An ETF Trend-Following Plan For All Seasons

It’s hard to believe that the S&P 500 Index has been flatter than a pancake for the past nine years. It’s had its ups and downs, but when you connect the dots, it went virtually nowhere.
It’s even harder for index investors who relied on this large-cap benchmark to grow their retirement savings. To think, a portfolio with $100,000 allocated to the S&P 500 hardly budged at all. That’s a lot of wasted time and missed opportunity.

That’s why we advocate following trends and actively managing our portfolios using exchange traded funds (ETFs). Whether the broad market travels sideways or falls, a trend is always in the making.
Actually, the term “sideways market” is somewhat misleading. There’s plenty of market activity, but it’s in the form of a sharp downward move, and then a slow recovery period back to its original price level. Only the best and luckiest of timers can get in at the lows and exit at the highs. Otherwise, it can be a very frustrating experience, even for seasoned investors.

Surviving the Dry Season
A quick review of history shows that there have been dry spells in the market lasting 10 years or more. For example, an investment in stocks making up the S&P 500 Index during the periods from 1929 through 1942 (13 years) and 1966 through 1982 (16 years) would have amounted to no more than a break-even investment.
In this most recent nine-year sideways move, the S&P 500 has fallen in value an average of 0.37% per year, a far cry from the stock market’s historical average annual returns of 10% to 12%.
Many financial advisors focus on your timeframe for growth, but it doesn’t matter if you have five years or 25 years left until retirement. You can’t afford to let your investments sit idle for nine years. Worse yet, an idle investment doesn’t take advantage of the beauty of compounded growth.
No matter what the cause, the market’s recent non-action underscores the inherent danger of the buy-and-hold strategy. Sure, the markets will likely rebound eventually, but that will be of little consolation to investors who need their money now for retirement, or who may have bailed out of the markets at or near the bottom.
The volatile jerks during a sideways market often make investors believe that a market rally has taken hold during highs, only to experience disappointment when yet another sharp downturn occurs. Some who can’t stand the fluctuations get out of the market and sit on the sidelines, often without any plan for how to get back into the market later on.

Countering Volatility With ETFs 

So what can an investor do? Well, an ETF investor who follows the trends and sticks to a sell discipline has a whole bunch of options.
We take advantage of trends that have developed in asset classes, sectors and global regions. Increasing allocation to these areas work well as long as the trend remains intact.
With the growing list of available ETFs and ever-changing trends, we are convinced more than ever that a disciplined investment strategy is required to enhance portfolio returns, diversify and reduce downside risk.
Your strategy, like ours, should be to stick to a plan and not let emotions get involved. Once you start thinking with your heart or gut, it can be hard to kick-start your logic. Even neutralizing emotions will serve any trader well.
You need to know what to buy, when to buy and, as importantly, when to sell.

Three Main Rules

Here are three rules that should help keep most ETF investors out of trouble:

1. Maintain an 8% stop-loss on your ETFs.
2. Keep an eye on the trend. If your ETF declines below its 50-day average, that’s not a good sign. If the same ETF declines below its 200-day average, sell.
3. Don’t chase markets that are too hot. The last time many world markets and industry groups collectively hit new highs was in 2000. You know what happened then – the boom went bust. Keep your emotions in check.

The Business of Buying and Selling
The first, and perhaps most important screening process for ETFs is knowing the 200-day moving average of each candidate—and where it stands in relation to it. Trend lines are so key that you should only invest in ETFs trading above their 200-day moving averages. You can find this information by clicking on the “basic technical analysis” in the sidebar of any fund information page at finance.yahoo.com.
We look for uptrends, and then examine those trends using fundamental analysis. Once a position is entered, we stay in the investment until the trend turns negative, declining below its trend line.
In some cases, where trends have moved steeply to the upside, the corresponding ETF may be more than 10% above its moving average. In those cases, we impose an 8% stop-loss. If you buy an ETF trading 15% above its 200-day moving average, it’s best to sell if it drops 8% from a recent high. That way, you preserve as much profit as you can.
You must remember that over time, the stock market and individual securities follow general trends and these trends are identifiable. The idea is that you want to be more fully invested in stocks when the market is above its long-term trend line (200-day moving average). And you want to be safely positioned when the market is trending downward.
Below is a chart of the S&P 500 (NYSEArca: SPY) with its 200-day moving average. You can see that it traded above that mark between 1995-mid-2000, at which point the bear market replaced the bull market. The S&P 500 stayed below its 200-day moving average and kept us out of the market from mid-2000 to mid-2003, then climbed back above from mid-2003 to mid-2004.

How often we pull the trigger on building or unwinding a position all depends on the ETF and where that ETF lies in relationship to its own moving average and its performance off the high.

Looking at the iShares FTSE/Xinhua 25 (NYSEArca: FXI) chart, for example, if an investor bought in at the beginning of September 2007, they should have sold in the beginning of November 2007 when the ETF fell 8% off of its high. This would have meant a gain of about 25% and would have saved the position from falling further, as it is now about 40% off of its high. By following a sell discipline, one could protect more of the gain and avoid greater losses.

Resolve To Protect and Profit
Momentum can certainly turn on a dime. Just look at the health care sector in 1991 as an example. It was up 50% for that year, but the following year it was down 19%.
Whatever trend you’re following, just be sure to take a disciplined approach and remember to follow through with your strategy.

• Resolve to stick to your discipline. We know the past year has been rocky, and it is hard not to get emotional. We can’t predict the future, so we don’t know what’s in store for the rest of 2008. One way to avoid pulling every last hair out of your head in frustration over the uncertainty is to have a plan and adhere to it no matter what.
• Resolve to pay attention to the news. Political upheaval, major weather events and leadership changes are among the things that can indirectly affect your holdings. Don’t just isolate yourself to the business section.
• Resolve to pay attention to your investments. Are you coming up on a major life change, such as having children or entering the homestretch before retirement? Look at your portfolio and make sure it’s still working for you.
• Resolve not to invest in something simply because it’s “hot.” That’s the best way to get burned. Invest because it fits your needs, interests and your portfolio.

