you only want to trade occasionally or monthly then most of your positions will generally be mid-term or long-term.

o How you determine the length of your average holdings will be decided by how much time and how frequently you can manage your investment portfolio, AND what are your goals, your objectives.

• Type: where are you going to place your investment dollars? In other words do you favor stocks or ETFs or mutual funds or perhaps a little of all?

o Stocks can offer the greatest opportunity for gain, for profit because you are investing in on particular company. Investing in stocks also allows you to buy and sell just about any day at any time. However stocks tend to be more susceptible to the ups and downs of the markets and world events.

o Mutual Funds offer diversification by their very nature. Each fund is composed of many individual stocks of the same type or objective, utilities or large corporations, for example. Because a fund contains stock in many companies it is not as dependent on any one company for it success in producing gains or increase value. While funds are less susceptible to major losses they are equally less likely to achieve soaring gains.

o ETFs are kind of a cross-breed between mutual funds and individual stocks. Like funds each ETF (Exchange Traded Fund) contains investments in many similar companies, but unlike a fund there is no active management involving switching stocks. ETFs have become extremely popular in recent years because they don’t have the fees and holding requirements of funds and can be traded at any time like stocks.

• Safety: balancing risk is a key component to diversifying your investments. You can do this by creating different groups you are willing to invest your money into, for example:

o High Dividend paying

o USA companies

o Foreign companies

o Bonds

o ‘Select’ type funds

o Industry sectors

o Asset strength

By investing in six to eight different groups or types of investments it is easy to achieve diversification and still have your portfolio easily manageable. The groups can be all ETFs, for example, or a mix of stocks, ETF and mutual fund groups. If you are using a mix of the three types of investments it is important that each one is unique; in other words don’t have a utility ETF and a utility fund.

With proper diversification you can maintain safety because it is rare that all types of investments will suffer a decline at the same time, and also have the opportunity for substantial gains.

Author Raymond Dominick is the designer of Dynamic Investor Pro investment software for stocks, ETFs and mutual funds. He has been investing in the markets since his teenage years. An experienced business manager and journalist, he has been a registered investment advisor representative, also a professional photographer who loves escaping to the wonders of Glacier National Park in Montana. View his software at: http://www.dynamicinvestorpro.com

Once you have an investment plan, a solid, proven winner for an investment plan; it is important, if not critical that you stick with it.

A good plan is just like preparing dinner:

• Figure out what you want
o Stocks, ETFs or funds
• Check the ingredients
o Which group of stocks or funds or ETFs
• Do some research for the best recipe
o Method of Analysis
o Back test to find the best strategies
• Prep time
o How much time do you have to develop your strategies
• Cooking time
o How much time and how often to manage your investments
o Minutes or hours a day or a week or even just monthly

Consistency in an investment plan doesn’t mean buy something until someone dies: you or the stock.

Consistency in an investment plan means developing a plan based on a recognized means of analysis like relative strength momentum or alpha with a variety of tested sell signals and perhaps even a signal for when it is time to take a pause and exit the markets entirely.

If you create a plan with half a dozen different groups and for each group you have two or three strategies you will achieve both diversification and a strong degree of safety.

Now you have an investment plan you can stick with. Why? Because:

• It is based on your personality
• It is formed with your time constraints in mind
• It is aimed directly at your own objectives
• It consists of stocks or ETFs or funds that you are willing to consider (yes you can add more groups whenever you want)
• It has strategies back tested for both buying and selling

It is important in creating your groups to settle on not just one but to have two or three trading/selling strategies for each group. Why?

Experience says that instead of going with just one strategy for each group, narrow your back testing down to two or three strategies. Switching from one strategy to another can be advisable because frequently one will perform better than the other depending upon the economic climate.

One strategy may be better in volatile markets while another, for example, may excel in stable markets. Thus by having a few strategies for each group you don’t have to self-guess what is best in today’s market; your strategies will tell you, plain and simple. And when they tell you what to do, it is a lot easier to stick with your plan and not be swayed by your emotions, the news or your neighbor.

