Making Money Alert
Bear Rally Mode
04/17/2008
We've seen it time and time again this year. The it is the phenomenon of a bear market rally. That's what happened Wednesday, April 16, with the major averages all surging more than 2% in the trading session.
Now there is no denying we had a solid day of market upside, but the problem is that there is a lot of resistance in the market. As stocks go up, they'll inevitably run up against technical resistance levels. The key resistance level on the S&P 500 is 1,375, which can be seen in the chart below.
Yes, we are almost there, but not quite. If we see stocks blow past -- and stay above -- this 1,375 level, we could be looking at a sustained rally. If we fail to go above 1,375, or if we go above this level and then come back down hard, it will be more business as usual in this tough 2008 market environment.
Pucker Up! 10 Lemon Funds You Don't Want To Own
It's Fabian Lemon List time again, and that means it's time to take the top 10 underperforming lemon funds to task.
If you don't know what a lemon fund is, let me explain. A lemon fund is a mutual fund whose performance isn't living up to its peers. When I say a mutual fund's performance, I am talking about its average annual return during a given time period. When measuring the performance of a mutual fund, we look at a fund's one-year annual return, its three-year average annual return and its five-year average annual return.
Looking at mutual fund performance over one year, three years and five years allows us to really see which funds are performing well over several distinct time periods. It also allows us to see which funds are in need of a tune up.
When it comes to the standard by which each fund is judged, you have to compare apples to apples -- or, in this case, you have to compare individual mutual fund performance with that of its benchmark.
We define a mutual fund's benchmark as the average performance of all of the funds in that mutual fund's category. In this context, a category means a mutual fund's objective.
For a fund to make it onto the Lemon List, it must under perform its category (objective) average for each of the time frames measured: one year, three years and five years.
If you think Q1 was bitter for stocks, then it was really sour for this quarter's lemons. All told, there were 2,144 funds on the Lemon List, totaling $870 billion in assets.
Things were particularly bad for the 10 largest Lemon List funds. If you are currently invested in any of the funds in the table below, my advice is to get out while you still can.
Name | Ticker | QTR | 1YR | 3YR | 5YR |
Fidelity Equity-Income | FEQIX | -9.7 | -9.4 | 5.73 | 12.35 |
Templeton Growth A | TEPLX | -11.8 | -10.5 | 5.78 | 14.81 |
Fidelity Growth & Income | FGRIX | -10.37 | -9.27 | 1.73 | 6.55 |
Fidelity Dividend Growth | FDGFX | -9.93 | -9.16 | 4.12 | 8.2 |
Vanguard Windsor | VWNDX | -12.48 | -15.86 | 2.67 | 11.35 |
Van Kampen Comstock A | ACSTX | -8.9 | -11.53 | 3.06 | 11.76 |
Vanguard Asset Allocation | VAAPX | -9.44 | -4.11 | 6.19 | 11.3 |
Longleaf Partners | LLPFX | -10.89 | -13.2 | 4.17 | 10.29 |
Fidelity Investment Grade Bond | FBNDX | -0.52 | 0.72 | 3.32 | 3.4 |
Vanguard Pacific Stock Index | VPACX | -8.18 | -7.87 | 10.39 | 18.15 |
For the complete version of the new Q1, 2008 Lemon List, click here.
ETF Talk: Real Estate ETFs
ETF Talk has delivered key facts to you during the past couple of months about exchange-traded fund (ETF) sectors that range from some of the world's most precious resources -- from agriculture and precious metal commodities to water. This week's ETF Talk examines a popular turnaround sector -- real estate ETFs. That sector increasingly may be catching your attention as real estate market gyrations persist.
You may be surprised to learn that there are about 30 real estate ETFs, tracking both domestic and international indexes.
One real estate ETF with a performance that may prove notable in the months ahead is the UltraShort Real Estate ProShares (SRS). SRS seeks investment results that are twice the inverse of the Dow Jones U.S. Real Estate Index. That index measures the performance of publicly traded stocks in the U.S. real estate industry. The Ultra Short designation of SRS means that when the Dow Jones U.S. Real Estate Index is down, SRS is up twice that amount, and vice versa.
While this fund may seem like a sure thing when it comes to profiting from the struggling real estate market -- you may want to think again. Its quarter-end market price performance, as of March 31, 2008, was down 9.93%. The fund's price is up 30.79% for the past year. As a result, SRS has not been any utopia for investors seeking to prosper from the miseries of the real estate meltdown.
RWX seeks to closely match the returns of the Dow Jones Wilshire Ex-US Real Estate Securities Index. That index measures the performance of publicly traded real estate securities in countries outside of the United States. After taxes, the fund had a fourth-quarter 2007 loss of -2.34%.
DRW is an ETF that seeks to track the performance of the WisdomTree International Real Estate Sector index. That index tracks the performance of companies in developed markets, outside of the United States and Canada, which pay regular cash dividends on shares of common stock that are in the international real estate sector. Its first-quarter 2008 performance was down 15.41%.