Exiting An ETF…Safely and Profitably

If an ETF falls below its 200-day moving average, or if it drops 8% off its high without going below its 200-day average, sell it. It’s a rigorous discipline and is applied to all asset classes, sectors and global regions where there is ETF representation. It’s clear-cut, and you know exactly what your risk is.
However, if you don’t have an exit strategy, then your risk tolerance may not be as well-defined. It takes a high tolerance and lots of patience to suffer 20% or more in losses that some sectors and regions have experienced a few times over the last several years.
While we are clear proponents of having an exit strategy, we understand that there can be some confusion when certain ETFs drop quickly and then climb sharply. There’s a chance you might have sold a position that declined further after you sold it but then rebounded.
In this case, don’t beat yourself up over lost opportunity. Just stick to your plan, have no regrets, never look back and keep moving forward.
When this happens, remember that you can treat the cash you have from previously selling an ETF as a “free agent.” This means that there’s no rule that says you must buy back the same ETF you sold if it’s performing well now. Shop around; see where new trends are developing. There might be a different ETF that’s even better for your portfolio now.
Sharp market movements and subsequent ETF declines can unsettle many investors. However, with an exit strategy and specific stop-loss points, the drops can be less stressful for you as it prevents small losses from turning into there-goes-my-house losses.
There have always been and will always be bubbles, and the only sure way you can protect yourself is to have an exit strategy always at the ready.
If an ETF you’re holding – whether it’s commodities or something else – drops below its trend line or falls 8% off its high, let it go, no questions asked.
A lesser stop-loss, such as 5%, could be too low since markets often have a 3% to 5% correction before they move on and hit new highs. If your stop loss is too low, for example, at 3%, you’re going to be buying and selling more frequently, racking up fees in the process.
Ultimately, that eats up your returns. You also won’t be able to fully take advantage of trends. Instead, you’ll be dealing with constant short-lived whipsaws. Sometimes there are volatile days in the middle of an overall uptrend, and it’s in your best interest to ride those out.
On the other hand, having a sell point that’s too high can also hurt you. Setting your sell point at 30% could mean that you lose a significant portion of money before you’re out. It also has you sitting in areas that might not be performing so well and missing out on areas that are trending up.

What If You Missed The Safety Boat?

What should you do if you missed the 8% drop, and you’re down much further than that? Missing the sell point creates the conundrum above. That’s when I recommend the following:

Sell 1/3 of your equity holdings and focus on the most aggressive positions—those that might be down 20-30% and trading 10-15% below their 200-day moving averages.

If those holdings decline by another 5-7%, consider selling another third.

Keep an eye on the 200-day average of these positions. As the trend lines continue to decline, there will be an excellent buying opportunity in the future when the markets eventually rebound.

Letting Go of a Winner Can Be Hard

It can be difficult to let go of a mover and shaker you’ve always had a soft spot for, but if you want to protect your money, you must. It’s like your parents always said when they were grounding you every other week: “This hurts me more than it hurts you.” But sometimes it has to be done for everyone’s good.
There are no guarantees that when you let a fund go, it’s not going to turn around and deliver the numbers again. But that doesn’t mean it won’t, either. It’s exactly why you have to remain as stoic as possible and stick to the plan and rationalize nothing.
What if you follow your exit strategy, and the ETFs you sell end up rebounding? Try this:

• Treat the newly available cash as “free agent” funds. Just because you sold an ETF doesn’t mean you’re obligated to buy it back when it rebounds.
• Look for ETFs that are above or rising above their trend lines.
• Look for ETFs with positive, relative strength. When markets rebound off a low, it’s usually those with the greatest momentum that enjoy sustained uptrends.

As you manage your own portfolio, you might feel a need to always have a set amount of money designated to a certain investment (i.e. small-cap, China or commodity). If this is the case, then the cash can be held until that certain investment goes above its 200-day moving average or gains 5% from its recent low.
With the recent volatility in the markets, we have seen some price swings in ETFs. One shouldn’t worry about the daily ETF price movement; having an investment plan is the priority. When there is a discipline in place, it can help guide investors through the volatile times.
If you’ve got nervous hands as your ETFs swing up one day and down the next, the best thing you could do is to just sit on them.
Removing the emotions from your investing is one of the smartest things you can do.
And, as we’ve said, having a strategy and removing your feelings from your money is especially timely, considering the ups and downs can make you feel sick.

The Anatomy of a Bursting Bubble—Here and Abroad

Investors and economists often use history as gauge for what might happen today and in the future. Could we have studied the onset of a 14-year bear market in Japan to predict the dot-com crash and subsequent bear in the U.S.? And, what do both events say about today’s economy and markets?
Let’s take a look back.
In the 1980s, outsiders perceived Japan as a utopia because its people had the highest quality of life and longest life expectancy. In addition, Japan was the world’s largest creditor and had the highest GDP per capita. Many Americans feared that Japanese-made robots would eliminate their jobs. With the economy booming and the stock market climbing, skyscrapers filled the Tokyo and Osaka skies, causing real estate prices to skyrocket as well.
Between 1986 and 1988, the price of commercial land in greater Tokyo doubled. Real estate prices soared so much that Tokyo alone was worth more than the United States. Between 1955 and 1990, land prices in Japan appreciated by 70 times and stocks increased 100 times over. Large-scale stock speculation led to worldwide mania. Investors all over the world clamored for Japanese shares. These euphoric investors believed in a perpetual bull market. Luxury goods were purchased in large numbers by the newly wealthy.
Unfortunately, all excessively good things must end. To cool the inflated economy, the Japanese government raised rates. Within months, the Nikkei stock index crashed by more than 30,000 points. The Nikkei crashed this far because its value was inflated on false hopes and hype, not solid financials. Japanese housing prices plummeted for 14 straight years. At its height, the Nikkei stood at 40,000. The Nikkei sank until its low of 8,000 in 2003.

Dot-com Déjà vu 

Back at home, we experienced a similar crash, but one not nearly as lengthy or devastating as that of Japan’s: the dot-com crash, which began on March 11, 2000 and lasted until Oct. 9, 2002. From peak to valley, the Nasdaq lost 78% of its value as it fell from 5046.86 to 1114.11.
The U.S. military created the Internet decades before “dot-com” became a household word. Vastly underestimating how much people would want to be online, it began to catch on in 1995 with an estimated 18 million users. Soon, speculators were barely able to control their excitement over this new economy. Today, 210 million people in China-alone go online, 50 million users shy of the United States.
The first holes in this bubble came from the companies themselves: Many reported huge losses and some folded outright within months of their offering. In 1999, there were 457 IPOs, most of which were Internet- and technology-related. Of those 457 IPOs, 117 doubled in price on the first day of trading. In 2001, the number of IPOs shrank to 76, and none of them doubled on the first day of trading.
Many argue that the dot-com boom and bust was a case of too much too fast. Companies unable to decide on their corporate creed were given millions of dollars and told to grow to Microsoft size by tomorrow.
Unfortunately, economic and “unanticipated” risks will always be there. Investors hate uncertainty, and since we can’t always identify them in advance or eliminate them, there will be times when they affect the investment markets negatively.
If you follow a buy-and-hold strategy, you leave your portfolio vulnerable to any number of unknowns: oil spikes to $200/barrel, the Middle East erupts into war, The Fed makes a drastic move with interest rates. With an exit strategy, you’re prepared to cut losses or pocket profits when events send the markets lower.
Risks Without Reward

