How do you make your investment decisions and where do you get your information? If you are like most of the people I know, you look at the experts.
That's fine, but it is important to realize that for every expert, there is an opinion and every opinion is an expert. I have a friend who says that opinions are like noses: everyone has one, but you would not live in someone else's nose!
Around the first of the year, along with the New Year's resolutions, the new year comes predictions for what's hot and what will not. As if that is not enough to produce a massive case of indigestion information now we have the financial cable shows with pretty much the opinion of the hour.
What this produces is a frenzy of buying and selling activities for stocks in general, and now also for investment funds. I do not think this approach is both investors in particular whether the funds in general.
The major problem with this fund for investors is that all experts are recommending different funds. It might be one thing if experts had a solid foundation for their perspective. If they did, you would think that their recommendations would line up and they would all be touting the same.
But they do not and they are not. Oh sure, each of them can make a good case for their choice. But so can the next "expert." And will usually not both be right (if one of them is). So, where is the value in it for you? Beats me.
Another problem with this approach is that many experts recommend different funds at different times, and investors continue to move from fund to fund. In the hot fund, in an attempt to
In the same breath, the experts tell you to invest for the long term us. Well, I can not figure out how to do both: in the latest hot fund, and keep what I have for the long term.
The downside of all this for the funds is a fund that sometimes touted as the hot one to draw much attention in investment (ie money) that it grows beyond its original intent. At that point, it loses its direction and the very thing that made it strong is sacrificed. And guess what happens to the performance?
So, in the middle of all Hawking and hype for this fund or that, what to do to make intelligent choices an investor
For myself and my clients, I use a trend following method, which identifies trends in various markets in the long term. I research funds for stability and reliability, as well as the current performance. Then, when our trend indicator signals a buy, we select our mutual funds based on momentum figures for different time periods to achieve the most promising fund (s) to use for this cycle.
This gives us an advantage and sometimes weeks after we bought a fund I see it written in financial newspapers as one of the best performers.
This approach has always put us in the number one fund? Maybe not. But we are almost always in funds that are doing very, very well. And we get to the bottom and from the top? Again, maybe not.
But I can tell you that, using this method, my clients and I followed the sell signal we received in October 2000, and were safely invested in the money markets fixed when the stock market crashed and burned.
Is this approach for you? It depends on how much you want adrenaline rush when you watch your investments. Personally, I have my thrill quotient with other things in life and enjoy sleep at night when it comes to my investments.
Ulli Niemann is an investment advisor and has been writing about objective, methodical approaches to investing for over 10 years. He eluded the bear market of 2000 and has helped hundreds of people make better investment decisions. To learn more about his approach and find his FREE newsletter please
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