You may have wondered why your mutual funds have been going down for the past 2 years. The answer is very simple, but not one you will hear from Wall Street as they want you to send money.
In order for stock mutual funds to go up you must have a bull market. Unfortunately, that bull ended 2 years ago and is probably not going to return for a long time. Yes, there will be short-term rallies that can last from weeks to months, but the downward spiral will continue. For the past 100 years the Price/Earnings ratio of the S&P500 index has a mean average of about 15. With the current P/E running about 41 the rubber band has been stretched too far and is now contracting toward a more realistic level. It will take a time, probably several years, for a true bottom to be reached.
Mutual fund charters require the fund manager to be fully invested at all times. The fund may be required to be invested in tech stocks, pharmaceuticals, automotive, Asia or some other specific category. If that particular sector is weak and almost all stocks therein are headed down the fund manager has nothing to buy and is not allowed to sell to put the money in cash or bonds to protect the investors. Some are allowed to buy and sell what they wish; others must invest in stocks of a particular index such as the Dow Jones, S&P 500 or the Nasdaq. Most of the fund managers today are too young to have experienced a bear market and do not know how or what to do.
The small investor today has been taught to believe that the stock market always goes up. From 1982 to 2000 it did, but that was the end. All the talking heads on radio and TV have been telling you to buy the breaks and that the market always comes back - except when it doesn't. Almost none of them has ever seen or even studied a major bear market. The last one was 1973-74 just about the time most of these guys were in grade school or high school. They haven't a clue and don't know when or how to sell.
Today there are trillions of dollars in 401Ks, IRAs, pension plans, etc. run by professional fund managers, financial planners, bankers, etc. who have no idea how to protect their investors. More trillions are getting ready to go down the drain. Last year 90% of stock mutual funds lost money. The Grim Reaper is now the manager of your mutual fund.
For the little guy, that's you, there is only one way to protect your money. If you are in one of those plans you can tell them you want to have your funds in a money market account. At least it won't go down. If there are any fixed income or bond funds available to your account that is another safe venue.
Mutual funds are no longer a good long-term investment. The age of the stock mutual fund is over. Dead. Don't let your hard-earned money get away.
Al Thomas' best selling book, "If It Doesn't Go Up, Don't Buy It!" has helped thousands of people make money and keep their profits with his simple 2-step method. Read the first chapter to receive his market letter for 3 months at www.mutualfundmagic.com to discover why he's the man that Wall Street does not want you to know.
Comments to al@mutualfundmagic.com
Copyright Albert W. Thomas All rights reserved.
professional maid services Park Ridge ..It has fallen upon the consumer to make our economy... Read More
Are you paying any attention to your retirement savings? Do... Read More
Before they go over the cliff to their destruction these... Read More
Both the stock market and oil prices rallied recently, which... Read More
It is finally catching up with them. The brokerage companies... Read More
How do you make money without picking tops and bottoms?I... Read More
Let me start by saying that...Most online brokers do not... Read More
You remember the story about the frog that was put... Read More
The Law of Chaos is the theory of random unpredictable... Read More
TOO OFTEN, INVESTORS SIMPLY CHOOSE TO follow the crowd. This... Read More
There is nothing more exciting than finding an undervalued stock... Read More
It depends on your level of understanding of the market... Read More
If you have not back tested your trading system, you... Read More
Over the past few months, several investment professionals have brought... Read More
Time to look back2004 is over, now we are in... Read More
It's about time someone spoke the truth concerning outsourcing. The... Read More
The single most expensive stock market trades are those made... Read More
If it walks like a duck, quacks like a duck... Read More
From the book 'The Stockopoly Plan' by the author Charles... Read More
We all know that emotions control every decision that an... Read More
Among the largest forces that affect stock prices are inflation,... Read More
Unfortunately, most of you who are reading my column are... Read More
As a novice trader, you'll often feel the need to... Read More
Ever turn down a street, get half way and suddenly... Read More
Sometimes the best way of lowering exposure to risk is... Read More
cleaning lady near Lincolnshire ..How can you dispel an illusion unless you look directly... Read More
You should ignore analysts on TV, the radio, the newspaper... Read More
What can I expect to make my first year of... Read More
I have watched my cat play with a bag of... Read More
How is it possible that trash Companies are posting less... Read More
Stock investment advice is easy to find. Do you get... Read More
There is a current movie entitled "Eternal Sunshine of the... Read More
It is finally catching up with them. The brokerage companies... Read More
Yesterday I received my monthly issue of MONEY magazine. This... Read More
All of the talking heads have been telling us that... Read More
"There is nothing more frightful than ignorance in action!" Johann... Read More
I use the P/E ratio as a secondary indicator for... Read More
The Dow Theorycharles h. dowcharles h.... Read More
I continually hear from economists, talking heads, other market letter... Read More
Now that you have some money burning a hole in... Read More
The Macedonian Stock Exchange (MSE) is not operating successfully. True,... Read More
Have you ever thought of investing? Do you have a... Read More
Mutual funds by definition are a mixed bag of stocks,... Read More
You'd have had to be living on a desert island... Read More
Right now there doesn't seem to be any "gold fever".... Read More
Refuse is a serious issue in any society, about as... Read More
Peter is a professional trader, Paul is not. Peter has... Read More
A PEG ratio cannot be used alone but is a... Read More
So you're started trading, you bought some positions with your... Read More
Starbucks earnings are up again and so is their stock... Read More
Stocks & Mutual Fund |