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Comparing Major World Indexes Since March 9, 2009 – Michael Covel
Posted in Historical Data, Market Trends, Other Blogs
Tagged technical analysis techniques, trendfollowing
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Quote of the Day: Jim Sarni
“We are just plagued today with the lack of long-term trends, and it’s because of people reacting to the issues of the day. You get long-term investors trying to anticipate what hedge funds are going to do-and not do-so they don’t get caught on the train tracks.” -Jim Sarni, managing principal, Payden & Rygel
This quote highlights the need (again) to create a plan for your investing and then execute the plan, rather than trying to guess what others will or won’t do. As Napoleon Hill pointed out in Think and Grow Rich, failure and defeat are nothing more than the failure of a plan. Change your plan and try again until you get it right.
Sources:
Risk On/Risk Off Trade Returns
Barry Ritholtz – The Big Picture
http://www.ritholtz.com/blog/2011/03/risk-onrisk-off-trade-returns/
Posted in Quotes
Tagged financial planning, investing process, Quotes
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Quote of the Day: Robert Kiyosaki
“A true investor takes a bad investment, and tweaks and manipulates it into a good investment.” – Robert Kiyosaki
Remember Safe Investing Principle #10 – “Learn from your mistakes (i.e. losses) ; you’ve already paid for them.”
So assuming that the last few days of market mayhem have caused you to violate Principle #2 (Always protect against losses), how are you going to turn things around?
Posted in Current Events, Quotes
Tagged personal investing strategies, Quotes, Robert Kiyosaki, rules for investing
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Always Invest with a Plan
A good bit of advice from Barry Ritholtz over at The Big Picture, regarding how to invest during a crisis:
The time to look for the emergency aisles and where the exits are located is before takeoff, not after the wings fall off the plane.
Sources:
Black Swans, 100 Year Floods
Barry Ritholtz – The Big Picture
http://www.ritholtz.com/blog/2011/03/black-swans-100-year-floods/
Posted in Current Events, Investing, Other Blogs, Quotes
Tagged investing process, market trends, Quotes, rules for investing
2 Comments
Oil Price Spikes: Historical Data Point
I have received several questions on the impact of oil price spikes (both personally, via invest-safely.com, and comments on this blog).
I do have an opinion, which is based on my limited knowledge of the facts. I am no expert on the oil industry, let alone how the impact of price is absorbed through corporate value chains and investor perceptions. As I say on my website: We cannot predict. We can only prepare.
I came across some historical data over at the Big Picture that you may want to consider. Since we’re always talking about a process or rule-based decision making, this is the type of analysis that you should consider when making decisions or developing a process.
Mr. Ritholtz posts some interesting findings from David Rosenberg of Gluskin Sheff about the spot price of oil:
“There have been only five times in the past 70 years when this [ed. – spot price of oil doubling in a 2 year timeframe] has happened within a two-year time frame: January 1974, November 1979, September 1990, June 2000, and August 2005. And now, December 2010…all but one involved a recession for the U.S. economy (ed. emphasis added)
Combined with an extended rally which is encountering selling pressure, now is definitely the time to dust of those sell rules!
Sources:
What Does Oil Doubling in 2 Years Mean?
B. Ritholtz – The Big Pitcure
http://www.ritholtz.com/blog/2011/03/what-does-oil-doubling-in-2-years-mean/
Rule-Based Investing Saves the Day
Right now, the market has been in an uptrend for almost two years. Statistically speaking, the rally is one of the longest uptrends on record. So it is only natural for people to begin questioning “when will we see a correction?”.
When you begin to make investment decisions solely based on opinions, you run into issues; you can always find one to support your argument. As mentioned on our investing strategies page:
Each strategy has staunch allies and enemies. To make matters worse (or better, depending on your point of view), everyone can point to data that shows their investing strategy is can make all kinds of money.
And if you don’t have a strong opinion either way, the opposing views only muddy the water.
Case in point: This week, two articles crossed the wires. One article came from Marketwatch.com, called “The Bull Market is Here to Stay”, which discussed eleven signs the economy is on the right path. The other article came from Barrons.com, called Has the Nearly 2-Yr-Old Bull Market Topped Out?”, with the lead in that if history is any judge, the stock advance that began in March 2009 is hitting valuation levels that are cause for concern.
If you want to invest safely, you’ll need some investing principles to guide you. Work your investing process, and stick to your rules. They will tell you when it is time to get out of the market.
Sources:
The Bull Market is Here to Stay
Marketwatch
http://www.marketwatch.com/story/the-bull-market-is-here-to-stay-2011-02-10
Has the Nearly 2-Yr-Old Bull Market Topped Out?
Barrons
http://online.barrons.com/article/SB50001424052970204703504576124090287979026.html
Make your kid a millionaire follow-up
In yesterdays article “Make your kid a millionaire“, I mentioned my thoughts on using an average annual return of 8% for projecting future returns.
As a follow-up, here is an infographic from the NY Times, entitled “In Investing, It is When You Start and When You Finish”.
To summarize, Crestmont research created a matrix of the returns for the S&P500 since 1920. Based on the year you first started investing, you can see the yearly returns.
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.”
The graph highlights the 20 year timeframe as a realistic start date for making withdrawals from a retirement account (i.e. the day that you need to have that million dollar account).
The absolute BEST 20 year span averaged 8.4% annual return. If you take the median of the “average annual return” for each 20 year span from 1920 until 1990, you get 4.1%.
This is one reason everyone (kids and parents alike) needs to be financially literate and take responsibility for their financial future.
Posted in Investing, Personal Finance
Tagged investing for kids, investing strategies, retirement
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