Paradoxically, the trying economic conditions over the past several years have been perfect for super-rich and connected investors — the top 1% of the 1% — to exponentially increase their wealth. #-ad_banner-#One of the more popular but seldom talked-about tactics is known as IPO flipping. This refers to the practice of buying IPO shares at the initial offered price then quickly reselling them once the shares start trading — and profiting from the initial pop. However, only institutions, hedge funds and very wealthy investors are allocated shares by the underwriting broker before the IPO. Even though most regular investors are… Read More

Paradoxically, the trying economic conditions over the past several years have been perfect for super-rich and connected investors — the top 1% of the 1% — to exponentially increase their wealth. #-ad_banner-#One of the more popular but seldom talked-about tactics is known as IPO flipping. This refers to the practice of buying IPO shares at the initial offered price then quickly reselling them once the shares start trading — and profiting from the initial pop. However, only institutions, hedge funds and very wealthy investors are allocated shares by the underwriting broker before the IPO. Even though most regular investors are precluded from IPO flipping, they can still learn a profitable lesson — never purchase an IPO on the first day of trading. Sure, it’s tempting to buy a newly issued stock as prices rocket higher that first day — but share prices often retreat just as quickly. This is because the flippers are dumping their often substantial allocations as the public is trying to scoop up shares. Last year saw the most IPOs since the height of the dot-com bubble in 2000, and the surge in IPOs is showing no signs of abating this year. As of February, IPO filings… Read More

Have you ever received emails promising quick returns of 1,000% or more from stock investing?  I know I have. Most of these emails tout high-risk, hugely volatile micro-cap stocks.   #-ad_banner-#The majority of investors simply discard these emails as nonsense — but the funny thing is, returns of 1,000% or more are indeed possible in the micro-cap sector. What’s important to keep in mind is that these huge gains are accompanied by equally gigantic risk — the kind that can quickly wipe out your entire investment. Fortunately, there’s a way to profit from this market while greatly reducing… Read More

Have you ever received emails promising quick returns of 1,000% or more from stock investing?  I know I have. Most of these emails tout high-risk, hugely volatile micro-cap stocks.   #-ad_banner-#The majority of investors simply discard these emails as nonsense — but the funny thing is, returns of 1,000% or more are indeed possible in the micro-cap sector. What’s important to keep in mind is that these huge gains are accompanied by equally gigantic risk — the kind that can quickly wipe out your entire investment. Fortunately, there’s a way to profit from this market while greatly reducing the risk. To be sure, this technique does not allow for outrageous returns, but it did return over 50% during the past year and has a history of market-beating results.  Before I get into the specifics of this low-risk method of investing in the micro-cap market, let’s look at what exactly a micro-cap stock is. The SEC’s definition of a micro-cap stock is one issued by a company with less than $300 million in market capitalization.   These tiny firms often do not file financial reports with regulators, making research and due diligence very difficult. This lack of freely available… Read More

To consistently earn the highest returns, financial advisors often recommend using a low-cost fund that tracks the S&P 500 since there’s only perhaps a 30% chance of beating the index over time with actively managed investments.  #-ad_banner-#That’s all well and good if you’re a growth investor, but what if your goal is to maximize your dividend yield without taking any undue risk? In that case, tracking the market definitely isn’t the way to go. One of the most popular funds that does this, SPDR S&P 500 (NYSE: SPY), yields a meager 1.9%. And it comes with all the… Read More

To consistently earn the highest returns, financial advisors often recommend using a low-cost fund that tracks the S&P 500 since there’s only perhaps a 30% chance of beating the index over time with actively managed investments.  #-ad_banner-#That’s all well and good if you’re a growth investor, but what if your goal is to maximize your dividend yield without taking any undue risk? In that case, tracking the market definitely isn’t the way to go. One of the most popular funds that does this, SPDR S&P 500 (NYSE: SPY), yields a meager 1.9%. And it comes with all the stomach-churning volatility you typically see in the broader stock market. That’s why income investors so often turn to sectors known for generous dividends — like telecommunications. Stocks in this sector often boast yields well north of 3%, and many are far less volatile than the market. The big question is which are the best ones to own? My answer: Why not own them all through an ETF? That way, you’ll be well-diversified across the sector but still able to enjoy attractive yields. In my opinion, the #1 choice for the job is Vanguard Telecom Services ETF (NYSE: VOX). The $673… Read More

With its constant ups and downs, investing in stocks is like a roller-coaster ride. Investing in bonds, on the other hand, usually isn’t — especially during the bond bull market of the past 15 years.  While bond investors love to complain about the pitifully small income stream bonds provide these days, they’ve grown accustomed to growing and stable principal values. But that era of good feelings is probably over. Bull markets ALWAYS come to an end — and it appears this time is no different.  As the Federal Reserve telegraphed its “tapering” plans and even hinted at higher… Read More

