Mutual funds were created with the idea that one person can specialize and manage the investments of a large pool of money from multiple investors. Before the great depression mutual funds were called investment pools and mutual fund managers were called pool operators. The bull market of the 1920’s created a time of economic prosperity akin to the 1990s. The conceptualization of the pyramid scheme occurred at this time as well.

Ironically, the pyramid scheme had been debunked in 1920 when Charles Ponzi was arrested for offering investors unsustainable returns on postal certificates. The investors lost all of their money in Ponzi’s elaborate con job for which his name became synonymous. He was reportedly making a killing buying the postal certificates in Europe at low price and selling them at high prices in the United States. Con jobs in general like the one perpetrated in the movie “The Sting” with Robert Redford and Paul Newman were labeled “Ponzi Schemes.” The public never saw through the investment pool concept as a new form of Ponzi scheme.

Investment pools eventually became thought of as a rip-off in the mind of the public. This is because becoming a pool operator was like having a license to steal. Instead of focusing on the interests of the public who had money in the “fund” the pool operators would engage in risky investments because the money was not theirs. They would also pay themselves extremely large fees. It became very clear to the public that investment pools were a big-rip off in the aftermath of the stock market crash of 1929.

There was so much abuse by pool managers that the Security Exchange Commission (SEC) was formed in large part to stop these rip off artists. The SEC effectively shut down the more blatant con jobs. Then the securities industry came up with a fancy new name for investment pools to suck the public back in: “Mutual Funds!”

If your 401(k) provider offers an indexed mutual fund then put your money into that. An indexed mutual fund uses a stock market index such as the S&P500 to guide which stocks are bought. The biggest and oldest indexed mutual fund is the Vanguard 500 (VFINX).

A computer divvies up the cash in the fund to match the index as closely as a possible. As such, there is not fund manager to sitting on your hard earned retirement savings to rip you off in bogus fees.

ABOUT THE AUTHOR: Dr. Scott Brown, Ph.D., a.k.a. “The Wallet Doctor”, is a successful futures trader, real estate investor, and stock investor. Dr. Brown holds a Ph.D. in finance from the University of South Carolina. His 1998 articles in Technical Analysis of Stocks and Commodities were prophetic in predicting an impending stock market crash. He has helped many people become profitable investors by teaching them to look out over many years to spot stocks that are low and primed for rise in the new bull market. His second article met with approval by Dr. Bob Shiller of Yale University. Dr. Shiller is the economist that Alan Greenspan most highly regards who coined the term “Irrational Exuberance.” In 1998 he shouted to the world to “get out” of the stock market but now he is shouting to everyone that it is time to “get in!” The Wallet Doctor is not only sought after for investment advice and coaching in stock investing but also in futures trading and real estate investing.

Visit Dr. Brown’s site at http://www.BonanzaBase.com or sign up for his investment tips at http://www.WalletDoctor.com

Look back over the years and try to remember how many different stocks and mutual funds you have owned. Suppose you had owned only 2 different equities during that entire time. One when the market was going up and the other when the market was going down.

And you always make money in both directions probably doubling your money every 4 to 5 years.

You don’t believe it. Follow along and I will prove YOU can do it.

You are not going to buy any stock; you are not going to have any short positions. Both are too volatile and shorting is too dangerous. Furthermore, you are not going to change your position more than once or twice a year and there will be no commission paid. You will never have any big losses and you will have some huge winners. Forget about that myth of doing research; you never need it. There will be times you will have one position on for a couple of years. Am I getting your attention?

You are going to buy hundreds of stocks that have their prices smoothed out so you can sleep at night. You buy them in mutual funds and the funds you are buying do not have any commission charge at all. You may want to open an account with these fund families as they do not have brokers who try to talk you in or out of your buying or selling decisions. Of course, you can do this with a discount broker. I have no financial connection with these firms. One is Rydex Investments and the second is DAL Corporation. Both are on the Internet.

The mutual fund symbol for DAL is FUNDX and for Rydex it is RYURX. These are seen on the Internet at bigcharts.com or at your broker’s web site. Run out a 5-year weekly chart and put in a 40-week Moving Average. This is not complicated. If you have a problem ask your broker and print out both charts.

Look at the RYURX chart and you will see that the price of the fund moves up through the 40-week moving average line on September 20, 2000. You buy this fund for $7.32. For the next two years all your friends are losing their money and your fund is erratically moving up and up, When the price finally turns down below the 40-week moving average line you sell out on April 21, 2003 at $11.88 for a profit of $4.56 per share or 62%. The stock market went in the tank and you made money.