During the 1990s, many investors believed that the stock markets would produce returns of 20% (or more) per year indefinitely, which was a part of the herd mentality back then. Same goes for the late 1970s and early ’80s, when investors thought bank certificates of deposit and fixed annuities would always have double-digit yields—two assumptions that were clearly wrong.
If your expectations for portfolio returns are too high, there is a very good chance your financial goals will not be met. And more importantly, this can lead to saving too little money to meet your retirement goals. Unfortunately, this can also lead to investing in securities and strategies that are far too risky in order to try to “turbo-charge” the returns.
On the flip side, there are investors who invest too conservatively and risk losing purchasing power to inflation. Investing too conservatively can also raise the odds of not meeting investment goals, as well as the risk of outliving your assets.
So, we find ourselves at another crossroads in the markets. Real estate exuberance, based on inflated prices, has gone sour along with values; financial institutions have turned from princes to frogs in a matter of months; consumer debt is at all-time highs, and investors grow increasingly frustrated with the lack of opportunities the current stock markets offer.
But investors who combine the flexibility, diversity and ease-of-use of ETFs with a disciplined buy and sell plan don’t have to fret about all the outside influences on the markets. You can turn a deaf ear to financial hype and keep emotions out of the investing equation.
That’s because the simple, technical indicator—the 200-day moving average—tells us precisely when to buy and when to sell. Even when it seems like the entire market is down, you can count on there being a trend-bucking ETF ripe for the picking.

What the Opportunities Look Like

The S&P 500 and Dow have been trading below their 200-day moving averages for all or most of the year. Meanwhile, gold, oil, steel, and agriculture ETFs have traded above their respective 200-day marks and offered investment opportunities in 2008.

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 Disclosure I am Long SPY.

retirement landscape and things look pretty darn dire

Take a quick survey of the retirement landscape and things look pretty darn dire. According to a survey conducted by Wells Fargo last month, the average American has managed to save a meager 7 percent of the amount they’d like to have in their Golden Years. That fact alone is bad enough. But what’s worse is that I think even their “ideal” amount is WAY too low!

The average “middle class” survey respondent said they would need $300,000 to fund their retirement. Keep in mind, this is how Wells Fargo defined “middle class” …

• Ages 30 to 69: Household income between $40,000 and $100,000 or investable assets of $25,000 and $100,000
• Ages 25 to 29: Household income or investable assets between $25,000 and $100,000

If we take the median of this definition, we get a household making about $70,000 a year and with a nest egg worth $62,000 or so.

Let’s imagine there are two adults in the home, roughly 50 years old each based on this survey.
Even if they’re not carrying any serious debt, they haven’t managed to save anywhere near their targeted amount … so it’s safe to say they’re spending almost all of their annual income as it comes in.

Now, are they likely to slash their expenditures as they continue to age? And is it reasonable for them to expect health care costs, energy prices, and food bills to stay what they are today?

I’d say no to both of those questions. Yet even their magical target of a $300,000 nest egg represents just a bit more than four years of their current expenditures.

No wonder one in every three respondents also said they will have to keep working during their golden years to support themselves! I’m probably preaching to the choir here, and I’m sure you’re in much better shape than the typical American retiree-to-be. At the same time, I think it’s fair to say that there’s no such thing as being TOO prepared or having a nest egg that’s TOO big. Which is why I want to give you …

Four Simple Steps to a Richer Retirement Nest Egg, Whether You’re Already Ahead or Trying to Play Catch-Up

It doesn’t matter what age you are right now … how much you’ve already saved … or how far away from your goals you are right now. You absolutely want to make sure that you’ve got a plan in place, and that you’re sticking to it.  And the following four basic steps are a great starting point for building a better retirement nest egg without sacrificing safety …

Step #1: Before you do anything else, make sure you have a safe, liquid emergency cash fund.
 
Sure, I encourage 401(k) participants to at least contribute enough to get the maximum company match. And yes, I implore people to take maximum advantage of other tax shelters like IRAs, too.
But I don’t think anyone should be retirement rich and cash poor!

It simply doesn’t make sense to plow your money into long-term accounts like 401(k)s and IRAs if there’s a chance you may have to withdraw those same funds in short order in the event of an emergency. Not only will you likely be invested in less liquid investments but you could possibly face additional taxes and penalties, too.

So you absolutely want to make sure you have a solid emergency fund in place before you contribute another penny to your retirement nest egg.

Ideally, it will represent a full years’ worth of your current expenses or income but I would recommend three months as the bare minimum.

And even though you’ll get near-zero returns, I suggest keeping your emergency funds in a plain vanilla savings account, Treasury-only money market fund, or similar cash equivalent.
After all, the goal here is maximum safety and liquidity. You never know when you or a family member might need money due to a job loss, illness or busted water heater!

Once you have your liquid fund in place, of course, it’s time to start investing the rest of your nest egg for maximum income and growth …

Step #2: For your U.S. investments, stick mostly to conservative dividend-paying stocks right now.
I’ve said it before, but it bears repeating: With interest rates still near record lows, most bonds, CDs, and money market funds simply aren’t paying enough to warrant owning them in your long-term investment accounts.

Plus, given the fiscal mess here in this country — at the federal, state and local levels! — there is a substantial risk of further losses for many government bondholders going forward.
So if you want the biggest, safest yields here in the U.S., I continue to think conservative dividend shares represent your best option.

As I’ve pointed out time and again — these types of investments not only kick off stable, growing cash streams … they also offer you the chance for long-term investment gains, too.
And even if you don’t to go about picking individual companies, you can always own a broad swath of solid income stocks through vehicles like the PowerShares Dividend Achievers (NYSE:PFM) exchange-traded fund.

Step #3: Add some foreign dividend shares, too.

It’s no longer enough for us to invest solely in the U.S. — the world is becoming a smaller and smaller place … some economies overseas are expanding at much faster rates than those in the traditional places … and it’s getting more important to diversify your portfolio as much as possible.
This is precisely why I’ve been recommending select foreign dividend stocks even for my own father’s retirement account!

By holding the U.S.-listed shares of foreign corporations you can quickly and easily access new worlds of growth.