With its constant ups and downs, investing in stocks is like a roller-coaster ride. Investing in bonds, on the other hand, usually isn’t — especially during the bond bull market of the past 15 years.  While bond investors love to complain about the pitifully small income stream bonds provide these days, they’ve grown accustomed to growing and stable principal values. But that era of good feelings is probably over. Bull markets ALWAYS come to an end — and it appears this time is no different.  As the Federal Reserve telegraphed its “tapering” plans and even hinted at higher federal funds rates, the bond market responded accordingly: It went down. This price chart of the iShares Barclays 20+ Year Treasury Bond Fund ETF (NYSE: TLT) paints a clear picture. #-ad_banner-#At the height of “Taper terror,” shares plunged over 15%. Prices have recovered, but don’t expect a quick return to the bond glory days. If anything, investors should prepare for more volatility. The challenge that investors face daily is the need for income and some type of bond or bondlike allocation to a portfolio. For example, as an investment professional, I manage a handful of different investment strategies… Read More

A few years ago, the phrase “smart-beta ETFs” barely existed in the investing lexicon. Yet these exchange-traded funds are now the hottest category among fund sponsors, with nearly 400 of these funds now managing more than $150 billion in assets — with plans for many more to be launched in coming years. #-ad_banner-#The key question: Are they worth it — or are they just a bad marketing concept in search of your funds?  Smart betas were launched to address a clear problem that emerged in the fund community. Low-cost traditional ETFs were launched to provide investors with access to simple,… Read More

A few years ago, the phrase “smart-beta ETFs” barely existed in the investing lexicon. Yet these exchange-traded funds are now the hottest category among fund sponsors, with nearly 400 of these funds now managing more than $150 billion in assets — with plans for many more to be launched in coming years. #-ad_banner-#The key question: Are they worth it — or are they just a bad marketing concept in search of your funds?  Smart betas were launched to address a clear problem that emerged in the fund community. Low-cost traditional ETFs were launched to provide investors with access to simple, passively managed portfolios that need not account for the salaries of million-dollar fund managers.  Yet their “buy the whole group” approach to any theme, whether it was a particular industry, country or asset class, meant that each portfolio was packed with both good and bad investments. In defense of higher-priced mutual funds, at least fund managers took the time to weed out presumably bad investments and hold only good investments.  The smart-beta ETFs aimed to be the best of both worlds: a higher degree of portfolio rebalancing to weed out the duds, in a fund that still was cheaper to… Read More

Over the past half decade, the exchange-traded fund (ETF) industry has caught the mutual fund industry off-guard. The assets being managed by ETFs have more than doubled in size since 2009, compared with flat growth for their more mature counterparts (though mutual funds still manage more assets overall). #-ad_banner-#​ETFs have proved to be especially popular with investors seeking global exposure. There are now a few hundred country- and region-specific stock and bond ETFs, enabling investors to glean very targeted exposure. For example, as I wrote recently, I think Chile and Vietnam represent sound investment… Read More

Over the past half decade, the exchange-traded fund (ETF) industry has caught the mutual fund industry off-guard. The assets being managed by ETFs have more than doubled in size since 2009, compared with flat growth for their more mature counterparts (though mutual funds still manage more assets overall). #-ad_banner-#​ETFs have proved to be especially popular with investors seeking global exposure. There are now a few hundred country- and region-specific stock and bond ETFs, enabling investors to glean very targeted exposure. For example, as I wrote recently, I think Chile and Vietnam represent sound investment environments.  The appeal of country ETFs is self-evident: They are much cheaper to own than comparable mutual funds, and lower expense ratios can add up to big savings over the short or long haul.  But ETFs also have one major flaw: Their passive portfolios take the good with the bad, as they own a slice of every key company in any given market.  That makes them solid investments if you prefer global themes such as “the Brazilian middle class is growing,” or “South Korean interest rates are set to fall” — but the approach is not so good at drilling… Read More

The old saying “You get what you pay for” doesn’t necessarily hold true for mutual funds. #-ad_banner-#Lots of funds that won’t let you in for less than $25,000 or $50,000 lag behind the market and their peers. Conversely, many of those with initial investment minimums of $1,000 or less put up long-term numbers most fund managers would envy. It’s pretty ironic, but I’m glad that’s the way it is. It’s hard enough getting a jump on building wealth without having to come up with a huge wad of cash just to get started. So why should great growth… Read More

The old saying “You get what you pay for” doesn’t necessarily hold true for mutual funds. #-ad_banner-#Lots of funds that won’t let you in for less than $25,000 or $50,000 lag behind the market and their peers. Conversely, many of those with initial investment minimums of $1,000 or less put up long-term numbers most fund managers would envy. It’s pretty ironic, but I’m glad that’s the way it is. It’s hard enough getting a jump on building wealth without having to come up with a huge wad of cash just to get started. So why should great growth funds be exclusive to those with a lot of money to invest?  Well, they shouldn’t. And fortunately, investors can get into one of the world’s best growth funds for a mere $500. After that, you can add as little as $100 at a time. As the following table shows, the fund has beaten the market and its peers by substantial margins in the short- and long-term. And it has often been noticeably less risky than the broader market, as indicated by its beta of 1.0 over the past year.  As the benchmark, the market itself has a beta of 1.0. Read More