When the real estate market bottoms out, the funds that place long-term bets on its recovery should do well. However, even the UltraShort real estate fund we highlighted is struggling. It shows just how dicey investing in real estate can be -- not only for those who buy homes and buildings, but also for the rest of us who might be tempted to delve into real estate ETFs.
You're Invited To An Open House
This event will take place on Saturday, April 26, 2008. I will be doing a live radio broadcast from our in-house studio, and I would love for all of my Alert readers to join me.
It's been nine years since I began broadcasting my radio show, and this event will help me celebrate with all of you in style. If you've ever wanted to see a live radio broadcast, or if you are curious about where Fabian Wealth Strategies conducts its daily operations, then you need to be there.
Come tour our new offices, stay and watch the radio broadcast, and enjoy food and drink with the Fabian family. Our offices will open at 9 a.m., and the radio broadcast will begin at 10 a.m. and conclude at 11 a.m.
This is an excellent opportunity to meet the Fabian Wealth Strategies team and learn more about our asset management firm. The offices and radio studio are located at:
260 East Baker St., Suite 200
Costa Mesa, CA 92626
For directions, click here
Please RSVP for this event by calling us at 800.391.1118.
We look forward to seeing you there!
A Simple Plan
Want to fix your ailing mutual fund portfolio but aren't sure how to begin the process?
If this describes your situation, don't fret. I have devised a simple plan to help you get back on track toward a more prosperous 2008.
Here are the five steps you need to take right now.
1. Type, Ticker and Fund Family
What kind of fund is it? What is the ticker symbol and which company manages it. This is the most basic info, but you need to know it before you can proceed with your research.
2. Fees, Commissions, Surrender Charges, 12b-1 Fees
Knowing how much you are paying might open your eyes to what your funds really cost. It might even irk you enough to get you to make a change.
3. Bull and Bear Market Performance
Most funds do well in the best of times, but how do they handle adversity? If your fund doesn't measure up during rough patches, you need a change.
4. Ratings and Relative Performance
Morningstar is a company that provides ratings for mutual funds, and if you look up your fund on Yahoo! Finance, you will see the Morningstar ratings right there. Find out how your fund is doing in relation to other funds of the same kind. If your fund is floundering, you need to make a change.
5. Comparable ETFs
Here's the most important step in this process. If you're not happy with your fund after walking through the first four steps, then you need to find a comparable ETF to replace it. This can be done by identifying the type of fund (step 1), and then looking for its ETF counterpart. Here again, you can use Yahoo! Finance to get you there.
Radio Show Changes 2
I've got great news for my radio audience. Beginning this Saturday, April 19, my radio show, Doug Fabian's Wealth Strategies, will be moving to a new time slot in the Phoenix, Ariz., area.
I will be broadcasting LIVE from 10 a.m. to 11 a.m. every Saturday on 1510 KFNN.
This time slot change has me very excited, because it will allow me to answer your questions live on the air and after the show. I would like to encourage all of my listeners to call me with their investment related questions at 888.300.3684 or e-mail.
For more information on show times, and for some great Fabian content, please visit the show's Web site.
I want everyone to know that I am deeply committed to spreading the message about safety-first investing using my favorite tools, exchange-traded funds. My mission is to empower investors with the knowledge they need to achieve their financial dreams.
Here's to the best within us.
Listen To A FREE Replay Of Doug's Retirement Income Conference Call
Are you prepared to live out your retirement for 25-30 years? How will you generate the income you need from your retirement plans and real estate? How will you stay ahead of inflation and maintain your standard of living?
These are important questions, and Doug Fabian can help you answer them all.
Retirement income investing is a whole new ball game. It's about the proper asset mix; the right investment products, and the right income investing strategies. Most people are comfortable with growth investing by the time they've reached retirement, but they are not prepared to make the most important decisions of their lives -- the decisions that will help generating retirement income.
To help investors get on the proper path to reaching their retirement goals, Doug recently hosted a conference call to share his views on how to generate the income you need from the assets you've worked so hard to accumulate.
Now you can listen to a FREE replay of Doug's first conference call. The call was a huge success, and now you can listen to it anytime you like, absolutely FREE.
Blogs Away: A Fabian Aural 2
Want to hear my latest rant about the state of the financial markets? Well, now listening, and even watching, is as easy as a mouse click.
To listen to the audio blog, simply click here.
The Wisdom of A "Hero's Song"
Smoke and explosions surround me
A flood of hate, it drowns me
I cannot live this way
No I cannot live
With doubt and confusion
They find me
They run up right behind me
I cannot die this way
No, I will not die this way—Brendan James, "Hero's Song"
The heart-wrenching lyrics in this song reflect the state of mind present in so many of our brave military members serving in Iraq right now. I say right now, as in right this very moment. When you read this, think about what it must be like to live in a constant state of stress imposed in a combat zone. I guarantee you'll appreciate your present circumstances much more, however difficult they may be.