Better yet, because your shares (and dividends) are originally priced in foreign currencies, you have the unique opportunity to profit further whenever the U.S. dollar moves lower relative to the listing company’s home currency.

Again, there are even exchange-traded funds that will give you all-in-one-shot access to these global dividend stocks — including the S&P International Dividend ETF (NYSE:DWX).
And that brings me to a bigger point …

Step #4: Learn all you can about other alternative investments and strategies, too!
It’s important to stay on top of the latest investments that are becoming available … especially if you’re looking for unique new ways to hedge your traditional holdings or for new vehicles to use in the more aggressive part of your portfolio.

Disclosure None

Time for 100% Stock Allocation??

Every so often, a well-meaning individual or publication will come along and espouse the idea that long-term investors should invest 100% of their portfolios in equities. Not surprisingly, this idea is most widely promulgated near the end of a long bull trend in the U.S. stock market. Consider this article as a pre-emptive strike against this appealing, but potentially dangerous, idea.

The Case for 100% Equities

The main argument advanced by proponents of a 100% equities strategy is simple and straightforward:

"In the long run, equities outperform bonds and cash; therefore, allocating your entire portfolio to stocks will maximize your returns."

To back up their views, supporters for this view point to the widely used Ibbotson Associates historical data, which "proves" that stocks have generated greater returns than bonds, which in turn have generated higher returns than cash. Many investors - from experienced professionals to naive amateurs - accept these assertions without giving the idea any further thought. (For an in-depth view of this topic, see The Stock Market: A Look Back.)

While such statements and historical data points may be true to an extent, investors should delve a little deeper into the rationale behind - and potential ramifications of - a 100% equity strategy.

The Problem With 100% Equities

The oft-cited Ibbotson data is not very robust. It covers only one particular time period (1926-present day) in a single country - the United States. Throughout history, other less-fortunate countries have had their entire public stock markets virtually disappear, generating 100% losses for investors with 100% equity allocations. Even if the future eventually brought great returns, compounded growth on $0 doesn't amount to much. (To read more about Ibbotson's theories, see Investors Need A Good WACC.)

It is probably unwise to base your investment strategy on a doomsday scenario, however, so let's assume that the future will look somewhat like the relatively benign past. The 100% equity prescription is still problematic because although stocks may outperform bonds and cash in the long run, you could go nearly broke in the short run!

Market Crashes

For example, let's assume you had implemented such a strategy in late 1972 and placed your entire savings into the stock market. Over the next two years, the U.S. stock market crashed and lost about 40% of its value. During that time, it may have been difficult to withdraw even a modest 5% per year from your savings to take care of relatively common expenses, such as purchasing a car, meeting unexpected expenses, or paying a portion of your child's college tuition, because your life savings would have almost been cut in half in just two years! That is an unacceptable outcome for most investors and one from which it would be very tough to rebound. Keep in mind that the crash in 1973-1974 wasn't the most severe crash, considering the scenario that investors experienced during 1929-31. (To learn more about crashes, see The Greatest Market Crashes and How do investors lose money when the stock market crashes?)

Of course, proponents of all-equities-all-the-time argue that if investors simply stay the course, they will eventually recover those losses and earn much more. However, this assumes that investors can stay the course and not abandon their strategy - meaning they must ignore the prevailing "wisdom", the resulting dire predictions and take absolutely no action in response to depressing market conditions. We could all share a hearty laugh at this assumption, because it can be extremely difficult for most investors to maintain an out-of-favor strategy for six months, let alone for many years.

Inflation and Deflation

Another problem with the 100% equities strategy is that it provides little or no protection against the two greatest threats to any long-term pool of money: inflation and deflation.

Inflation is a rise in general price levels that erodes the purchasing power of your portfolio. Deflation is the opposite, defined as a broad decline in prices and asset values, usually caused by a depression, severe recession, or other major economic disruption (think Japan in the 1990s). (To learn more about inflation and deflation, see All About Inflation and What does deflation mean to investors?)

Equities generally perform poorly if the economy is under siege by either of these two monsters. Even a rumored sighting can inflict significant damage to stocks. Therefore, the smart investor incorporates protection - or hedges - into his or her portfolio to guard against these two significant threats. Real assets - real estate (in certain cases), energy, infrastructure, commodities, inflation-linked bonds, and/or gold - could provide a good hedge against inflation. Likewise, an allocation to long-term, non-callable U.S. Treasury bonds provides the best hedge against deflation, recession, or depression. (Read more about hedges in A Beginner's Guide To Hedging, Introduction To Hedge Funds - Part One and Part Two.)

Fiduciary Standards

One final cautionary word on a 100% stocks strategy: If you manage money for someone other than yourself, you are subject to fiduciary standards. One of the main pillars of fiduciary care and prudence is the practice of diversification to minimize the risk of large losses. In the absence of extraordinary circumstances, a fiduciary is required to diversify across asset classes. Would you like to argue before a judge or jury that your one-asset-class portfolio was sufficiently diversified shortly after it loses 40-50% of its value? "But, your honor, if you just wait eight to 10 years …" Odds are you would soon be wearing an orange jumpsuit and making new friends in an exercise yard.

Solution

So if 100% equities is not the optimal solution for a long-term portfolio, what is? An equity-dominated portfolio, despite my cautionary counter arguments above, is reasonable if you assume that equities will outperform bonds and cash over most long-term periods. However, your portfolio should be widely diversified across multiple asset classes: U.S. equities, long-term U.S. Treasuries, international equities, emerging markets debt and equities, real assets and even junk bonds. If you are fortunate enough to be a qualified and accredited investor, your asset allocation should also include a healthy dose of alternative investments - venture capital, buyouts, hedge funds and timber. (To learn more, read The Pros And Cons Of Alternative Investments.)

This more diverse portfolio can be expected to reduce volatility, provide some protection against inflation and deflation, and enable you to stay the course during difficult market environments - all while sacrificing little in the way of returns.

Disclosure I am long the stock market

Recent Buys and current news

July News is in so far. On 7/6/10 I purchased EOS, FSC and PFE $8.00 each company. On 7/13/10 I purchased ED, IBM, BPT at $8.00 each. My june statement has arrived. Equities and stock for June $351.11 value at may end was $261.44. Dividends for the month Jumped to $2.25 from .79 cents the period before.


    My top three holdings for June were GE 1.594 Shares $22.99, 2nd IGD 1.9271 shares $20.06, and #3 is AOD 3.7947 shares $18.78. Top 3 dividends in June were AOD .44 cents , FRO .25 cents, DO Special Dividend .13 cents Regular Dividend .01 cent. Total of 12 buys for June. Total 33 dividends collected in June.

