11/23/2005
As I have said, equity markets turn on a dime and preparation is everything for an investor. So many investors react to the markets without the benefit of a solid plan they can execute in response to any market activity. As trend-followers, we always have two plans in place. One is our response if the market goes up. The second is the plan for if the market goes down.
The importance of a plan cannot be overstated. It's long been said that the stock market is guided by two emotions: fear and greed. It's absolutely true. Emotion drives the market, wholly and completely. What drives that emotion is the lack of a plan. You see, the plan is what will keep you on the right path with your investments regardless of what the market serves up.
Having a plan and sticking with it is the key to being a successful investor. However, what is the plan? How did you develop that plan? Do you have faith in the plan? If you don't trust the plan will work, you cannot put your money, trust and conviction behind it.
Nowhere is a rock solid plan for your investments more important than with your retirement assets—the money you have to grow, but you can't afford to lose. I'd like to help you put together a safe growth plan for your retirement assets. In fact, Ed Foster, President of Fabian Financial and I together have over 40 years of experience in successfully developing investment plans that protect and grow nest eggs just like yours.
We would like you to join us for a very special workshop entitled "Re-energizing Your Retirement". This is an evening dedicated to helping you learn how you can safely grow your retirement assets. We will be in Las Vegas on Wednesday, December 7, 2005 at the JW Marriott Las Vegas Resort at 6:30 pm. Or, you can join us in Santa Monica on Wednesday December 13, 2005 at the Santa Monica Doubletree at 6:30 pm.
We'll show you how you can avoid bear market losses and how you can easily capitalize on momentum plays for maximum profits in both domestic and international markets. We'll give you all of the tools and tips you need to become a proactive trend-follower.
Ed and I will give you a second opinion on your retirement investments. We will review your retirement investing strategy with an emphasis on improving your portfolio's performance, costs and overall risk management.
You'll hear first-hand, Ed's views on where the market is heading and what investments offer the greatest potential for growth as we start thinking about 2006.
You'll learn how you can save an incredible 50%-75% in fees by using exchange traded funds and generate spendable income for you and your family.
Would you like to make money in a declining market? You'll find out how you can make money in a declining market because trend-followers know that markets don't always go up.
Sign up now for this very special event because space is limited. Just $24.95 and you'll receive a free copy of my book, Maverick Investing—a $20 value! Call Becky at 800-391-1118 ext. 280 or sign up here: https://www.dougfabian.com/secure/SeminarOrder.jsp
Solid gains in the equity markets have pushed the Dow Jones Industrial average into the black for the first time since March of this year. The S&P's gains have pushed that index to its highs for the year, while the Nasdaq has been on a tear hovering at a four-year high. A few more days like this and we may eke out a decent gain this year after all.
Markets can turn on a dime. Our shopping list was ready to be put to work when Monday's strong close pushed us over the edge of our pre-determined buy point. My Successful Investing subscribers re-entered the markets with a fresh perspective on a shifting market.
The changing of the guards we witnessed brought growth back into the foreground as value and energy stepped out of the limelight. As a result, our buy recommendation focused on good, solid growth ETFs that are poised to carry this market through the upcoming growth season. Remember what I have said about November through April presenting the best growth opportunities for the entire year.
Stepping out of a declining market helps a trend-follower assess a rotation in the market and plan and prepare to re-enter with the new market leaders. This is a very important point to remember and it is at the heart of the Fabian Trend-following Plan. It is also, obviously, the best way to make and keep big gains in the market.
Our current buy allocation to the markets puts my Successful Investing subscribers 100% invested so we can take 100% advantage of the strength this market has to offer. Interested in what we're buying? We just re-entered this market and, as you know, the key to making the biggest gains is to be in at the beginning. Want to know what we just bought yesterday? Subscribe to Successful Investing right now and you will get our recent allocation advice just in time for the big gains.
Click here to learn more: https://www.fabianssuccessfulinvesting.com/order.php
It may be a little premature to start thinking about New Year's resolutions, but I want to plant the seed early. Now that we have re-entered the market and we have made a strong commitment to equities, it is imperative for you to consider making ETFs a part of your investing strategy. No longer are they the new kids on the block, ETFs have come into their own and have the market capitalization and the diversity to offer a compelling alternative to actively managed mutual funds.
Managed funds are just too expensive. They pay those fund managers a ton of money and it's coming out of your pocket. And I'm going to let you in on a little secret: most of those fund managers are so nervous about not beating the benchmark of the index funds, that they just buy the index with most of the money and charge you a huge management fee. The differential amount that they invest using their own strategies will most likely not elevate the value of the investment enough to justify the added expense associated with those funds. It's also important to remember that you are taking a risk in betting on those fund manager's picks as they could just as easily drag your investment below the benchmark as raise it above the benchmark. In essence, by purchasing mutual funds you have a 50-50 shot at beating the index fund. You do, however, have a 100% probability of paying about five times more for a managed mutual fund than for a comparable ETF.
There are 189 ETFs and plenty of good choices for every type of investor. In fact, for most every type of mutual fund, you can find a corresponding ETF for about 1/5 of the fees.
Just look at the following comparison:
Fidelity Magellan v. SPY: both are large cap blend funds, which means they are a combination of growth and value. They both have as some of their top holdings GE, MSFT, Exxon, Citigroup and AIG, They both have comparable percentage allocations to specific industries. In short, these two funds are very similar to each other and their investments will track almost equally. In fact, at the close of yesterday's trading, SPY was up .42% while Fidelity Magellan was up .39%. The one-year track records of the two funds are virtually identical. The only difference between these two funds is that SPY actually performed slightly better than Fidelity Magellan and SPY has an expense ratio of .11% which is nearly 1/6 of Magellan's .7%.
Additionally, Fidelity Magellan is now a closed fund with a new fund manager who is committed to taking more risk to try and shake the fund out of the doldrums. There's just no need for you to assume that extra risk because the fund manager is shooting for a miracle of restoring Magellan's luster of yesteryear. Save your money, buy the ETF and sleep better at night knowing your money is following the index as opposed to the whimsical pursuits of a fund manager on a lofty mission.
There are mutual funds that concentrate on specific sectors, but so too, there are ETF sector funds as well. With few exceptions, you can easily find an ETF that will correspond to virtually every type of mutual fund out there. There are sector ETFs for technology, biotech, healthcare, energy, natural resources, building materials, real estate, consumer staples, international as a group and by country. Additionally, there are ETFs for large cap, mid cap and small cap and also value, growth and blend. There is just an abundance of ETFs for all investment objectives. There are even bear market ETFs.
I encourage you to make 2006 the year you actively get into the ETF game. To learn more about investing in ETFs, check out my special report entitled "From Mutual Fund Mess to ETF Success" at http://www.dougfabian.com/radio/store.jsp
WARM WISHES FOR 2006
My dear friends, we are entering into a very exciting time of year for our families and for the markets. I would like to extend my warmest wishes to all of my readers at the beginning of this festive season. I hope you all have a happy and prosperous end of year.
Happy Thanksgiving!
--Doug