Author Raymond Dominick is the designer of Dynamic Investor Pro investment software for stocks, ETFs and mutual funds. He has been investing in the markets since his teenage years. An experienced business manager and journalist, he has been a registered investment advisor representative, also a professional photographer who loves escaping to the wonders of Glacier National Park in Montana. View his software at: http://www.dynamicinvestorpro.com

Where should you put your investment money? There are three basic choices for growing your money or building your retirement fund: stocks, mutual funds and ETFs.

Your choice depends upon a number of factors based primarily upon your willingness to accept risk, the risk of losing, your time to manage your investments and, of course, your desire for growth, for profits.

How you choose to invest, where to place your money, doesn’t have to be exclusive to just one type or another; you can mix and match. Each of these four basic types has their own pluses and minuses:

• Stocks are the most well-known. Investing in stocks allows you to pick individual companies such as Ford (F) or Apple (APPL). In buying stocks you are banking on the growth and success of the individual company to prosper so that it’s shares increase in value and thus your account grows.
With the ‘right’ pick the potential for major profit is great. On the other hand, the potential for major loss is equally great should the company falter, the economy tanks or world events scare investors.

• Mutual Funds offer some protection from the traumatic roller coaster effects that can occur with individual stocks. Not totally, but somewhat. This is because funds are composed of many stocks based upon the nature or description of the fund. A ‘utility’ fund, for example, will consist of stocks from electric companies, natural gas companies and even telephone companies.

Because each fund is ‘managed’ the manager of the fund will buy and sell individual stocks to produce the best returns for the fund as a whole. And because the fund is invested in many stocks if one company’s stock dives the result is not as severe as it could be because the growth of others tends to balance out the overall value of the fund and in this respect, help to protect your money while still offering growth.

Buying and selling of mutual funds is governed by many more rules than either stocks or ETFs. For example most funds have required minimum holding periods which mean once purchased you cannot sell for 30 or 60 or 90 days, depending upon the fund, without paying a penalty.

• ETFs are similar to mutual funds but are not managed on a daily basis like funds. Because once an ETF is built with the various company stocks it tends to remain with those holdings. In this respect an investor buying ETFs is still diversify his holdings when he buys a ‘utility’ ETF.

An advantage of ETFs over mutual funds is that they trade like stocks. This means you can buy and sell at any time. There are no minimum ‘hold’ times, for example.

In terms of risk and greatest potential profits these three types of investments would rank:
1. Stocks
2. ETFs
3. Mutual Funds

In terms of time requirements, you can invest in any of the three regardless of whether you have lots of time or very little. However, if you have very little time, less than an hour a month, stocks would be more risky unless you are buying strictly for the long term.

Author Raymond Dominick is the designer of Dynamic Investor Pro investment software for stocks, ETFs and mutual funds. He has been investing in the markets since his teenage years. An experienced business manager and journalist, he has been a registered investment advisor representative, also a professional photographer who loves escaping to the wonders of Glacier National Park in Montana. View his software at: http://www.dynamicinvestorpro.com

Is your destiny, your financial future controlled by you, a family member, a financial person chosen by you or a total stranger?

In other words: Who’s in control of your investments, or your retirement account, of your MONEY?

These can be scary questions especially if you think you are not qualified to manage your own retirement account, create one or invest in the stock market. The truth is, I believe almost every single person can manage their financial future. Perhaps you need a little assistance, but you can not only do it, but probably do it better than almost anyone else.

Controlling your financial future involves just a few key factors:

• Time – are you willing to spend 30 minutes a week, perhaps an hour managing and developing your financial future? Your retirement account?

Yes, this means finding 30 minutes almost every week, perhaps skipping a TV show, but the reward is equivalent to paying yourself the “big bucks”.

• Method – invest some initial time to review software that can aid you with recommendations for what stocks, ETFs or mutual funds to buy and when; plus equally important when to sell and especially critical, when you should sell out and stay out of the stock market to preserve and protect your money.

The software should be flexible enough to meet your goals, your personality -conservative – moderate – aggressive.

