Stocks and Trading Thread - Channeling your inner Mono

[citizen k]

Well, if you have the ability to pick winning stocks AND avoid poor performing stocks, sure.  Thing is, I certainly don't have this ability, and I will be very, very skeptical of anyone who claims they do.

I don't think picking Apple and Google as winning stocks is taking too great a leap. 

[citizen k]

Top Three ETFs for 2010
Don Dion
12/24/09 - 06:00 AM EST

NEW YORK (TheStreet) -- In 2009, investors in exchange-traded funds flocked to alternative assets, emerging markets and bonds.

The SPDR Gold Shares ETF(GLD Quote) and Vanguard MSCI Emerging Markets ETF(VWO Quote) both had net asset inflows of more than $1 billion.

Bond funds like iShares' TIPS ETF(TIP Quote) and Investment Grade Corporate Bond ETF(LQD Quote) ranked among the largest funds in the ETF universe.

In the wake of the global economic crisis, some investors regained their appetite for risk, while others sought protection from it.

As 2010 begins, a different group of market forces, political pressures and investor frustrations will guide the flow of ETF assets and help to shape the future of the fund industry. ETFs, with their unique structure and low management costs, will continue to offer investors convenient ways to access individual sectors, market trends and portfolio strategies. While many of the concerns that inspired investors in 2009 will still affect investing in the months ahead, ETF investors should consider the three following themes, and their corresponding funds, as they prepare their portfolios for 2010:

Dividends: iShares Dow Jones Select Dividend Index ETF(DVY Quote)

With rates pegged near zero for the foreseeable future, investors will have to venture out of bond and money market funds and into equities to find returns. High-yield dividend stocks are attractive holdings for investors looking to step off the sidelines and put their money to work.

ETFs like DVY are a good way to gain exposure to high-yielding equities while minimizing security-specific risk.

DVY's strategy is to identify companies with the highest-paying dividends, and then eliminate the riskiest holdings with a series of "screens." In an effort to avoid exposure to extremely distressed firms, DVY's index omits REITs, as well as firms that have paid more than 60% of earnings in the form of dividends or cut their dividend in the past five years.

DVY is a large, liquid ETF with top holdings that currently include Chevron(CVX Quote), Kimberly-Clark(KMB Quote) and McDonald's(MCD Quote). The top sector allocations in DVY's portfolio are utilities, consumer goods and industrials, with 26.56%, 18.55% and 14.97% allocations, respectively. Inflation Protection: iShares Barclays TIPS Bond(TIP Quote)

Low interest rates, a weak dollar and massive stimulus spending will continue to keep talk of both inflation and deflation in the headlines in 2010. While hard economic data has yet to demonstrate a real inflation threat, it makes sense to include inflation protection in your portfolio, and to do so before periods of high inflation.

Buying shares of an ETF like TIP, which tracks a portfolio of Treasury Inflation Protected Securities (TIPS), is an easy and inexpensive way to protect against inflation in a diversified portfolio. TIP has the advantage of being the first mover in the TIPS ETF space, and this ETF has a laddered structure to provide exposure to securities with different maturities.

According to recent data from the National Stock Exchange, TIP is the sixth largest fund in the ETF universe when measured by assets. TIP experienced an incredible expansion in 2009, and government initiatives, coupled with investor fears, should help to keep this fund at the top of the pack in 2010. Green Energy: PowerShares WilderHill Clean Energy(PBW Quote)

Science has yet to come to a consensus on global warming, but two hard facts will keep "green energy" a hot topic in 2010. First, the rapid expansion of emerging markets and limited natural resources have helped to put a premium on the development of green energy technology. Secondly, both legislation and regulation are working to curb carbon emissions in both the U.S. and abroad. (See "Five Energy ETFs to Watch".)

PBW is designed to deliver capital appreciation through exposure to companies that focus on greener and generally renewable sources of energy and technologies that facilitate cleaner energy. This large, liquid ETF tracks 52 firms, including JA Solar Holdings(JASO Quote), Fuel Systems Solutions(FSYS Quote) and Advanced Battery Technologies(ABAT Quote).

Cleaner energy and the reduction of carbon emissions will be top items on the political agenda in 2010. As companies work to comply with new standards, investors in PBW will already be ahead of the curve. (See "ETF Plays for Copenhagen Talks".)

ETFs are an easy, inexpensive way to gain access to short-term market trends and diversify a long-term portfolio. As investors move assets into segments of the market like clean energy, inflation protected securities and high-yielding equities, the rapidly expanding ETF marketplace will evolve to meet their changing needs.

