Last time we looked at the real performance of the stock market (we used the Dow Jones as a reference point) and the apparent performance that makes the headlines and can be seen by a casual look at a chart or "ballpark" figures - briefly; the Dow went up, for example, less than 50 points between April 1999 and April 2005 - essentially 6 years with no growth!
But behind that seemingly "becalmed" Dow there were at least 10 significant moves each and every year totalling many thousands of points!
But did the Wall Street Moguls, the so-called "Masters of the Universe" make you any money from those huge movements?
No.
Of course they didn't!
Here's how I know...
The web is a goldmine of information. Knowledge that was just not available to the private investor or trader is now there at the press of a mouse button.
Forget the Freedom of Information Act - the Internet leaves it standing.
Foremost amongst websites offering information about the financial facts of life (the things that affect you directly - Mutual Fund performance etc) is Morningstar.com.
And amongst other things, morningstar.com publishes a league table of mutual funds on a weekly, monthly and annual basis.
If you check out the table that I have provided at my website (www.TriggerSystem.com - full link at the bottom of the article), you'll see the performance of the top 20 or so mutual funds over the last 10 years.
I've chosen the 10 year chart because mutual funds are essentially long term "investments", and which most people seem to keep almost for ever (the chart on my website is by it's very nature a little bit out of date, but things haven't improved too much since that screen shot was taken. If you want the up to date figures just go to www.morningstar.com and search their data base for the 10 year performance of mutual funds)
Take a look...
You'll see that the top rated fund, over 10 years, has shown a total growth of 23% - which at first sight looks fairly impressive; 23%; wow!
But the problem is, that 23% is total growth over 10 years, not growth per annum.
So the 23% total growth starts to look like a less than impressive 1.7% per annum compounded (hey, even the banks are giving more than that on deposit).
I'll be honest, I didn't believe it either - so I sent off an email to morningstar.com and they confirmed my worst fears - 23% is the total growth over 10 years.
Sheesh!
And the average growth of all 1304 funds? A less than impressive 7.3% over 10 years (less than one half of one percent)!
Check out that hiding place under your mattress - at least you don't have to pay exhorbitant fees to keep your money there.
The one certainty is that the Fund Managers will not, personally, have fared so badly - they will still draw their large salaries and enjoy all the benefits of charging you fat fees for their "professional expertise"
As Thomas Sowell wrote:
"It is hard to imagine a more stupid or more dangerous way of making decisions than by putting those decisions in the hands of people who pay no price for being wrong"
OK, I know not everybody has money "tied up" in Mutual Funds and some people prefer the higher returns of the Stock Market.
So what about the analysts and stock brokers?
Well, we all know about Enron and the others - the stocks in the early 90s that crippled so many of America's biggest pension funds.
Use the TriggerSystem link (shown below) to view the Enron chart screenshot, which is lower down the page (below the Morningstar.com screen shot).
You'll see that on 20 November 2000 there was a "technical sell signal" flagged for Enron when it was trading at just over $80 per share (don't worry about the term "technical sell signal" - it just means a sophisticated trading programme told it's owner that he should SELL).
Over the next 2.5 months, Enron's price fluctuated up and down without really going anywhere, until the middle of February 01 when it really started to slide (just as it appeared to have stabilized at $80).
As they say, a picture is worth a thousand words, and to save my typing fingers - the numbers speak for themselves.
Follow the chart to the right and you'll see that the major stockbroking houses and analysts were still saying "BUY" as the market lost 75% of it's value over the next 9 months.
It was only on October 19th 2001 - just 11 months after our "technical sell signal" that the first warning appeared from the Brokers and Analysts - and even then there was a further major BUY reccommendation before Enron slipped again to be worth less than 40 cents on 30 November 2001 - A decline from $80 per share to $0.26 per share in 12 months!
And all the time the major brokers and analysts were telling their ordinary customers to either Buy or Hold.
And as we later found out, the Brokers and Analysts were telling their biggest corporate customers a totally different story.
So, whilst the Stock Market is your best friend (trust me on this one, or look for my previous article) - the people who operate it may simply be their own best friend, and from your point of view, any advice you receive from them should be taken with a very large pinch of salt.