Preferably the software shouldn’t require months to learn or even a college degree. Even then training videos at a reasonable cost should be available along with the opportunity to talk with a human being whenever you have a question – for free.

And the program should work with stocks, ETFs and mutual funds so you have full flexibility. It should allow you to manage your portfolio daily or weekly or even just occasionally.

• Understanding – what kind of future do you want? Just saying “more money” doesn’t cut it. You need to be specific, for example:

Money for a new house
A new car
Secure retirement
Vacation funds

• Recognize – there are pluses and minuses to having someone else handle your portfolio. They may have cookie cutter portfolios that you must fit into or so many clients that there is no time for true personal attention. Yes, some advisors can and do work with your specific goals and objectives, but you must check them out thoroughly.

Your company sponsored retirement account is most likely handled in the most generic manner and without your input and management will grow slowly and is apt to suffer whenever the market drops.

Thus, my suggestion is that the person to really control your financial future should be you if you have 30 minutes or so most weeks.

Author Raymond Dominick is the designer of Dynamic Investor Pro investment software for stocks, ETFs and mutual funds. He has been investing in the markets since his teenage years. An experienced business manager and journalist, he has been a registered investment advisor representative, also a professional photographer who loves escaping to the wonders of Glacier National Park in Montana.

View his software at: http://www.dynamicinvestorpro.com

There is a difference between being afraid to invest and be cautious. When you are considering whether or not to buy stocks, invest in ETFs or purchase mutual funds for your financial future being afraid to act does nothing but insure that you will not be successful.

Being cautious with your investments is totally different from being afraid. Caution should be part of every investment decision. But there are precise ways to exercise caution so you can be successful with your investments and grow your money.

Growing your money is what investing in the stock market is all about. If you grow your money you accomplish many key factors including:

• Less stress because your portfolio or checkboo9k is expanding
• Comfort in knowing you will have enough money to live in retirement
• Comfort in knowing you have a financial cushion if it is ever needed.
• Knowledge you can dream about big purchases or trips and they can become a reality.

So how do you invest cautiously yet with confidence and knowledge that your money will grow? A few simple premises:

• Pick a proven method of analysis to guide you in your evaluations.
• Pick a software program that enables you to invest to meet your objectives.
• Pick a software program where help from a real human being is just a quick phone call or email away.
• Back test your investment strategies or ideas to make sure they are most likely to see going down the road.
• Pick a software program that makes reading charts clear and easy.
• Pick a software program that goes beyond charts and evaluates your stocks, mutual funds or ETFs on other factors, especially in comparison to the general market and other stocks, ETFs or funds.
• Use a software program that tells you when to get out of the market and preserve your money.

If you follow these principles the fear of investing, the fear of losing, will be diminished. Will it go away completely? No. We are all human and all afraid of losing but if you invest with caution and base your decisions on solid recommendations your likelihood for success jumps dramatically.

Will you ever lose in the stock market? Yes. Not every decision, even with the best of analysis is going to turn out right. But remember that a successful baseball play is one who bats over 300 which means he gets a hit one out of three times. A successful quarterback never throws each pass for completion, just the majority. On the other hand if you can score a gain on 60% or 80% of your investments while keeping those losing choices to a bare minimum your portfolio, your checkbook is going to see substantial growth.

You can see substantial investment success if you follow these key principles.

Author Raymond Dominick is the designer of Dynamic Investor Pro investment software for stocks, ETFs and mutual funds. He has been investing in the markets since his teenage years. An experienced business manager and journalist, he has been a registered investment advisor representative, also a professional photographer who loves escaping to the wonders of Glacier National Park in Montana.

View his software at: http://www.dynamicinvestorpro.com

How do you protect your investments with stops? This is a good question. Should you sell your mutual funds, ETFs or stocks only when a strategy says so, even if it is a strategy updated weekly or monthly? Or should you set stops with your broker following the same stop rules as in your strategy, but letting them activate whenever necessary?

