My Investing Notebook
:: Learning from the pros; making decisions on my own. ::
My Investing Notebook
:: Learning from the pros; making decisions on my own. ::
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Any healthy system needs a way to correct error and remove waste. Nature has extinction, the economy has loss, bankruptcy, liquidation. Interfering in this process lengthens feedback loops. Error and waste are allowed to accumulate, and you ultimately get a massive collapse.
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Invest 10% in all of these 10 ETFs and you got yourself something close to what an Ivy League portfolio looks like. For more information, check theivy.portfolio.com
iPath S&P GSCI Total Return Index (GSP)
iShares Barclays TIPS Bond (TIP)
PowerShares DB Commodity Index Tracking (DBC)
SPDR Dow Jones International Real Estate (RWX)
Vanguard Emerging Markets Stock (VWO)
Vanguard FTSE All-World Ex-US (VEU)
Vanguard REIT Index (VNQ)
Vanguard Small Cap (VB)
Vanguard Total Bond Market (BND)
Vanguard Total Stock Market (VTI)
Reference
Kiplinger’s Magazine – 11/2009 Issue
In the July 20th issue of Fortune, there is an interesting article on Case and Shiller. Mr. Shiller recently launched two products that “let investors make a pure directional bet on home prices.”
If you expect home prices to rise, buy Up Metro Market ( (UMM)), if you expect it to go down, buy Down Metro Market ( (DMM)).
I’m interested in seeing how it performs.
Sell in May, buy in November?
It’s a technique that’s proven to yield good results. I wrote about it in 2007, see Sell in May, Buy Back in November.
Last year, the biggest losses were in that period. This year, I think it might be similar. Over the past couple of weeks, the stock market rebounded a great deal. I feel that stocks might be overvalued. Too fast too soon — that’s my general feeling.
I’ve sold several of my stocks recently. It’s not only because of this rule. I want to simplify my investing. I want to own companies that I know (TJX, PHG,NOK,F,CSCO,VZ are some that I’m sticking with). I want to own less stocks and more ETFs.
I’m going to test the impact of this rule, though. I have a larger share of my stocks in Consumer Staples (Kraft, General Mills, Procter&Gamble). Plus, I recently found a mutual fund that has a large short position, so in my retirement account, I investing a bit in it. It’ll benefit when the stocks go down.
I had a feeling that stocks were overvalued when the Dow reached 14K. But selling short is tough. I did several transactions, one of them was Wells Fargo. I did benefit, but with a wild stock market moves, I just bailed out. Investing in a Fund that has many short positions is better, I think. One that I found that is open and only requires $1K upfront is Comstock Capital Value R (CPCRX). It returned 57% in 2008! Had I known about these funds, I would have invested in them. Now I do, and this will help me in the long run. I learn something new every day. 
But this fund is expensive! 
It charges around 2% per year, I’ll have to find something else eventually. (Let me know if you know about something less expensive, that’s open and requires small position to invest.)
All in all, I think the stock market is due for a correction to the downside. The economy, though it seems it might be leveling off, is still in a bad position. Unemployment is high, foreclosures are mounting , house prices are sliding… Too much negative for the ecomomy to quickly rebound. I’m preparing for it a bit different this year, Sell in May, But in November.
It’s not easy to be in the stock market in the past few days and weeks. I had a feeling that the stock market recovered a bit too high too soon. I should have capitalized on that. How? By betting that it will correct itself. How do you do that? By “shorting,” which is a way to make money when a stock goes down: you’re basically betting that a stock will go down, and when it does, you make money. I just discovered that there are now ETFs designed specifically for that purpose. That’s a very good investor’s resource, in my opinion.
Here are a few ETFs that do the “shorting” for you:ProShares Ultrashort ( (QQQ)) – rewards a fall in the Nasdaq;Proshares Ultrashort S&P 500 ( (SDS))- rewards a fall in the S&P benchmarkProshares Ultrashort Dow 30 ( (DXD)) – rewards the fall in the bluechip industrials.
Rydex recently rolled out eight new ETFs, half of which offer double-inverse plays on the energy, financial, health care and technology sectors. The Rydex Inverse 2x Select Sector Financial ( (RFN)) – up more than 8 percent in light Thursday trading.
Keep in mind that “shorting” can cause unlimited losses: if stocks go up, you lose. But these ETFs do limit the risk somewhat and that is a very good think.
Reference
Shorting Stocks Could Be Way to Play This Market, cnbc.com article
Being well diversified is the key to long-term investing. If you were not, you probably learned from the recent correction. I began moving towards big, dividend paying, safe companies for some time. As a result, my portfolio is in good shape after the correction. The fact is, though, the economy is slowing and might even go through a recession. It doesn’t mean that there are no good picks. Actually, the best time to buy is during market downturns.
Here are some of the stocks and ETF that I’m currently looking at. I think technology is a good place to be in the near future. There is decent growth and the stocks do not look overpriced. I am going to have to pick on technology oriented ETF and invest in it.
Software and Technology ETFs
Software ETF ( (SWH))
iShares S&P GSTI Software Index Fund ( (IGV))
PowerShares Dynamic Software ETF ( (PSJ))
Technology Select ETF ( (XLK))
Town Sports Intl ( (CLUB))
Strong membership growth; profits should follow.
Americans are getting heavier. That’s a fact. Companies that deal with that will benefit. Which companies? Good question.
Life Time Fitness ( (LTM), $53), is a “Lexus experience for Toyota price. This is a health-club chain, where members for about $60/month enjoy amenities usually reserved for facilities that charge a lot more: wood panel rocker rooms, yoga, Pilates, pools, care, and day-care centers, and more. They currently operate in Minnesota and Texas, but are expanding to Georgia, Phoenix, and Salt Lake City areas.
ReferenceKiplinger’s, March 2007 issue
RelatedNautilus ( (NLS)), Bowlex maker
PowerShares WilderHill Clean Energy ( (PBW))It looks to me like an interesting ETF. I see a lot of activity in the clean energy area, a lot of talk. It looks to me that clean energy is the future and things are starting to happen there.
“PBW holds 40 companies specializing in the production of clean energy, such as wind and solar power, and hydrogen fuel cells.” – Kiplinger’s
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