AAII Investor Update: Is Facebook an Investment or a Trade?

Posted on May 18, 2012 | Investor Update

Should you buy Facebook (FB) or avoid it? The answer depends on whether you are looking to speculate or invest.

Benjamin Graham defined speculation in his classic book “The Intelligent Investor” as primarily “anticipating and profiting from market fluctuations.” Conversely, he defined investing as “acquiring and holding suitable securities at suitable prices.” Notice the final two words used to describe investing: “suitable prices.” When it comes to investing, valuation matters—always.

AAII Investor Update: CFA Institute Conference—Fix the Financial Industry

Posted on May 11, 2012 | Investor Update

I spent the first half of this week at the CFA Institute’s annual conference. I think one of the most encouraging themes at the conference for individual investors was the awareness from within the financial industry that problems exist and need to be fixed.

AAII Investor Update: The Opportunity Cost of Not Selling

Posted on May 4, 2012 | Investor Update

Imagine that somebody came at night and sold everything you own. Then ask yourself, would you repurchase the same things?

AAII Investor Update: Stay in Stocks or Sell in May?

Posted on April 27, 2012 | Investor Update

“Sell in May and go away” is strategy that some investors and traders are likely contemplating right now. The adage is based on the historically weaker performance of stocks during the May through October time period. Adherents shift from stocks to cash at the beginning of May and then invest back into stocks at the start of November.

AAII Investor Update: How I Monitor My Stocks

Posted on April 20, 2012 | Investor Update

A key task for investors who own individual stocks is to regularly monitor them. Such analysis requires specifically looking for those items that could give you reason to either continue favoring a stock or sell it.

AAII Investor Update: Be Wary of Crowd Funding Start-ups

Posted on April 6, 2012 | Investor Update

Later this year, or early next year, you will have the chance to buy shares in small, growing companies through a process known as crowd funding. If an offering seems interesting, tread carefully, do as much research as you can and do not commit any money you are not willing to lose.

AAII Investor Update: Are Stock Prices Random or Chaotic?

Posted on March 30, 2012 | Investor Update

Price momentum is a key component of chart analysis. Traders commonly look for stocks moving in a certain direction or signs that the direction of a stock’s price is about to change. The idea is that momentum is a trader’s friend, if it can properly be identified and analyzed.

AAII Investor Update: Greek Bonds and the Risks of Speculation

Posted on March 9, 2012 | Investor Update

Greece is making progress with its bondholders on a debt swap. Under the program, holders of Greek bonds will exchange their securities for new bonds with longer maturities, lower interest rates and face values that are over 50% lower than those of the existing bonds. Greece is required to complete the swap in order to get new loans from the European Union and the International Monetary Fund. We’ll know whether the Greek government’s targeted participation rate of 90% is reached tomorrow morning at 1:00 a.m. Eastern time.

AAII Investor Update: Buy Now or Wait?

Posted on February 24, 2012 | Investor Update

The stock market’s strong start to this year has created challenges for those of you who have been looking for opportunities to buy stocks. It is particularly challenging for those of you who have purposely kept your allocations to equities low. Do you buy stocks now or do you wait for prices to fall?

AAII Investor Update: Despite Risks, Bonds Still a Have Role

Posted on February 10, 2012 | Investor Update

Had this email gone out yesterday, it would have opened with a summary of a conversation I recently had with an AAII member about bonds and interest rates. This morning, after reading Warren Buffett’s arguments against bonds on Fortune’s website, I felt the need to revise the first few paragraphs to incorporate the Berkshire Hathaway’s (BRK.A) CEO’s opinions.

AAII Investor Update: The Dovish Fed and Your Investments

Posted on January 27, 2012 | Investor Update

Yesterday, the Federal Open Market Committee (FOMC) voted to keep its interest rate target unchanged through at least late 2014. Just last month, the FOMC listed mid-2013 as the possible date for the first rate increase.

AAII Investor Update: Returns and the Full Story

Posted on January 13, 2012 | Investor Update

Three-year total returns for stock mutual funds jumped last quarter. The average annualized gain was 16.8% as of December 31, 2011. This compares to an average annualized three-year gain of 2.0% at the end of September 2011 for the large-cap, mid-cap and small-cap funds tracked for our Quarterly Low-Load Mutual Fund Update.