I usually set the stops with my online broker and if they execute mid-week on my weekly strategies, I simply wait until the weekend to get the signal of what action to take from my investment analysis software This way I am protected from major losses. This doesn’t work well, however if you set stops that are really tight, like one or two percent, because a fund, ETF or stock can rebound that amount when the markets are topsy turvey.

Let me give you an example: let’s say that my investment program recommended buying EWD and VALU. The ETF, EWD (ishares Sweden) has a stop of 4% and the stock, VALU (Value Line) also had a stop of 4%. With these somewhat tight stops set with an online broker the positions easily stopped out and were sold with the recent market gyrations. Both tickers began a recovery within about 10days and were climbing steeply in the few weeks afterwards. If the stops had been set to 6% they would have still been sold because the recent market drop was so extreme.

However the loss would have been minimal because the stops were used mid-week.

In other situations where the markets do not have extreme movements on an almost daily or every other day basis, stops can move you out of a position one day and then the same position recovers and soars ahead in the following days. Again, the solution depends upon the stop percentage.

In any case, as a “weekly” trader, if my stops with the broker close me out of a position mid-week I wait until the end of the week for my software to tell me what to do next. I don’t try and second guess what the program will recommend.

The hard part of this process is remaining positive. When you are stopped out, it means you took a loss, but the positive point of view is that your loss was minimized. The even more important factor to keep in mind is that if your strategy of buy-sell rules with stops is based on a thorough back test analysis and the history of this strategy has produced excellent returns, strong gains, then yes, a few losses should be expected, but the long term outlook is for further gains and more money in the bank or portfolio.

I said I usually set stops with my online broker, but I don’t set them for every position. If I knowingly have purchased a stock or fund for the long term, I won’t set the stops with the brokerage, but will follow the recommendations of my investment software if it says to sell, even if I have only owned the position a short time. In these situations my buy-sell rules have settings designed to hold a position a long time extreme situations where the market or the position is taking a dive.

Author Raymond Dominick is the designer of Dynamic Investor Pro investment software for stocks, ETFs and mutual funds. He has been investing in the markets since his teenage years. An experienced business manager and journalist, he has been a registered investment advisor representative, also a professional photographer who loves escaping to the wonders of Glacier National Park in Montana. View his software at: http://www.dynamicinvestorpro.com

A recent article in a noted financial magazine discussed the folly of market timing versus buying and holding good stocks. The author pointed out how a ten year investment in a strong stock could produce substantial gains, while admitting that buying and selling the same stock a few times during the 10 years produced almost twice the results…but only if you timed the purchase-sale correctly. In essence, with many examples and reasons, he shot down the concept of market timing while making his case for buy & hold.

The true folly of anti-market timing arguments is that they always focus on tracking particular tickers symbols and questioning the ability to buy or sell at the right time. You could argue that all programs that give buy-sell recommendations are market timing programs, but that would be stretching the argument way out. The advantage with some software is that they can tell you when a ticker is going down and when another ticker is outperforming your current holding, even if your current holding is still going up. This power means that losses are limited by your sell rules and gains become cumulative so as to far surpass results from simply holding an individual ticker.

The folly with taking a buy/hold approach has been fully illustrated with our recent recession and again with the recent turmoil and drops in the markets. News headlines during the recession pointed out how retirees had lost 40-60% of the value of their portfolios. The latest market swings have been almost as dramatic.

While many portfolios recouped a lot of their value when the markets swung up from the recession lows few, if any, fully recovered and then surpassed their pre-recession level to the same degree as the markets climbed out of the recession if they were still holding the same positions.

I know the recession hit my portfolio – but not nearly as bad as most because the software I was using told me to sell and move to cash. The same software then told me to buy just as the markets were swinging up so my gains were based on about the same value as before the crash.

The recent decline in the markets also triggered the software I use to sell and I moved 80% of my portfolio value into cash, placing me in an excellent position to obtain future gains as the market rebounds.
In other words, buy and hold means your stocks and your portfolio are going to jump upon a roller coaster ride. While I like riding the Space Mountain roller coaster at Disney World, I would rather my portfolio traced a route more like going on a scenic drive along a valley floor that has a few ups and down but is basically moving on a constant upward path – kind of like following the Missouri up river to its high mountain peak origins.

