Tag Archives: Stock Market

3 Common Diversification Mistakes

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Dear Mr. Market:Diversification 2

Whether you handle your portfolio or hire a professional to manage it, there is no way you have not heard of the importance of diversifying your investments. The reality is, however, most investors fall prey to one of three major diversification mistakes; which of the three is your issue?

First and foremost, let’s briefly review what diversification is:

Investopedia defines Diversification as: ‘A risk management technique that mixes a wide variety of investments within a portfolio. The rationale behind this technique contends that a portfolio of different kinds of investments will, on average, yield higher returns and pose a lower risk than any individual investment found within the portfolio.’

At first glance this makes sense and doesn’t appear to be complex, right? We find that investors typically appear to be in one of three different camps when it comes to diversification:

  1. Under Diversification
  2. Improper Diversification
  3. Over Diversification

Let’s take a moment to look at each and how investors can get their portfolios back on track. Continue reading →

InvenSense (INVN) : Motley Fool’s Secret Wearable Technology Stock!?

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INVN #2Dear Mr. Market:

Technology is a bit like true love. You have to believe in it but it can also bite you in the ass.
Read through this article and you’ll see how this relates to a particular investment!

The technology Industry can be a challenging sector for investors. Perhaps the best way to describe it is with a popular saying … “the one constant is change itself.” Plenty of analysts and investment firms scour through stock ticker symbols looking for the next Apple (AAPL), Amazon (AMZN) or Google (GOOG).

We couldn’t help but notice the Motley Fool’s recent …shall we say, “stock pitch” about a company that could be your next homerun! If you’re a die-hard Apple fan, wouldn’t you like to know who their next HUGE inside supplier is? Rewind the clock and take for example the desktop computer or the cell phone you have within inches of your hand right now…

Put Apple, Sony or IBM on the shelf for a minute and think about investing in the next company that has a stake in every sale regardless of the brand you choose? In other words, buy the “chip” or technology that’s inside of each device instead of trying to figure out which phone or computer manufacturer is going to win the battle. Continue reading →

MPG Core Tactical 60/40: April 2014 Performance Update

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MW-BB798_sm6040_20130422180557_MDDear Mr. Market:

Unless you’ve never picked up a financial magazine or read the business section of any newspaper, you have undoubtedly heard of the old investment adage “Sell in May and go away”. Many financial “experts” and journalists do their best to paint the summer months as those that are primed to underperform. Does history always repeat itself in exactly the same way? Nope. It’s not hard to find investors who sold last spring (or even the one prior) in anticipation of a nasty summer and they are still in cash or underweight equities. If you’re in that boat and don’t trust the stock market, you may sleep better at night for now but in the interim you’ve lost opportunity cost and missed another bull market.

The flip side to this is that bearish investors will eventually be right! The S&P 500 has not had a correction of -10% or more since October 3, 2011. Like many investors out there we firmly believe a correction of -10% to -20% is coming this year but we don’t think it will be the start of a bear market. The challenge behind all of this, however, is that the longer we go without a healthy correction the deeper and more severe the inevitable sell-off will be. Continue reading →

High Frequency Trading – How does it impact you?

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HTF robotsDear Mr. Market:

The markets are constantly moving from one headline to the next – some of them having a profound impact on the markets. Last Sunday night “60 Minutes” aired a topic that has been lurking in the shadows for years, suddenly it jumped up and grabbed headlines raising concerns and paranoia with investors. High Frequency Trading (HFT) has dominated headlines over the last week prompting a federal investigation and hours of debate.

Michael Lewis, author of “Flash Boys”, has been on a publicity tour claiming the U.S. Stock Market is ‘rigged’. Is the average investor at a disadvantage, on the outside looking in at the security exchanges? This week we encourage you to view a letter being sent to our clients and friends of the firm (High Frequency Trading letter) Continue reading →

MPG Core Tactical 60 /40: March 2014 Performance Update

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MW-BB798_sm6040_20130422180557_MDDear Mr. Market:

March has turned in another month of stubborn market defiance as the investment world is waiting for a correction yet it never seems to come or fully develop! It’s without question that many of the warning signs continue to lurk below the surface but the S&P 500 has still managed to tack on about another +1%. Year to date we’re just about 1% of where we started 2014 but it sure feels uncomfortable for many.

If this is your first time reading about our MPG Core Tactical Portfolio please refer back to our first post. (click here) In short you will see what adjustments we make throughout the year on a $1 million dollar portfolio and how that performs relative to a portfolio that is rebalanced once per month with an allocation of 60% Stocks and 40% Bonds. Continue reading →

Update: March Madness: Final Four Investing Bracket 2014

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March MadnessThe 2014 NCAA Basketball Tournament certainly had an eventful weekend!  52 games have been played across the country with 5 of them going into overtime. The $1 Billion that Warren Buffett offered to anyone that had a perfect bracket is now a distant memory. Every year there are plenty of surprises and this year has been no different:

  • 3 of the 4 teams that were seeded as #12 in their brackets posted wins over teams seeded #5! The one team that lost was beaten by only 3 points in overtime!
  • #1 seed and ‘media darling’ Wichita State lost to #8 Kentucky in the 2nd round.
  • The 2 longest winning streaks in the country have both come to an abrupt end – Wichita State with 35 and S.F. Austin with 29.