Well thatis it for now cheers all.

Dow's Losing Streak Hits Seven

The Dow Jones Industrial Average ticked off a string of ignominious markers on Friday. Among them: the longest losing streak since the dark days of the financial crisis.

The Dow slipped 46.05 points, or 0.5%, to 9686.48, its seventh straight decline and longest losing streak since the eight-day fall ended Oct. 10, 2008.

The benchmark tumbled 4.5% for the week, its worst weekly percentage drop since the week of the May 6 "flash crash."

The weekly percentage drop also represented the worst performance for any week leading up to the July 4th weekend since 1896. The S&P 500 and the Nasdaq put in similarly bleak performances.

The declines came on relatively muted volume ahead of the July 4 holiday weekend. Just over 4 billion shares had traded hands in New York Stock Exchange Composite volume, well shy of the 2010 daily average of 5.4 billion shares.

All in all, it was not a great week for stocks. Worries have been mainly driven be renewed anxiety about the U.S. economy. Those fears were kept alive Friday by a report showing the first drop in U.S. nonfarm payrolls so far this year.

"The only thing that would have been surprising is if it had been a good number," said strategist Stephen Wood of Russell Investments in New York.

Consumer-discretionary companies led the market's decline as investors worried about how the drop in payrolls might hurt already weak consumer and business spending.

Worries about the economy fed into the currency markets, where the dollar slipped against the euro. The euro ended Friday afternoon at $1.2550, up from $1.2386 a week earlier.

Treasurys fell, but gained on the week as concerns percolated about a second half slowdown in the U.S. Crude-oil futures fell for a fifth consecutive day, capping their steepest weekly decline since early May.

Disclosure none

Wowzers Were did da time go.............

     I stumbled across my password the other day finally can do some updated. The wife had a heart attack I had to sell all that had at folio investing and recover the family. I now have a roth ira through sharebuilder.com Get ya own Account here. I am still using the same investing style as before. I put in 50.00 every payday and invest $5.00 for each day that I work (Kinda like a reward for having to go to work and deal with all the drama everyday that goes with work). With that being said my first deposit was on 4-16-2010. My account today stands at $346.21. I am a subscriber to the plan so I pay a flat $12.00 per month for 12 trades per month. I am long 52 different holdings in what I think is a pretty diversified portfolio. My current Holdings ranked by the amount held in the account 1 being my biggest holding and 52 being my smallest.

    My current holdings include the following, AOD, IGD, MRK, WMT, TNH, FRO, DO, GE, XOM, INTC,  PHK, EOS, PTY, DPD, IID, PHT, GDX, NLY, BMY, CTL, VNQ, CFP, CAH, KMB, O, PEP, SYY, CAT, PG, TPZ, ESD, LQD, EOI, ABT, PGX, JNK, PFF, VWO, GGN, MMM, IGI, BDX, XLF,  BAX, FSC, SPY, PFE, ED, KMP, BPT, IBM, AND BP.Those are all my holdings that i plan to stick with for now and the ones I talk about on my blog. In my challenge to beat the company sponsored 401k.

         I try to invest with a huge focus on dividends and reinvesting of the dividends you can not beat having your money working for you. Most of the time if a holding cuts its dividend I will sell it the next chance I get (however different in the case of bp). As this stock i am not sure what to do with so I will just hold it for the time being.

       Dividends Paid this month include, INTC, PFE, WMT, DO on 6-1-2010, LQD, PFF on 6-7-2010, JNK on 6-9-2010, IBM on 6-9-2010, XOM, MMM on 6-14-2010, ED, IGD, IID, and O on 6-15-2010 and CTL on 6-21-2010. All dividends are automatically reinvested back into the same stock they come from.

       I purchased DO, IGI, FRO, GDX and PHT on the 6-01-2010 value $5.00 each. On 6-8-210 I purchased AOD 2.05 shares for $13.00 and 1.1321 shares of IGD for $12.00. On 6-15-210 I purchased 0.3422 shares of MRK for $12.00 and 0.2525 shares of WMT for $13.00. And next week I plan to purchase on Tuesday $12.00 worth of IBM and $13.00 worth of ED.

      It seems like it is taken for ever to get this going all over again, but I know Rome wasn't built in a day. So I be using this blog to share my thoughts and current investments. Feel free to follow along with me as I try to once again build a nest egg of money working for me.

7 tips for investing in stocks

Investment experts always advise investors to stay away from 'junk' stocks. Warren Buffet once famously said "The only time to buy these (junk stocks) is on a day with no 'Y' in it."
Stocks can be as tricky a business for novice investors as they are for seasoned players. However, as Warren Buffet has always propagated, 'Right stocks at the right price' is the way to laugh your way to the bank. This means, avoiding all those 'junk' stocks and setting your sights only on the 'right ones'.

So how do we really separate the wheat from the chaff? In an age where Satyam [ Get Quote ] and Infosys [ Get Quote ] both ruled the roost at one point of time, how do we know which ones are the black sheep and which ones are not?

In this issue of women's weekly, we bring to you the fundamentals of choosing a stock from a long-term perspective:

Sound management

A sound management is like a captain of a ship. The onus of charting out the right direction in still waters and steering the company safely in troubled times lies on the management.

We would even go to the extent of saying that the way in which a management behaves, determines to a great extent, the long term success of the business. You don't want to be an investor in a company where the management takes money from the shareholders to fill its own pockets.

A case in point here would be Satyam. It promised its investors the moon. However, they soon had to settle for sleepless nights as the ugly truth of Satyam reared its head.

Investor mentality

Traders routinely buy and sell the same stocks within a time frame of a few hours. 'Investors', on the other hand, put money in stocks and hold on for a longer period of time, generally at least 2 to 3 years.

Develop an investor mentality. Adopt a long-term investment strategy. While looking at the quarterly results of the company, don't lose sight of the bigger picture. Invest for a longer duration which promises more returns and is not affected by daily market fluctuations.

Research shows that the shorter the duration of investment, the more are the chances of losing money. While, with long term investing, the chances of losing money are lesser.

Remember, the longer the investment period, the greater are the chances of making money.

Practical approach

Emotions need to be kept aside while dealing with stocks. Don't get emotionally attached to your investments. Your aim is to get maximum profits out of your stocks. It's immaterial if this is achieved through selling them, buying them or holding them.

Just because you are emotionally attached to the stock or just because the little voice inside your heart says, "Give it some time and things will work out just fine", does not mean that you have to hold on to a stock when it is destined to hit its nadir.