Inflation concerns fueled the recent launch of three additional TIPS ETFs by bond giant PIMCO, while the buzz over renewable energy has produced increasingly focused green ETFs.

Investors looking to participate in these areas of the market should aim for ETFs with high liquidity and low expense ratios.

DVY, TIP and PBW are good funds to target in 2010.

-- Written by Don Dion in Williamstown, Mass.

[Monoriu]

I don't think picking Apple and Google as winning stocks is taking too great a leap. 

It is not good enough to just pick Apple and Google.  You have to hold onto them, and avoid all other losers.

[Monoriu]

And, as I said, it's a stupid reason to bash them, which is not surprising, because money advisers are a stupid and corrupt bunch.  Insurance products aren't supposed to maximize returns, they're supposed to protect you against adverse outcomes.

But insurance doesn't come free.  Cost is a valid concern in evaluating whether I should get the insurance or not.  In the case of annuities another problem is that the cost to me is very opaque, that I have trouble even seeing the price tag. 

[Monoriu]

This whole business is so tough.  Knowing that every wrong action (or inaction) has severe consequences puts a lot of pressure on me.  I am not in this for fun.  I am betting my future.  I just can't stop me from blaming me.  Why didn't you sell at that time?  Why was I a pussy and didn't buy back then? 

Right now the stock levels are too low to sell, and too high to buy.  So I'm stuck.  But I keep telling myself that I need to do something. 

[Josquius]

This whole business is so tough.  Knowing that every wrong action (or inaction) has severe consequences puts a lot of pressure on me.  I am not in this for fun.  I am betting my future.  I just can't stop me from blaming me.  Why didn't you sell at that time?  Why was I a pussy and didn't buy back then? 

Right now the stock levels are too low to sell, and too high to buy.  So I'm stuck.  But I keep telling myself that I need to do something. 

Ah the Chinese and their gambling.
What is it with that?

[MadImmortalMan]

But I keep telling myself that I need to do something.

Sometimes nothing is the right thing to do. It's just hard to keep holding when your gut tells you there is uncertainty or trouble ahead. Like the Caterpillar example in the OP. For me it just comes down to how good the asset in question is and how much ability to survive the unknown it has.

[citizen k]

I don't think picking Apple and Google as winning stocks is taking too great a leap. 

It is not good enough to just pick Apple and Google.  You have to hold onto them, and avoid all other losers.

You'll never be able to do that. You can only be diversified to hedge your bets.

[citizen k]

Ah the Chinese and their gambling.
What is it with that?

Human nature?

[Valdemar]

I'm doing like most here, my retirement fund is part of my employment and I let them take a substantial part of my income, even if their investments is subpar they have the added benefit of insurance and guarantees of payment if by some reason I need to retire before planned time (and with my current medical sit that may well be in the 50s or early 60s instead of full retirement age)

On the private side I put it into longterm basic stocks. Been very fortunate with the timing of stocks like Carlsberg (+100%), FL Smidt (+80%) and trucking/transport (+60%) all within a year, mostly due to the timing of the buy... others I've had for a long term are banking (which suffered hard) and medical.. which has turned out to be THE perfect longterm, but then I've had them 20 years or so

I DO diversify with bonds, but the DEN realestate bond makret is very unique in terms of safety.

V

[Tamas]

So let's say your family has some modest saving accounts, plus about 10k$ which could be used for the hope of a somewhat higher yield. Where to put it?

Assuming (and this is quite unlikely, sadly) that there is reasonable access from a Hungarian brokerage to foreign funds, would it make any sense to put half of it in a couple of emerging market funds, and the other half into the whatever-its-name gold ETF? Thinking along the lines of course that if there is yet another crash, people will flock to gold, while if there will be a consensus that teh depression is over, emerging markets would take off again?

[Admiral Yi]

I think if you buy gold right now you're buying into a bubble.

[Fate]

You mean the gold bugs that advertise non stop on FOXNEWS and FOXBUSINESS are wrong? 

[Tamas]

I think if you buy gold right now you're buying into a bubble.

Yeah but last time I checked (pre-holidays) it was going down a bit.

[Admiral Yi]

You mean the gold bugs that advertise non stop on FOXNEWS and FOXBUSINESS are wrong? 

Dude, you need some new hobbies.

Tamas: if I were you I would put some money into companies that service Chinese domestic demand.  At some point the Chinese currency will have to rise.