 Here are some other mind boggling numbers to take into consideration with the NCAA Tournament:

  • The odds of winning Buffet’s $1 Billion prize was 1 in 4,294,967,296!
  • It is estimated that Vegas takes in over $100 Million from bets on the NCAA Tournament – experts think this represents only 4% of all the money wagered on games!
  • The NCAA tournament costs businesses $1.7 Billion in lost productivity during the month of March.

Continue reading →

Should You Buy Target (TGT) Stock?

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Target InvestigationDear Mr. Market:

With the holiday season now in the rear view mirror U.S. consumers are being reminded of the world we live in.  In the middle of the holiday shopping season Target made an announcement that had an impact on millions of individuals.  On December 19th Target announced that 40 million credit and debit cards had been jeopardized by a cyber attack.  Since then the number of cards has grown to 70 million, it has been reported that the number could grow to as many as 110 million!  Just last week Neiman Marcus released news that it is dealing with a similar situation and other retailers are likely to be in the same boat in the coming weeks.

On Friday (January 10th) Target announced that the security issue had a negative impact on their holiday shopping results.  Stores saw sales decline up to 5% (depending on location) when compared to the previous years results.  When 4th quarter earnings are announced on February 26, 2014, the additional expenses the company has incurred due to the hacking incident will certainly have an impact.  CEO Greg Steinhafel announced that 4th quarter EPS (earnings per share) were lowered to $1.20 – $1.30 from the previous guidance of $1.50 – $1.60.  Continue reading →

Mutual Funds’ dirty little secret….Capital Gains Tax

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cap gains tax cartoonDear Mr. Market:

With one of the strongest stock market years on record many mutual fund investors will end the holiday season by unwrapping a lump of coal. In January most mutual fund companies and the IRS (Internal Revenue Service) will mail out Form 1099-DIV. 2013 will bring mutual fund investors capital gains distributions ranging from 6% to 60%. It’s no secret that we’re not fans of most mutual funds and capital gains distributions are just one more reason.  Today we will take a moment to address an issue that every investor (especially mutual fund investors) needs to be aware of – Capital Gains Distributions.

Capital Gains Distribution – The payment of proceeds prompted by a fund manager’s liquidation of underlying stocks and securities in a mutual fund. Capital gains distribution occurs when a mutual fund manager liquidates underlying positions that have made gains since they were added to the fund. Capital gains distributions will be taxed as capital gains to the person receiving the distribution. (Source – Investopedia.com)

 When a mutual fund sells any position at a profit it creates a capital gain, these can be either short-term or long-term.  By law mutual fund companies are required to distribute these gains to all of their shareholders.  If the position was held for less than a year it will be considered short-term. These are distributed to shareholder as income dividends and taxed at their ordinary income rates.  Long-term capital gain distributions (over one year) are taxed as follows: 0% for taxpayers in the 10% and 15% tax brackets, 20% for individuals in the 39.6% bracket and 15% for all others.  The key thing to remember when looking at mutual funds is that the investor has absolutely no say as to when positions are purchased or sold within the fund and the taxable consequences that are incurred. Continue reading →

How Should your Portfolio be Performing now?

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outside boxDear Mr. Market:

How is my portfolio doing this year? Am I on track for retirement? Why is the market up big but I’m not? What would my portfolio look like if the market tanked again like it did in 2008? I’m in cash right now because I feel stocks have moved too high but I don’t trust bonds because we all know where they’re headed.

These are some common and very typical questions many investors are asking themselves this year. If any one of these questions applies to you or feels familiar, don’t think you’re alone! One common thread among all these questions or concerns is benchmarking. What exactly is a benchmark and which one is appropriate for you?

Far too often investors compare themselves to other investors, strategies or benchmarks that are completely unrealistic.  Investors need to take the time to truly understand who they are and what their goals are before they compare themselves to anyone or anything!   Let’s put this in perspective…. Let’s say you decided you wanted to start swimming to get in shape.  Would you expect to get in the pool and swim times comparable to Michael Phelps (winner of 22 Olympic medals) within a couple of weeks?  Of course not… that would be ludicrous and clearly not the right athlete to try and compare yourself to!  As crazy as this sounds many investors have similar expectations with their investment portfolio. Continue reading →

Sorry Mutual Fund: You’re Fired!

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always done it that wayDear Mr. Market:

It has been said that eight of the most expensive words in the business world are: “Because we have always done it that way!”  How often have we heard these words in our personal or professional life?  Where would we be as a country if we embraced this phrase?  Isn’t it safe to say life as we know it would not be the same if generations before us didn’t challenge the norm and truly “think outside the box”?

For decades Wall Street has fought change and attempted to maintain a shroud of secrecy with investors.  Mr. Market has become very skilled at pushing aside information and research that questions the norm and in many cases proves him completely wrong.  In this article we will look at some facts and figures that simply can’t be argued with or twisted into something that they are not.  If you are an investor who owns any mutual funds you need to read this! Continue reading →