Consistently Proven track record

At the end of the day, it's all about numbers. Numbers can tell a story - you should just have an ear attuned to understanding their language. It makes sense to thoroughly investigate the company and its track record.

Consistency is the key. If the company is good, it will have a consistent performance. Its income statement will show consistent profits. Its annual reports will talk about the consistent dividends doled out. Ideally, the company should have a dividend history over the past 5 years and a dividend payout comparable with its peers.

In the case of 'growth stocks', the game changes a little. The company may not distribute its' profits as dividends; rather, it would invest the profits back into the venture for future growth. However, all said and done, it should not invest so much that it has to resort to frequent financing from outside. In other words, it should not undertake frequent dilution of equity or raise so much debt that its debt to equity ratio spirals out of control.

Looking at prior records helps one understand the company's capabilities. It gives an idea, shows a direction, and helps to understand the company's vision and the path ahead.

Intensive research

The golden rule to investing is considering the future growth prospects of the company you are investing in. During the dot-com boom, many investors displayed a herd mentality, investing in companies without any research. The result was the dot-com bust that followed.

It is important to not only know the company like the back of your hand but also be aware of the external factors influencing the growth of the stock. The overall state of the economy, the factors influencing political and social environment should also be considered while investing.

Sector growth, the demand supply trend and the competition in the sector also need attention before you decide to invest in a particular stock.

Extensive Homework

If you are a serious investor, you cannot go by intuition alone. You will need to do a lot of homework before zeroing on a particular stock. This should not be difficult. We may be considered impulsive buyers, but we do have our own ways of background research before we make the ultimate buying decision.

Homework before investing would include reading up about the company you are about to invest in. Reading its annual reports, studying the balance sheet, analyzing its profits, assets and liabilities; reading interviews of the top management, keeping yourself updated about the latest economic policies.

In short, being the sponge and soaking every piece of news and information related to your investment.

Serious follow up

Keep a constant track of your investments. Regardless of the market condition, whether it is a bear market or a bull market, it is your money that is at the stake. Your hard earned money! You owe it to yourself to ensure that the savings that you have invested are showing a promise and growing.

It's the last mile that makes the difference in the race. It's not just about the right formula but about the grit to see it through. The grit to emerge as a winner.

Don't lose steam once you invest. Serious follow up is what will differentiate you from other investors. It will be your secret weapon, your protective armour, the secret charm that will help you make the best of your investments.

Disclosure NONE

Introducing the ETFdb ETF Screener: A Robust, Free Online ETF Analyzer

If you’ve ever tried to do some analysis on ETFs using customized parameters, you might be aware of how limited and buggy the various online tools are. Often, these tools can take six months or more to include newly issued ETFs, they categorize ETFs wrongly, and don’t include critical search options such as total market cap, leveraged/non-leveraged, etc.

With that in mind, we’re quite happy to announce the launch today of our 100% free ETF Screener tool. We have put a lot of work both into ensuring the ETFdb ETF Screener has all the options and functionality our users want, while also tagging ETFs correctly in the underlying database that powers the search results, to ensure the tool gives valid, useful data.

Please give the free ETFdb ETF Screener a test drive, and let us know what you think in the comments. Is there any other feature you’d like to see included?

Disclosure NONE

Jim Rogers: Focus on China Video

Nine minute video by Mr. Rogers; as usual unflattering towards the U.S. and constructive on China long-term. As I wrote in a piece last week, after the doubling in the stock market, he is cautious nearer-term on China. A nice swipe in the last minute at Timothy Geithner and a general comment about the U.S. holding no high ground to tell anyone how to run an economy.



Disclosure None

Five U.S. bank closures bring 2009 total to 69

Five U.S. banks in Oklahoma, Florida, Ohio, New Jersey and Illinois were closed by regulators Friday, bringing the tally this year to 69 and making a $911.7 million dent in the federal deposit insurance fund as the credit crisis takes a persistent toll on the nation's financial institutions.

The Federal Deposit Insurance Corp. said in a statement that Altus, Okla.-based First State Bank of Altus was closed, and that Amarillo, Tex.-based Herring Bank will assume the failed bank's deposits.

First State Bank of Altus had $103.4 million in assets and $98.2 million in deposits as of June 19, the FDIC said. The bank is the first to fail on Oklahoma this year, and will cost the deposit insurance fund $25.2 million.

The FDIC also said Jupiter, Fla.-based Integrity Bank was shuttered, marking the fourth bank failure in that state this year. Fort Lauderdale, Fla.-based Stonegate Bank has agreed to assume the failed bank's deposits.

Integrity Bank had $119 million in assets and $102 million in deposits as of June 5, the FDIC said, and its failure will cost the deposit insurance fund $46 million.

West Chester, Ohio-based Peoples Community Bank was also closed by regulators, and its deposits have been assumed by Hamilton, Ohio-based First Financial Bank, National Association, the FDIC said.

Peoples Community Bank is the first to be closed in Ohio this year. It had $705.8 million in assets and $598.2 million in deposits as of March 31, and its failure will cost the deposit insurance fund $129.5 million.

Elizabeth, N.J.-based First Bankamericano was also closed. Brick, N.J.-based Crown Bank will assume the failed bank's deposits, the FDIC said.

First Bankamericano, the second New Jersey bank to fail this year, had $166 million in assets and $157 million in deposits as of July 16, the FDIC said, and its failure will cost the deposit insurance fund $15 million.

Rounding out the list of failed institutions on Friday was Harvey, Ill.-based Mutual Bank. Garland, Tex.-based United Central Bank has agreed to assume the failed bank's deposits, the FDIC said.

Mutual Bank, the 13th bank to fail in Illinois this year, had $1.6 billion in assets and $1.6 billion in deposits as of July 16. Its failure will cost the deposit insurance fund $696 million, the FDIC said.

Disclosure None

Weekly update on 8 folios and recent transactions, Retire on $5.00 per day each day market open

Well not a lot going on with the buy and selling in my 8 folios but here is a breakdown of my recent activity.

Basic materials folio which includes my commodities picks. Currently I am long 17 picks and will be selling one tomorrow. I am long, IPHS,DO,KWR,TYG,EEQ,BP,KMR,NUE,
GNI,DJP,E,BPT,CVX,SLV,GLD, AND GGN. Combined this folio is up 12.24% year to date not including dividends. I will be selling RJI tomorrow, taking a small 5 to 6 % profit.

