Posts Tagged ‘Investing’
Stock market land mines

An excellent post on investments which will wipe out your capital:

And there are other investor traps out there, too numerous to expound on each of them here. They include:

 Oil and gas limited partnerships. (If you’re being cut in on them, the wells are dry.)

Principal protection funds. (They always come out after the market’s been killed and cap your upside on the recovery.)

Insurance brokers selling asset management. (Does your hairdresser also repair the roof on your house?)

Stockbrokers selling guaranteed-return equity-linked annuities. (Yeah, that’ll end well.)

Reverse convertibles and other structured products. (They will pit you against both the market and the banker — good luck!)

Brokers with one day left in their pay period. (They will call you with the news that “we need to rotate and move some things around.”)

Brokers with thick New York accents and Boca Raton area codes.

Anyone who claims to have a “system.” (Why? Because there is no such thing, and if there were, you would be the last person to hear of it.)

Anyone who calls himself a “financier.” (He’s guaranteed to be full of sh*t and probably wears dress shoes with no socks.)

Financial advisors who self-clear or self-custody client funds. (Always be sure there is another pair of eyes on your money, preferably a large corporation’s.)

Currency brokers and forex sites. (Nobody knows anything; this is all highly leveraged speculation, and the brokers are actually trading against you when you take a position.)

Managed futures funds. (The fees are so over the top that your actual return will look nothing like the advertised return.)

Movie investments. (The latest telemarketing scam; no studio worth investing in is going to unleash an army of cold callers to raise funds.)

Closed-end fund IPOs. (These funds should only be bought at a discount in the secondary market. Within 90 days of the IPO, the “penalty bid” phase ends and brokers can freely dump shares while keeping their commissions — you will be down 15 percent in a blink.)

Read the whole thing. It is devastating. Hat tip The Big Picture

Graphic from Alcatraz

 
Know when to hold them

I’ve had no end of debates with people saying that with stocks you should buy and forget. If you do that then over 10 or 20 years you will be showing a handsome profit. The post Cutting Losses shows just how improtant it is to limit your losses on the downside. Well Barry Ritholtz has linked to a chart that shows your return over a long period of time:

Stock Market Matrix: The Investment Triangle: Use the diagonal to select your start date; use the horizontal axis to select your “withdrawal” date. Where the 2 meet shows your returns: Red means returns failed to keep up with inflation; gray red is slightly above (0-3%); gray is 4-7%’ light green is 7-10%, while green is 10% plus.

Click here for large image.

The chart shows:

Historical averages can vary widely depending on their starting and ending points… After accounting for dividends, inflation, taxes and fees, $10,000 invested at the end of 1961 would have shrunk to $6,600 by 1981. From the end of 1979 to 1999, $10,000 would have grown to $48,000 .

“Market returns are more volatile than most people realize,” Mr. Easterling said, “even over periods as long as 20 years.”

It is a risky volatile world out there. There is no such thing as a guaranteed way to riches. Hard work and spending less than you earn increase your chances. But chance is still involved. With the best behavior in the world times may not suit you. I have no doubt there were lots of highly intelligent, thrifty hard working Jews who ended up in a gas chamber or shot. Not to mention Cambodians, Chinese or anyone anywhere the socialists have come to power. You have to love the left.

Good luck people. May the times suit you or you suit the times.