AAII Investor Update: The January Barometer: Bullish or Inconclusive

Posted on January 6, 2012 | Investor Update

As goes January, so goes the year, according to the Stock Trader’s Almanac. And as the first five days of month go, so go January’s full-month returns. So we should be rooting for a good start to 2012, right?

Well, the devil is always in the details.

Since 1950, the S&P 500 has started January with five-day gains 38 times. Full-year gains followed the positive starts 33 out of those 38 years (or 87% of the time). When the market started a new year with a loss for the first five days of January, full-year performance was mixed. Stocks rose 12 times and fell 11 times for an average annual gain of 0.2%.

AAII Investor Update: A Tough Year for Stocks

Posted on December 23, 2011 | Investor Update

This year was supposed to be better. Among the four years of the presidential term, the third has historically been the best-performing one for stocks. Yet, the total return for the S&P 500, which includes dividends, is barely positive. A small rise in prices between now and December would qualify as a win for the presidential cycle in the history books, but it wouldn’t be much consolation for investors.

AAII Investor Update: Should You Buy These 5 Dow Stocks?

Posted on December 16, 2011 | Investor Update

AT&T (T), General Electric (GE), Intel (INTC), Merck (MRK) and Pfizer (PFE) are currently passing our Dogs of the Dow: Low Priced 5 screen. This screen is tied for the year’s best-performing value strategy on AAII.com.

I bring this up to pose a question: Should you buy the passing stocks?

Before you answer, stop and consider what I have told you about them so far. They are among the highest-yielding stocks in the Dow, hence the screen’s “Dogs of the Dow” moniker. These stocks also pass this year’s top-performing value screen.

AAII Investor Update: 5 Strategies for Avoiding Unnecessary Risks

Posted on December 12, 2011 | Investor Update

Outflows from domestic equity funds totaled $6.67 billion last week. This was the largest estimated amount of weekly withdrawals since August 10, 2011, according to the Investment Company Institute.

Our monthly Asset Allocation Survey also signaled an increased aversion to equities, with stock/stock fund allocations falling to 53.1% last month. Many investors, both individual and institutional, are frustrated by the market’s headline-driven volatility, and some are just plain scared by it.

AAII Investor Update: Creating Liquidity for European Banks

Posted on December 6, 2011 | Investor Update

Given this morning’s coordinated action by the major global central banks, I am sending out this week’s newsletter a day early. I am doing this to explain what the central banks did and why.

The Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank, the Federal Reserve, and the Swiss National Bank agreed to lower the pricing on existing temporary U.S. dollar overnight swap arrangements. The intent is to provide liquidity to the global markets

AAII Investor Update: Analysts Pressured to be Positive

Posted on November 22, 2011 | Investor Update

‘Ban the analysts!’

This is what European Union commissioner Michel Barnier recently suggested. Barnier proposed banning credit agencies from rating the sovereign debt of countries undergoing bailouts. The commissioner was pressured into withdrawing his proposal for a ban, though he is still pushing for other reforms.

AAII Investor Update: Buy Good Stocks Cheap

Posted on November 11, 2011 | Investor Update

Joel Greenblatt offered to provide some insights for this week’s newsletter. Joel is the CIO of Gotham Asset Management and author of several investing books. He will also deliver the keynote speech tomorrow (Friday) at our Investor Conference.

AAII Investor Update: Bonds’ 30-Year Run

Posted on November 3, 2011 | Investor Update

“In 30-Year Race, Bonds Beat Stocks,” read a headline on Blooomberg.com earlier this week.

No, you did not read that wrong. Jim Bianco, president of Bianco Research, calculated an average annual gain of 11.8% for long-term bonds. Stocks lagged with an average gain of 10.8%. This has not happened since the Civil War, when the U.S. had a very different economy.

If you thought stocks, not bonds, were the best investment vehicles for beating long-term inflation, you’re right. This is still the case. The performance record of the past 30 years reflects two different events that combined to create a favorable environment for bond prices.

The first was interest rates. Ten-year treasury bonds yielded 15.8% on September 30, 1981, according to Bianco. Earlier today, the 10-year bond yielded 2.06%. Bond prices and interest rates are inversely related, meaning that as yields fell over the past three decades, bond prices rose.
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