Investment Myths Busted 01 (Jul 08 - Dec 16)

Re: Investment Myths Busted

Postby millionairemind » Mon Jan 04, 2010 8:14 pm

I hope this puts to rest the arguments about the merits of DCA and Investing for the Long Term.....

Dow, S&P End The Decade Down
Posted by Tiernan Ray

And that’s a wrap.

The Dow Jones Industrial Average ended 2010 down 120.5 points, or 1%, at 10,428.05. The S&P 500 was off 11 points, or 1%, at 1,115.10, and the Nasdaq was down 22 points, or 1%, at 2,269. Marketwatch’s Nick Godt has a nice sum of the year and the decade. The Dow was up 18.8% for the year, the S&P was up 23.5% for the year.

For the ten-year period, the Dow is off 9.3% and the S&P off 24.1%. The Nasdaq was off 44.2%.
http://blogs.barrons.com/stockstowatcht ... cade-down/
Last edited by millionairemind on Mon Jan 04, 2010 8:37 pm, edited 1 time in total.
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Re: Investment Myths Busted

Postby kennynah » Mon Jan 04, 2010 8:21 pm

i agree with MM...

market will always gyrate and although in the very long term, it has been proven that indexes rise, much like our housing assets...but that is in the very long term... perhaps in the order of decades ....

the truth remains that the market will exist far longer than our lifespans... if we are hoping that in the next 20 years, our investments in XYZ company will pay off handsomely, we'd better be right at that investment..becos, once that 20 years go by, the chances of us having another 20 years to live diminish significantly...and the reality is that there's no time machine to bring us back 20 years ...

so, i would be very careful about wanting to bet on a "make or break" deal that lasts 20 years... i dont wana live a life of regret...
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Re: Investment Myths Busted 1 (Jul 08 - Feb 10)

Postby millionairemind » Tue Jan 19, 2010 3:11 pm

The Annualized Total Return Roller Coaster
January 19, 2010 latest update

Click to View Here's a sobering set of charts that will especially resonate with those of us who follow economic cycles.

Imagine that ten years ago you invested $10,000 in the S&P 500. How much would it be worth today, adjusted for inflation with dividends reinvested? Brace yourself: Your investment has shrunk to about $7,4246, an annualized return of -3.17%. That's a 27.5% loss.

And this is an improvement over the same ten-year return as of March, when your annualized return would have been -5.93%, for a total loss of 45.7%.

Now let's imagine that we time-travel back to September 2000 and pose the same question. Your ten-year inflation-adjusted gain would have been 396% for an annualized return of 16.13%. As the chart illustrates, investment performance with a 10-year timeline has been a real roller coaster as far back as we have data.

If we extend our investment horizon to 20 years, the roller coaster is less volatile with higher lows and lower highs. The volatility decreases further with a 30-year timeline. But even for that three-decade investment, the annualized returns since the 1901 have ranged from less than 2% to over 11%.

As these charts illustrate, and as many households have discovered over the past two years, investing in equities carries risk. Households approaching retirement should understand this risk and make rational decisions about fixed income alternatives for that part of the nest egg that will pay non-discretionary expenses not covered by Social Security and pensions.
http://www.dshort.com/charts/SP-returns ... -dividends
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Re: Investment Myths Busted 1 (Jul 08 - Feb 10)

Postby kennynah » Tue Jan 19, 2010 3:23 pm

so sad....
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Re: Investment Myths Busted 1 (Jul 08 - Feb 10)

Postby winston » Sun Jan 24, 2010 8:07 pm

A Buy And Hold Strategy Is No Longer A Viable Option - In today's market, you are doing a disservice to yourself if you buy stocks and forget about them. With all of the variables coming into play (credit worries, oil prices, recession, stagflation) you need to take an active role in managing your money.

This means protecting profits and even more importantly, limiting your risk. Placing stops below critical support levels will lower risk and give you the best chance for a profitable trade.

Even if you do buy a stock and you are okay with it having a big drop because you "know" that in the long run, it will come back, how much of your money is going to be tied up in this stock, for how long and how much could you have made if you put that money somewhere else?

You're not a mobster so don't forget about it, take an active role in managing your stocks.


