December 31, 2011

2011 Results Are In - How Did Your Financial Guy Do?

2011 is now in the books and the S&P 500 lost less than 1%.

If you held some dividend paying stocks, ETF's and mutual funds (and you should have), you made a few percent in 2011.

Do yourself a favor, compare that with the results from your brokerage account to see if what you are paying your financial guy is worth it ?!  See the dirty stockbroker trick here.

My guess is that it won't be.  You'll see that your account probably lost a few percent.  The difference?  Commissions, concessions, churning and fees. 

Make the move in 2012 to handle your own account, its a lot easier than the investerati would have you believe and you'll be certain that the person who cares the most about your money is handling it - YOU !!

December 12, 2011

Barrons Picks For 2011, Looking Back

I love reading Barron's which is a weekly publication from Dow Jones.  I look forward to it delivered to my house every Sunday.

Every year Barron's produces ten stock picks for the next year and the last issue gave us those picks along with the results for the picks from last year.

To their credit, Barron's doesn't shy away from their results (unlike your stockbroker).

Bottom line is that the picks for 2011 have produced a return of -6.9% compared to the S&P 500 return of -1.9% (as of 12/9/2011).

I bring this up because it shows yet again how hard it is to keep up with a simple index like the S&P 500.  Imagine how your stockbroker is faring (after charging you some hefty fees) if the smart guys at Barron's can't beat the index!

December 2, 2011

Are Bond Funds A Good Idea?

As most investors know, bonds are a good idea and in fact, if you follow this blog, listen to me on the radio or seen any article I've written, then you know I am a proponent of having your age as a percentage in fixed income some of which should be invested in bonds.

But bond funds are different.  Bond funds typically buy bonds of different maturities from different entities, corporate, country, junk, etc and charge you a fee to manage it.  It doesn't matter what type of bond fund it is, the commonality is that when interest rates go up, the bonds inside the fund will decrease in value and if you own a bond fund while interest rates are rising, it'll be hard for that bond fund to make you any money.

Take note that many bonds use leverage as well and while that works in your favor sometimes, when interest rates do rise, bond funds that have leveraged themselves to give investors a few extra basis points in yield will get crushed, as they did in 1994.

Bonds too will go down in value but not if held to maturity and that's where you have an advantage over a bond fund, you don't have to be fully invested in bonds whereas they do.  When a bond matures, you can reinvest the principle back into a new bond paying a higher rate and not have to pay a percentage to do it!