And if you still think you can trust the advice they give you, here's the simple "5 word question" I mentioned at the beginning of this article... Ring them and ask: "What Guarantee Do You Give"? Just pick up the phone and ask them about the guarantee they give you regarding their advice.
Once they've stopped coughing and spluttering and picked themselves up from the floor, you may hear this well worn mantra: "the value of stocks can fall as well as rise" etc etc.
If they're not prepared to guarantee their advice, then frankly their advice is not to be trusted.
More next time...
Geoffrey Cummins is a full time stock market trader and has spent the last 12 years developing what he calls his "weedy little spreadsheet trading system", giving him some unique insights into the working of the world's stock markets. Under pressure from friends and family, Geoffrey is now making his unique insights and trading signals available to a worldwide audience
And unlike your stockbroker, he guarantees you a minimum 300% return on your investment (ROI) click here to view the charts referred to in this article
No wild claims, just common sense advice and the best Risk Free Trial (a full 90 days for less than $5 a week) on the internet all backed up by his unique 3 part / 300% guarantee.
If he doesn't provide you with a minimum return on your investment of 300% (the banks best offer is 3%. Not guaranteed) - he'll give you your money back. No questions asked. click here to view the charts referred to in this article
executive chauffeured services Bradford .. Madison to Airport carThere can't be many traders who haven't at least considered... Read More
Spread trading is a technique that can be used to... Read More
"Buy and hold" is one of the most heralded investment... Read More
Fundamental analysis.Fundamentals analysis says the best way to predict the... Read More
Did you know you can make money (and a lot... Read More
Is really not as important as to how you invest... Read More
You probably have been told that options are risky. Even... Read More
When it comes to stock market trading it PAYS to... Read More
Every day in any financial publication you will find the... Read More
In a previously written article, we expanded the use of... Read More
Because there are so many stocks that are NOT paying... Read More
Disclaimer: Please note that I do not necessarily purchase, own,... Read More
Starbucks earnings are up again and so is their stock... Read More
On the 40 year journey through the turmoil of a... Read More
A PEG ratio cannot be used alone but is a... Read More
Any online investor / trader seeks an excellent off or... Read More
Let me start by saying that...Most online brokers do not... Read More
You may have wondered why your mutual funds have been... Read More
In his wonderful book, 'Multiple Streams of Income', best selling... Read More
If there is one term over-used when talking about making... Read More
I mean it when I say that. While plastic silverware... Read More
One Saturday morning, while he was sitting at his computer... Read More
Day trading is all about making buy and sell decisions.... Read More
(1) Stock Market is Tough Place to Make Any Money... Read More
You have heard about a particular mutual fund from a... Read More
O'Hare Chicago prom limo ..1. Do not spread your money too thin.My friend has... Read More
The bear market that showed up at the end of... Read More
Dollar cost averaging is one of the most popular ideas... Read More
Are you paying any attention to your retirement savings? Do... Read More
Because there are so many stocks that are NOT paying... Read More
(1) Stock Market is Tough Place to Make Any Money... Read More
The Law of Chaos is the theory of random unpredictable... Read More
Having lived aboard a sailboat for 2 years I was... Read More
You have decided to buy some stock or mutual funds,... Read More
When you become interested in a stock or mutual fund... Read More
There are formulas for just about everything, but it has... Read More
As I said in Part I everyone in the insane... Read More
An insane person cannot evaluate an insane evaluation system.As you... Read More
One of the great "secrets" of successful people is discipline... Read More
Success in small cap & micro cap stock trading like... Read More
Most people think the stock market is a zero sum... Read More
We learnt the following the hard way! If any of... Read More
One of the big advertising kicks today from mutual funds... Read More
I feel that an investment strategy in the stock market... Read More
If you don't know what a Roth IRA is then... Read More
Yesterday I received my monthly issue of MONEY magazine. This... Read More
The demand for world oil is increasing while world reserves... Read More
Humpty Dumpty had a great fall and all the King's... Read More
Exchange Traded Funds (ETFs) are growing. Investors are choosing low... Read More
Professional stock options traders use the term lean to refer... Read More
Stocks & Mutual Fund |