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Re: Investment Myths Busted 1 (Jul 08 - Feb 10)

Postby winston » Thu Feb 11, 2010 1:15 pm

Investing lies we've all been taught

The financial crisis has turned old saws like 'bonds are safer than stocks' and 'government bonds are safer still' on their heads. The new rules? No rules.


By MarketWatch

Bonds are safer than stocks.

Government bonds are safer than those issued by companies.

And government bonds issued by developed Western countries are safer than those issued by emerging markets in the Third World.

So say three standard financial rules that have been repeated for decades to ordinary investors from Bakersfield to Boston.

But try defending those rules to anyone holding sovereign bonds issued by the governments of Portugal, Italy, Greece or Spain.

Safe?

Financial markets have now priced in a 30% chance that Greece will default within the next five years and a nearly 20% chance in the case of Portugal, according to CMA DataVision in London, which tracks the data. The perceived risks for Spain and Italy aren't much lower.

Sure, maybe the markets are being too gloomy. But the participants buying and selling bond insurance are sophisticated, and they can't all be stupid. Would you bet your life savings that they are wrong?

So much for the 'rules'
News that some European Union sovereign bonds are actually quite risky means yet another sacred cow of investing has been turned into hamburger.

One of the undertold stories of this financial crisis has been the way it's made mincemeat of so many of the financial "rules" we grew up with in previous decades.

Do stocks outperform bonds? Nope. That's what millions were told in the late 1990s. But since then, stocks have done worse. Indeed, stocks have done even worse than ordinary bank accounts, something that the old rules of money said was virtually impossible.

Are value stocks (in other words, cheaper stocks, usually in more established companies) safer than growth stocks? Hardly. Once again, that's what people were told. Many Americans who are nearing retirement were encouraged to load up on value stocks on the grounds they were safer, but the results were horrendous. Value funds actually plunged much further in the crash than those investing in the supposedly riskier stocks of faster-growing companies.

A potential crisis in sovereign bonds?

Will diversification protect you? That was another canard. Investors were encouraged to spread their money across different "investment styles" -- large-cap value, midcap blend, small-cap growth, international and so on -- in the belief that this diversification would keep them safe. So much for that. Those areas all fell together when the crash came.

Most of these investment styles are meaningless terms anyway. There is no more an asset class like "midcap blend" than there is an asset class "stocks that begin with a vowel."

The past few years have not been kind to the old, simplistic rules. Call it the Bonfire of the Inanities.

http://articles.moneycentral.msn.com/le ... aught.aspx
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Re: Investment Myths Busted 1 (Jul 08 - Feb 10)

Postby winston » Sat May 15, 2010 9:35 am

Another saying that has been screwing me is "Never Average Down".

It's precisely because I have a position that I understand the company and it's price action.

And when it's time to buy especially when fundamentals are improving, I tend to hesitate and remember that I should never average down.

I tell myself that I should let it go up higher first before I buy. Higher then becomes higher and next thing I know, it's way too high and that's actually the time to sell rather than to buy.

It's so difficult to have independent thinking and do the right thing when you have been brainwashed by all those "words of wisdom".

"Never Average Down" is to be applied only when it's on the way down. It's not be used when things have stabilized for a long time and you can see that fundamentals are getting better and the price action is on the uptrend.

It would be nice if we can reboot the brain once in a while and erase all those "words of wisdom".
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Re: Investment Myths Busted 1 (Jul 08 - Jun 10)

Postby kennynah » Sat May 15, 2010 12:40 pm

dont average down unless it is preplanned and with very exact preplan risk management ...

average up is fine, provided it is not topside heavy....
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Re: Investment Myths Busted 1 (Jul 08 - Jun 10)

Postby winston » Sat May 15, 2010 12:47 pm

kennynah wrote:dont average down unless it is preplanned and with very exact preplan risk management ...

average up is fine, provided it is not topside heavy....



You have a very clear mind. I need a few paragraphs to say what you can say in just two lines. :D
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Re: Investment Myths Busted 1 (Jul 08 - Jun 10)

Postby tonylim » Sat May 15, 2010 12:52 pm

I first bought Stamford Land at 0.67, it went down to 0.30 , I bought some .
It went down to 0.22 , I bought some, it went down to 0.19 , I also bought some.
If I did not average down, I won't be sitting on paper profit today.
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