In my bonds and closed end fund folio, (fixed income) all pay monthly dividends. I am currently long. IID, DPO, IGD, EOS, MAIN, AOD,ESD,JNK,HYG,PCY,PSEC,LQD, and BND. This folio is up 13.54% year to date. No changes this week.

In my financial and reit folio. I am long 15 stocks. This folio is up 10.10% year to date. Top pick AGNC and AFL, my 2 laggers are ESS and CMO. I just repurchased CMO this week after selling it last week for 34% profit. No other changes.

My consumer goods and consumer services folio, all but shipping stocks. Currently is long 11 stocks. MMM and CALM leaders, with SYY a lagger. This folio is up Year to date 10.94% no changes for this folio either.

My index etf and emerging markets etf folio. Currently long 11 etfs, with FXI and VWO leading the way. Even my lagger EFA is up 7.76%. This folio is up 13.36% year to date.
No changes at this time.

My industrial goods and healthcare folio. Contains 17 picks with CAT and GSK at the clear winners, ABT and ECOL the laggers. This folio is up 10.70% year to date. Recently Purchased CAH which is already up 7.83% since my initial purchase. No other changes.

My shipping and railroad folio. By far the healthiest and hottest folios of all lately. Currently long 14 stocks with CSX, SFL, leading the way, and the laggers are GMR and DHT. This folio is up currently 17.17% year to date. No recent changes to this folio.

And my last folio is my utilities and tech folio. Currently long 15 stocks, with INTC, TEG as the winners. The laggers are CTL and ADP. This folio is currently up 11.81% year to date. No recent changes to this folio at this time.

So my total portfolio consisting of 8 folios is up 12.53% year to date, which does not include dividends. I have received 2.24% in dividends this year to date. I still dollar cost average every single day the market is open. I have not missed one trading day this year. I add $5.00 a day spread across each folio plus reinvest the dividends back to who paid them. If a stock cuts its dividend I sell it period.

My core is 112 stock, etfs and closed end funds. The cream of the crop according to my eyes, my value and my long term holding period. I plan to hold this dividend paying stocks until further notice As I try to spank the shorts of my 401k provided through my employer with Principal Financial Group.

Now to my 401k my work currently matches 50% of the first 6 percent so that is all i put there i put the rest in my above mentioned Roth ira account at Folioinvesting.com.

Currently up year to date in my 401k, 18.81% before fees, god only knows how much they will be. Received $7.82 in dividends year to date, versus $40.29 through june in my roth ira.

In closing I am very excited to be playing the market, living, breathing and smelling the stocks. Dow broke 9000 today I used to watch everyday to see what happened, course i still do but nothing seems to matter now that I have plan and stick to it. My core is built and I am in the accumulate phase of my retirement plan. No matters what happens I have am on this train. I go to the coal mines shovel in hand(aka my work place). Do the best I can and try to add to my folio more money everyday.

Sometime I ponder how this all started with just $ 1.00 a day investing in my favorite stocks, at the start of this year I opened this roth ira and now I am off to the races(LOL). So yes you can retire at just 5.00 a day every day the market is open. Yes I do see some ups and downs in the future. But this is so much better than smoking, drinking, gambling and parting away all my money never having a pot to piss in so to say. Now I can see the light I feel better, look better, am happier and have a pot to piss in now.

Please feel free to comment on this or any of my other stories, I have gathered here on my blog. Only through each other can we prosper together. Thanks for taking the time to read my blog, I only hope I can show the light to one more person out there somewhere.


Disclosure I am long all stock mentioned in this blog as well and many that were not motioned. Please if you do invest do your own research what works for me many not work for all I am not a licensed broker at this time but sure hope to be very soon.

Roth IRAs are tax-free, but you must follow the rules

Here is a question i got e-mailed and will answer a very good solid point and excellent question.

Q: What are the tax implications of transferring the assets held in an taxable investment account with a broker to a Roth IRA?

A: With the stock market's returns being, well, shall we say, subpar, some investors are paying closer attention to taxes.

And paying attention to taxes, especially now that the stock market isn't an ATM, is smart. Given the size of capital gains taxes, especially if you sell a stock you've owned less than a year, Uncle Sam can end up taking a big chunk of your returns.

The Roth IRA is a great idea for people preparing for retirement. The Roth is structured so that you contribute money that's already been taxed. You can invest up to $5000 a year in a Roth, or $6,000 if you're 50 years old or older, if you meet a number of criteria. You can get the full details on annual contribution limits here.

Here's the catch for you, though. You need to contribute cash, not stock. That means if you have a stock in a taxable account that you want to move to a Roth IRA, you'll need to sell the stock in your taxable account, and you may owe capital gains taxes on the sale.

Disclosure I have a roth ira account(through folioinvesting.com) and love it!

Its over the 401k is DEAD, FAILED, Admit It's Over

Why don't we just admit that the 401(k) is a failure and get on to designing something better?

I say this as the writer of an admiring book about the ubiquitous saving plan (Take Charge of Your Future, Warner Books, 2003), and I still think that 401(k)s are fine as a supplement to other plans. But that's not what they are any more. They have become, by default, the only national retirement savings plan. That raises the bar considerably, and 401(k)s just can't clear it.

Here's what I'm not saying. I'm not saying that the main problem is that 401(k)s require ordinary people to manage their investments wisely and only we "sophisticated" investors who read Huffington Post can do that. (i have more faith in the average Joe's ability look out for himself than that--and less faith in allegedly sophisticated investors.) I am saying that even if every 401(k) participant were Warren Buffett, the plan still falls short of what you ought to expect from the nation's main retirement savings vehicle.

I am not saying that we ought to go back to old fashioned pensions, for good reason, or that you should stop funding your 401(k). You still have to save for retirement and the 401(k), flawed as it is, is the best way we've got to do that. (Especially the Roth 401(k) plan.) I am saying that we should do better. We are asking the 401(k) to play a role for which it was never intended, and we should reshape the plan to fit that role, or get a new plan. Here's what's wrong with the 401(k):

It randomly creates winners and losers. Citizens who take part in a national retirement savings plan ought to know what it takes to succeed. It matters less what the rules are than that they're fair and consistent. If you save more in the plan, you retire with more income. That would be a fine rule. If you earned more in your career, you get more retirement income. That works too. (It had better; it's the Social Security promise.)

But neither necessarily holds true in a 401(k). You could earn the same money, save the same amount, invest as wisely as an identical colleague and still wind up eating the Denny's special while your doppelganger vacations in Greece. It all depends on when in your working life the inevitable market downturn falls. If early, you'll build your nest egg by buying cheap assets and retire rich. If late, you'll find your life savings decimated when it's too late to rebuild. That's a problem. The nation's main retirement funding plan should not be a conduit for administering random acts of fortune. It should aim to alleviate randomness.