The key is not simply market timing, but rather to picking positions that are moving ahead better than others, even better than what your current holding is doing. This is accomplished by implementing:

• Relative strength analysis using alpha or relative strength momentum
• Implementing sell signals based on stops, ranking level and market movement – just to mention a few.

By selling to strength, limiting losses and exiting the market when risk becomes too great, your portfolio has a better chance for substantial gains with minimum losses.

Author Raymond Dominick is the designer of Dynamic Investor Pro investment software for stocks, ETFs and mutual funds. He has been investing in the markets since his teenage years. An experienced business manager and journalist, he has been a registered investment advisor representative, also a professional photographer who loves escaping to the wonders of Glacier National Park in Montana. View his software at: http://www.dynamicinvestorpro.com

Investment decisions should be based on solid analysis. Two of the many methods available to base your decision upon are ‘return’ and relative strength momentum as analyzed with an ‘alpha’ formula.

‘Return’ sounds pretty straight forward and is popular. In fact many chart programs are in effect illustrating the return of a ticker symbol simply by showing the movement of the ticker’s price. Either it is going up or down or perhaps gyrating nowhere. But normally there is a percentage change almost every day and if you bought and sold on this basis it would be easy to calculate your return just as you can calculate the return from previous days or history.

‘Alpha’ on the other hand is best used to try and predict the future movement of a stock, mutual fund or ETF.

Let me explain.

If you analyze a particular symbol that is part of a group of symbols using ‘return’ over a particular time period you will quickly and quite simply see which symbol has outperformed the others. You can take this a step further and say that the symbol with the best return for the past 10 or 30 days out of your group is the one to now buy. Investing in this manner can be very successful as the analysis indicates which symbols have the greatest growth or loss rate.

The difference between ‘return’ and ‘alpha’ is that ‘alpha’ is calculating not just the progress of the ticker symbol over your selected time period but it is comparing that progress, the change, to a benchmark like the S&P 500 and to all the other symbols in the group, and, most importantly, it is factoring in the rate of change and comparing this rate of change between all of the symbols in the group. In other words, ‘alpha’ is saying symbol X is moving at a more rapid pace than any of the other symbols and its pace also differs from the benchmark more than that of the other symbols in the group.

This concept of relative strength momentum analysis, of which ‘alpha’ is one means of calculation, can be used to predict changes. Because the analysis, or predictions, are calculating the relative differences between the ETF or stock symbols in your group the potential for accuracy and stronger profits are greater.

Personally, I have used ‘alpha’ as my favorite means of analysis for many years. But recently I decided to test ‘return’ to see which one would produce the best results. I ran tests from 1999 and from 2005 to the present. You might say I did a test drive to see if another model car would outperform the car I own.

Quite frankly I was amazed at the great results, the superb performance provided by ‘return’, especially when I incorporated a Market Exit signal into the analysis to pull me out of the markets when the S&P 500 was tanking.

However, the ‘alpha’ test drive still outperformed the ‘return’ and you might say, let it eat my dust. So I am sticking with my ‘alpha’ method of relative strength momentum analysis.

Author Raymond Dominick is the designer of Dynamic Investor Pro investment software for stocks, ETFs and mutual funds. He has been investing in the markets since his teenage years. An experienced business manager and journalist, he has been a registered investment advisor representative, also a professional photographer who loves escaping to the wonders of Glacier National Park in Montana. View his software at: http://www.dynamicinvestorpro.com

Staying prepared and ready to invest when the markets are down or rolling like a roller coaster is a challenge, but there are a few key actions that will help. There are obvious and the not so obvious steps to take.

When stocks or ETFs or mutual funds are sliding the question always is when will they land and when they do land will there be a deafening splat or will you and the markets pop upright ready to go?

The obvious get ready actions:

• Continue to monitor the markets at your normal pace whether it be weekly or daily.

