04/05/2006
The numbers are in, and they tell a tale of a market off to a very strong start. Last Friday's closing bell marked the end of the first quarter, and after the dust settled and the final figures were tabulated, stocks had posted their best quarterly gains in seven years.
The S&P 500 rose 3.7% in the first three months of the year, its best January through March performance since the first quarter of 1999. The Dow Jones Industrial Average also climbed nearly 3.7% in Q1, while the tech-heavy Nasdaq Composite banked over 6% gains in the first three months of 2006. I am happy to report that the Fabian Domestic Fund Composite, a selection of exchange traded funds (ETFs) we use to measure the overall performance of the market, was up 6.23% in the first quarter.
So what was the reason for the strong move to the upside? Well, basically it was the surprising strength of the U.S. economy. The economy posted robust gains in Q1, and that was after a disappointing final quarter of 2005 that led many to believe there would be more pain to kick off the year.
The solid move in stocks is even more impressive if you consider that it happened in the face of rising interest rates, a slowdown in the housing market, the threat of bird flu, continuing Middle East violence and higher energy prices.
Going forward this market will concentrate on earnings reports and the Fed's actions with respect to interest rates. So what's going to happen? Will stocks continue climbing from current levels, or will this recent bull run stumble?
Well, I have my suspicions, but I can't say for sure, and anyone who tells you he or she can predict what will happen to this market is flat-out lying to you. I prefer to be honest with my audience, as I know from nearly three decades in this business that you have to be objective if you expect to get anywhere.
It's this objective approach to investing that has been the philosophical driver of my Successful Investing service for 29 years. Our trend-following methodology is based on a proven plan for knowing when to get in, and more importantly, when to get out of the stock market.
In keeping up with the needs of our changing subscriber base, we created our High Monthly Income and ETF Trader services with the same philosophic guide, but we tailored the services to fit different investment goals.
Those who are in the income investing stage of life already have their wealth, but are looking for ways to manage and preserve it. That's the purpose of the Fabian High Monthly Income service.
For those aggressive types out there who are looking for big gains over short periods of time, we created the ETF Trader service. The missions may differ, but the essence of our approach remains consistent.
I invite all of my Making Money Alert readers to find out how our trend-following strategies can help you achieve the wealth you deserve.
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In Monday's Wall Street Journal there was a great article on what's been happening at the once-mighty Fidelity Investments. It seems as though over the past year, the bigwigs at Fidelity have taken a hard look at themselves, and apparently they haven't been fond of what they've seen.
Here's the money quote from the WSJ piece:
"After a generation of beating the competition, Fidelity's stock funds were literally in the middle of the pack. Some Fidelity flagships were among the dogs: The $50 billion Magellan Fund, once an icon of success, was being beaten by more than 80% of funds of its kind. Fidelity's long-dominant market share was shrinking."
I wish I could say that Fidelity's performance anxiety comes as a surprise to me, but unfortunately for them it does not. As a long-time observer of trends in the mutual fund industry, I've known for some time that things at Fidelity aren't what they should be. Now finally the company has acknowledged some of their shortcomings and is taking steps to get back to its former glory.
Management shakeups, a new way of recruiting talent and a new compensation structure for its analysts are just a few of the measures being taken by Fidelity. But the task of getting this behemoth back into fighting shape isn't going to be easy, and they have a very long way to go.
How much ground do they have to make up? Well, consider that last year investors pulled more money out of Fidelity than they put in, the first time this has occurred in a year when stock prices had not declined significantly. A decade ago Fidelity held about 20% of the market for U.S. stock mutual funds, but today that number has been whittled down to just 15%.
I have a few theories on why this has taken place, and I don't think it is due solely to management folly at Fidelity. I think people are coming to the realization that the performance most mutual funds offer is not all that attractive, especially considering the high management fees and oppressive restrictions placed on your own money.
The mutual fund industry at large, not just Fidelity, is going to have to start doing things differently if they want to compete with ETFs. As listeners of my radio show or subscribers to any of my subscription services already know, I am a huge fan of ETFs and I advocate using them as much as possible. As more and more people catch on to what I've been saying about ETFs, you are likely to read about more and more shakeups top mutual funds.
You heard it here first.
"Love, work and knowledge are the wellsprings of our life. They should also govern it."
--Wilhelm Reich
This little gem was sent to us by Making Money Alert reader Wesley. Thanks a lot for the contribution.
Wisdom about money, investing and life can be found anywhere. If you have a good quote you'd like me to share with your fellow Making Money Alert readers, send it to me, along with any comments, questions and suggestions you have about my radio show, newsletters, seminars, or anything else.