The plan leaves people poor Left to their own devices, most employees don't put enough into their 401(k)s to make a dent in their retirement needs. And even if they start out putting enough money in, when times get tough, they stop. Worse still, employers have begun to do the same. According to surveys, about a quarter of employers have stopped, or plan to stop, matching their employees' 401(k) contributions. This is happening at the worst possible time, of course: when stock prices are 40% cheaper than they were 18 months ago.

The plan exposes everyone to the risk that they'll live too long Because you don't know when you'll die, you have to save as if you were Methuselah, just to be safe. The usual financial planner's target is age 95. If you saved the fortune you need to cover yourself to that age and don't make it that far-and most people won't-tough luck. If you do live that long and you didn't save enough-and again, most don't-even tougher luck. The shame of this is, longevity risk can be insured away by averaging out the risk over an entire population. Every annuity does this. Why not the national retirement savings plan?

Congress has been talking extensively about 401(k) reform. At the moment, a bill called the 401(k) Fair Disclosure and Pension Security Act is moving through Congress. But it does nothing more than tinker at the edges of a looming disaster, acting as if lowering fees on 401(k)s by a few fractions of a percentage point will solve the massive underfunding of a whole generation's old age. Forget it. It won't. It's time to stop pretending that the 401(k) can get us where we need to go.

Disclosure I am long one 401k through my work using Principal Financial group.

Warren Buffett's Financial Rules to Live By Video

Billionaire investor Warren Buffett believes that the U.S. will emerge from the current economic recession "stronger than ever," but he said the behavior of the American consumer may be forever changed.
The billionaire shares investment advice for average Americans.

"We were on a binge before," the CEO of Berkshire Hathaway told "Good Morning America" in an exclusive interview. "I mean, we are not saving extraordinary sums now but the savings behavior has changed. ... I don't necessarily think that we will go back to behaving the way that we were two years ago."

Warren Buffett's VIDEO here!~!

The man known as the "Oracle from Omaha" because of his history of successful investments, shared his top three pieces of advice for average Americans who want to grow their savings and keep their money safe.

Number one: "If it seems too good to be true, it probably is."

Number two: "Always look at how much the other guy is making if he is trying to sell you something."

Number three: Don't go into debt.

"Stay away from leverage," he said. "Nobody ever goes broke that doesn't owe money."

The "binge," he said, was fueled largely by over-borrowing by both individuals and companies.

"The U.S. public as a whole has gotten into problems from leverage, financial institutions have gotten into problems through leverage," he said. "A long, long time ago a friend said to me about leverage, 'If you're smart you don't need it, and if you're dumb, you got no business using it.'"

At a time when many college graduates face uncertain futures and are struggling to find jobs, Buffett said he still believes that "investing in yourself is the best thing you can do. Anything that improves your own talents. And I always advise students to do that, high school students, college students and obviously investing in your children is, in some ways, investing in yourself."

No matter what happens in the economy, "if you have true talent yourself, and you have maximized your talent, you have a terrific asset."

Roth IRA beats 401(k) Hands Down in key ways

our ability to contribute to a Roth IRA account in 2008 is determined by your income. Here's what IRS Publication 590, "Individual Retirement Arrangements," has to say about the income restrictions:

For 2008, your Roth IRA contribution limit is reduced (phased out) in the following situations.

• Your filing status is married filing jointly or qualifying widow(er) and your modified AGI is at least $159,000. You cannot make a Roth IRA contribution if your modified AGI is $169,000 or more.
• Your filing status is single, head of household, or married filing separately and you did not live with your spouse at any time in 2008 and your modified AGI is at least $101,000. You cannot make a Roth IRA contribution if your modified AGI is $116,000 or more.
• Your filing status is married filing separately, you lived with your spouse at any time during the year, and your modified AGI is more than -0-. You cannot make a Roth IRA contribution if your modified AGI is $10,000 or more.

The modified AGI, or MAGI, limits for the 2009 tax year will be a few thousand dollars higher than the 2008 numbers. The publication "IRS Announces Pension Plan Limitations for 2009" puts a finer point on it if you're bumping up against these MAGI limits.

Assuming you're eligible to contribute to a Roth IRA, you still have to decide if the Roth is the better choice. Both the Roth IRA and the 401(k) plan are tax-advantaged accounts. With the Roth, you contribute after-tax dollars today, and qualified distributions coming out of the account aren't subject to federal income taxes.

With a 401(k) plan, you contribute pretax dollars today, and qualified distributions out of the account are subject to federal income tax at your ordinary income rate. Being able to borrow money from the plan is an advantage to the plan versus the Roth IRA, but the loan has to be repaid if you leave your company. Otherwise, it is counted as a distribution from the plan and subject to income tax and possibly a penalty tax if it is an early distribution.

While there is no loan program available for a Roth IRA account, you contributed after-tax dollars, so no income tax is due on withdrawals of your contributions. You can withdraw your original contributions for any reason and at any time without taxes or penalties.

However, early distribution of investment earnings can be subject to income taxes and may be subject to a 10 percent penalty tax. The age of the account matters. Distributions from accounts less than 5 years old are treated differently than accounts that are more than 5 years old.

In addition, different tax rules apply if the money is withdrawn early (before age 59½) for certain reasons, such as to pay for qualified education expenses or to buy a home for the first time, or if the account holder has died or is disabled. When in doubt about the rules, work with your tax professional.

Most people in their 20s are in a lower marginal federal income tax bracket than they will be when they retire. If you expect your tax rate is lower today than it will be when you retire, contributing to a Roth IRA can make sense versus contributions to a 401(k) plan. The Bankrate article "Traditional IRA vs. Roth IRA" can help you make the right decision.

Another advantage to the Roth IRA account is that you can control where the account is held. Being able to do this lets you have some control over account fees and expenses and lets you pick a custodian that offers the types of investments you want for the account.

A lot of workers complain about the investment choices offered in their employer's 401(k) plans. You can finesse these issues by picking your custodian based on how you want the funds invested.

Disclosure I have a Roth IRA and a 401K.

Spotlight - General Motors - Bloomberg

Sound Investing TV #52: Don't leave your 401k behind!

Sound Investing TV #51: Why asset allocation is absolutely critical

Bogle: This Bear Market's the Worst I've Seen (Morningstar)

Four Signs of Dividend Safety (Morning Star) Video

4 signs of dividend safety video ...............



Disclosure none