• Pay attention to key news items like new housing starts, sales of existing homes, unemployment trends and the level of manufacturing. These indicators are important because when people buy a home they usually have to spend more money in the months ahead furnishing or fixing up their new home to match their desires and needs. The more employed mean there is more money going into spending pockets and when manufacturing is climbing employment becomes more stable and even increases which means more spending money in everyone’s hands.

• Review your investment software or other means you use to get by signals just as if the market were climbing.

The less obvious actions that will help you grow your portfolio are:

• Evaluate the strategies in your software or the settings in your charts. On a monthly basis for the last few months, or even weekly, which strategies (rules for buying and selling) had the least losses or even made money while the markets dived. Especially compare their results to the S&P 500 so you have a guidepost with which to compare all your groups and strategies. In this manner you will discover when groups and which strategies hold up when times get tough.

• Evaluate the groups or universes of stocks, mutual funds or ETFs you use for your investments. Has the climate changed so that different types will be more likely to climb in the future? If this is the case, have you put together a group of these potential ticker symbols? Unless you have kept a diverse selection of groups on your desk or in your software you are likely to miss the next group or groups of symbols that recover first from the current market slump.

Perhaps the biggest challenge is to keep yourself positive and ready to take action when the opportunity arrives. The easiest way to keep yourself ready is to remind yourself that investing is like going to the exercise club, jogging, hiking, swimming or playing tennis every day. If you skip a day or (gasp) a week you find yourself quickly out of shape and fighting to get back into your groove. It’s a lot easier to stay in shape and to stay prepared than to get back into shape or get back to a readiness level for increasing your portfolio.

Author Raymond Dominick is the designer of Dynamic Investor Pro investment software for stocks, ETFs and mutual funds. He has been investing in the markets since his teenage years. An experienced business manager and journalist, he has been a registered investment advisor representative, also a professional photographer who loves escaping to the wonders of Glacier National Park in Montana. View his software at: http://www.dynamicinvestorpro.com

A big investment pitfall can be summed up in one word: greed. A major challenge when investing in stocks, ETFs or mutual funds is to remain with a working system, a methodology that produces results.

Too often new or even experienced investors get caught up in the “investing game”, the hype about what can be, the success story flowing from some sensational, but self-promoting newsletter or advertisement. There are dozens of ways to invest in the markets, not just stocks or ETFs or mutual funds, but using options or margin, buying and selling commodities, are amongst the many.

The key, as I have previously written, is to learn what suits you best and then to stick with it. Find a software program that works for you, based on your available time and the amount of risk you can afford.

Too often situations crop up that tempt you to sway from your path. These temptations can be:

• A friend telling you about new ways to invest money• Volatile markets in which you aren’t recording gains but advertisements make it seem like going a different direction will make you bundles of dough• Publicity and reports about new trends, like technology or foreign investments that tempt you to change course or even abandon your present methods

This doesn’t mean that there are not other methods to investment your money; it just means it is not a simple as the promoters or friends make it out to be. Switching tactics takes time to properly figure and evaluate the best tactics. Switching to totally new types of investments or investing styles can involve weeks and months of learning and studying.

So the question becomes: is it worth the time? Are the tradeoffs worth it?

If the methods you are using for investing are not working when everyone else is making money then, yes, you need to re-evaluate. But if your current methods do work, then perhaps they just need to be tweaked to make more money or perhaps the grass is not greener on the other side of the hill and you should stick with what you have.

If you are not satisfied with the results of a particular software program or you must work to make it work with your lifestyle then, yes, start looking for another investment software program. Don’t be afraid to contact your current software provider or any new one to see if you can do better with the program; in other words are there ways to boost performance that you may not know of but the authors are willing to share?’

Simply switching to new ways or places to invest can cost you money because of lost time and investment losses while you are learning so proceed cautiously and ask lots of questions.

Author Raymond Dominick is the designer of Dynamic Investor Pro investment software for stocks, ETFs and mutual funds. He has been investing in the markets since his teenage years. An experienced business manager and journalist, he has been a registered investment advisor representative, also a professional photographer who loves escaping to the wonders of Glacier National Park in Montana. View his software at: http://www.dynamicinvestorpro.com