“The times, they are a-changing.”  #-ad_banner-#Watching the stock market closely over the last week brought Bob Dylan’s words to mind. The Dow Jones Industrial Average plunged over 600 points in six trading sessions, and the high-flying Nasdaq Composite Index sustained its largest drop in over two years. What’s more, five of the 14 IPOs slated for the past two weeks postponed their launches due to the sell-off. The majority of this selling was by hedge funds slashing their risk exposure, according to The Wall Street Journal, sending shivers of fear into even the most hardened of stock market… Read More

“The times, they are a-changing.”  #-ad_banner-#Watching the stock market closely over the last week brought Bob Dylan’s words to mind. The Dow Jones Industrial Average plunged over 600 points in six trading sessions, and the high-flying Nasdaq Composite Index sustained its largest drop in over two years. What’s more, five of the 14 IPOs slated for the past two weeks postponed their launches due to the sell-off. The majority of this selling was by hedge funds slashing their risk exposure, according to The Wall Street Journal, sending shivers of fear into even the most hardened of stock market players. This selling is different than what we witnessed in January. The January selling was triggered by the fear of a change in Federal Reserve policy and simple profit-taking. Last year’s bull market prompted many investors to simply wait until January to cash in so they could delay paying taxes on their fat gains for another year. In contrast, the current selling appears to be a shift from high-flying growth stocks to defensive stocks. I think this selling is signaling that the smart money is starting to position itself for a flat to down stock market in 2014. Read More

All major U.S. indices finished more than 2% lower last week, led by the Russell 2000, an index of small-cap stocks, which was down 3.6%. Moreover, last week’s decline pushed the S&P 500 into negative territory for the year, joining the Russell 2000, Dow Jones Industrial Average and tech-heavy Nasdaq 100, which were already showing losses for 2014. From a sector standpoint, last week’s broad market collapse was led by financials and health care, which were both down 4%. The utilities sector was the only sector that finished in positive territory for the week, up just 0.6%. My own metric… Read More

All major U.S. indices finished more than 2% lower last week, led by the Russell 2000, an index of small-cap stocks, which was down 3.6%. Moreover, last week’s decline pushed the S&P 500 into negative territory for the year, joining the Russell 2000, Dow Jones Industrial Average and tech-heavy Nasdaq 100, which were already showing losses for 2014. From a sector standpoint, last week’s broad market collapse was led by financials and health care, which were both down 4%. The utilities sector was the only sector that finished in positive territory for the week, up just 0.6%. My own metric indicates that investors moved assets most aggressively into defensive consumer staples and utilities last week, and out of financials and industrials.   Dow, Nasdaq 100 Testing Minor Support Levels In last week’s Market Outlook, I pointed out a bearish key reversal day that emerged on April 4 in the Dow industrials. I said it indicated a near-term peak was in place at that day’s high and cleared the way for an additional 1.7% decline to 16,134. The Dow hit my target last week and continued to decline into Friday’s 16,027 close. The chart shows that last… Read More

You can’t keep the Old World down. That’s the conclusion I’ve come to after seeing the big surge over the past two months in European stocks, and particularly the blue-chip stocks of the Euro Stoxx 50 Index.  Since falling to its 2014 low Feb. 3, SPDR Euro Stoxx 50 ETF (NYSE: FEZ) powered nearly 12% higher on heavy buying volume before pulling back slightly. #-ad_banner-#This ETF holds the biggest, and arguably strongest, European companies, including Total (NYSE: TOT), Sanofi (NYSE: SNY), Bayer, Siemens (NYSE: SI) and Banco Santander (NYSE: SAN). FEZ has been a huge… Read More

You can’t keep the Old World down. That’s the conclusion I’ve come to after seeing the big surge over the past two months in European stocks, and particularly the blue-chip stocks of the Euro Stoxx 50 Index.  Since falling to its 2014 low Feb. 3, SPDR Euro Stoxx 50 ETF (NYSE: FEZ) powered nearly 12% higher on heavy buying volume before pulling back slightly. #-ad_banner-#This ETF holds the biggest, and arguably strongest, European companies, including Total (NYSE: TOT), Sanofi (NYSE: SNY), Bayer, Siemens (NYSE: SI) and Banco Santander (NYSE: SAN). FEZ has been a huge winner over the past 12 months, especially relative to stocks in the S&P 500 index, with a total return of nearly 30%. These gains are particularly impressive when you consider that just a few years back, European stocks were largely considered toxic. Who could forget all of those sovereign debt default worries, the social unrest and literal riots in the streets in protest over austerity, a sinking euro and the capital flight away from the region’s equity markets? Well, those things now appear a distant image in the Old World’s rear view mirror. And there looks to be more opportunity… Read More