Posts tagged " mutual funds "

Investment Objectives

September 24th, 2009 Posted by Stocks No Comment yet

Investing Principles and Methods Series, September 24, 2009.

I have a friend who always asks, “What is your objective?”  What do you want to achieve in your investment goal?  There are many objectives or motivations for you to join me in this investment series.  What is it?  My goal in investment isn’t unique; it is to earn a 15 percent annual compound return on my capital.

What are some of the professional money managers earning on their investment (capital)?  I ran a search using Scottrades’ database on mutual funds. Out of 10,878 funds, the best performer for the past 5 years is currently a fund ran by “T Rowe Price Int: Lat” PRLAX with 28.51 % annual average return.  How many of the 10,878 funds achieve more than 15% average annual return? The number is 105, less than 1% of the total funds population. That means 10,680 funds, representing 98% of the population, delivered an annual average return of less than 15% over the past 5 years.   Of that, 6366 funds (56% of population) earned less than 5 percent with the rest somewhere between 6 and 15 percent.

Perhaps we need to check out what the returns are for the Dow if we invested 5 years ago– from September 2009 the month end closing was at 9,748 and if we go back 5 years, on September 2004, it was at 10,080. If we had invested in 2004, we would have made a loss as of September 2009.  As you can see, if we observed the performance in isolation without comparing them to other opportunities it would have been difficult to have a proper perspective.  In our list of funds, the top 107 all beat the Dow substantially.  Not bad at all.

My goal is earn 15 percent or be among the top 1 percent of the professional money manager/ mutual funds. What is your goal?  I am not a fortune teller.  I could only do what I know.  So far I am satisfied not because it is a success but that I have done my best.  Happy investing to you!

PS: You will find very little uniqueness or original ideas coming from me.  Most if not all, came from Benjamin Graham.  The rest perhaps came from Warren Buffett.  Whatever errors you find– that comes from me – perhaps in my interpretations and applications of the principles.

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Investing Principles and Methods Series

September 16th, 2009 Posted by Stocks 5 comments

What do I want to accomplish in the next year at Investor Intelligent?  I have been looking at how the average person views investing.  In this area there are two extremes, the most common has to do with investing in money market or mutual funds and the other is to do it yourself investing or trading.  I am not going to focus too much on the trading aspects as there are many resources available in the market.  Most traders use technical analysis as a road map indicating when to buy and sell stocks.  While I think there is a use for the technical analysis I am not going to be focusing on this.

What I will focus on is the fundamentals of individual companies. Our purpose is to investigate a company and discover for ourselves how they made money in the past and how much they are going to make in the near future.  We want to be able to assess the value of the company.  What is it worth to us in terms of three scenarios; 1) by itself, 2) relative to their competitors, and 3) relative to other investing opportunities?  The reason is obvious we need a value in order to assess if we can buy the company or a portion of the company, i.e. stocks at a fair price.

 In this series my concern is how an individual investor evaluates the company behind the stocks.  On one hand it is easy to use the reports written by Wall Street Analysts for most stocks covered by the Analysts.  In addition, there are all of the financial media outlets such as Mad Money, CNBC, Bloomberg, etc.  Also, don’t forget all of the financial newspapers and magazines.

On the other hand if you are like me and you are not sure or if you think there is an inherit bias; reporters reporting  simply need to have something to write about – most of the time the contents don’t even make sense – often times linking causes and events that defies common logic, sometimes the reasoning is so logical that makes you pondered if the reporter isn’t putting much work in the article, simply settling on an easy way out.

Then there are the expert authors whose writing is to educate you on the company or stock. Unlike the Analysts and the reporters the motivation behind the writing has to do with getting traffic.  You might have seen Jim Cramer, the host of Mad Money on CNBC.  I like the guy and his brand of helping the trader or speculator with money making ideas.  His motto is that he is not there to make friends, he is there on the air to help you make money.  His primary concern is with the traffic; number of people tuned in to watch.  All the rewards he gets are somehow tied into the traffic he generates.

My interest in writing is similar to Jim Cramer that is to help you make money.  While this is the ‘want’ there is no way I can claim that it will happen.  However, I’m more interested in helping the investors and not so much the traders or speculators.  I will go into the distinctions when we get started.  Unlike Mr. Cramer I don’t mind making a few friends along the way.  My payoff is very similar to Mr. Cramer the more people I reach out to, the better my rewards are in terms of building traffic to my website.

My goal is to write something every day.  We will start in the next few days. I will be using the ‘Security Analysis’ by Benjamin Graham and David Dodd; the classic 1934 Edition as the textbook for a general reference to the subject.  I want to make this as easy as possible for anyone to follow five times a week.  I hope to clarify the topic and expand on it using real live examples.  The purpose is not a book review but that of an assessment of the tool we have at our disposal in our investigation of public companies.

As I go through the book, I will assess the companies as I have done in the past and present for my own portfolio.  You as the reader will get the full picture of how I assess, evaluate, and manage a portfolio.  You can follow along daily.  However, please understand that I am not your financial adviser.  My purpose is to provide you with a real life example of what I do.  I do not tell you that you will be successful if you follow my method.  There is no way to tell if I am any good.  In the end you should use this only as an ‘informational pastime’.  It is something to keep me practicing my writing – keeping me entertained and hopefully, you get to benefit along the way.

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