Now you are in cash in a money market account and the next buy signal occurs a couple of weeks later as that upward moving 40-week moving average has started up and is penetrated by the FUNDX mutual fund price on May 5, 2003 at $22.88. As of this date (7/4/05) you are still holding the shares now worth about $35.00 with an unrealized profit of 53%. In less than 5 years you are now ahead more than 148% (not counting taxes). If you have started with $10,000 in 2000 you would now have $24,880.

If you have the discipline to follow this simple method using just 2 funds that are only invested one at a time you can become a millionaire. These are two funds for the money.

Get ready – GO!

Copyright 2005

Al Thomas’ best selling book, "If It Doesn’t Go Up, Don’t Buy It!" has helped thousands of people make money and keep their profits with his simple 2-step method. Read the first chapter and receive his market letter for 3 months at http://www.mutualfundmagic.com and discover why he’s the man that Wall Street loves to hate.

Let’s go into the details of why non-indexed mutual funds are such a bad deal. When Arthur Levitt became the head of the Security Exchange Commission in 1993 he had to sell off all of his individual stocks so that people would not claim that he was doing any dirty inside dealing. He decided to put the cash from selling off his stock portfolio into mutual funds.

Mr. Levitt grew very angry when he tried to decipher how particular mutual funds divvied up their cash into specific stocks. He couldn’t make heads or tells from the fancy brochures of the mutual funds called prospectuses. He had been a major player in the stock brokerages for over 25 years at that point and knew that if he couldn’t understand the mutual fund’s prospectus then he knew public investors couldn’t either; it had to be a big scam to suck money out of the public.

In 1980 the US public invested $100 billion into the 500 mutual funds that existed at that time. By 1993 the public put $1.6 trillion into the more than 3,800 mutual funds that existed in that year; talk about growth! By the end of February 2003, at the bottom of the bear market there were 8,200 mutual funds and the public had pumped in $6.3 trillion dollars. Wow! That is a lot of money. What is important to note is that at least 40% of mutual fund money comes in from 401(k) retirement accounts. Today these mutual funds own about 20% of all publicly traded shares of stock. Mutual funds act like a herd of cows buying and selling the same stocks at the same time. This increases the wild price volatility swings in the stock market.

These funds are also sold and managed on pure hype, short term trading, and with key information withheld from the public. All of these factors I teach finance students and investors to avoid! The industry confuses investors by focusing on past performance, which should not be a factor to consider. Many mutual funds are able to cheat the public with excessive fees because investors don’t understand how these big costs destroy their profit. Mutual funds have no interest in educating investors because it is easier to hoodwink the ignorant!

Don’t put your trust in mutual funds unless they are fully indexed. Indexing means that the mutual fund simply uses a computer to buy and sell stocks in the mutual fund portfolio so as to mimic the composition of a major stock market index like the S&P 500. This means that there is no fund manager sucking out needless fees. A good example is the first fully indexed mutual fund called the Vanguard 500 (VFINX) which is also now the largest of its kind.

ABOUT THE AUTHOR: Dr. Scott Brown, Ph.D., a.k.a. “The Wallet Doctor”, is a successful futures trader, real estate investor, and stock investor. Dr. Brown holds a Ph.D. in finance from the University of South Carolina. His 1998 articles in Technical Analysis of Stocks and Commodities were prophetic in predicting an impending stock market crash. He has helped many people become profitable investors by teaching them to look out over many years to spot stocks that are low and primed for rise in the new bull market. His second article met with approval by Dr. Bob Shiller of Yale University. Dr. Shiller is the economist that Alan Greenspan most highly regards who coined the term “Irrational Exuberance.” In 1998 he shouted to the world to “get out” of the stock market but now he is shouting to everyone that it is time to “get in!” The Wallet Doctor is not only sought after for investment advice and coaching in stock investing but also in futures trading and real estate investing.

Visit Dr. Brown’s site at http://www.BonanzaBase.com or sign up for his investment tips at http://www.WalletDoctor.com

Alfred Winslow Jones started hedge funds in 1949. He was a pioneer of non-traditional investment strategies. “Non-traditional” categorizes hedge funds quite accurately. Hedge funds have the potential to make an investor quite a bit of money, but many do not understand the nature of hedge funds. Hedge funds have undergone skepticism because they do not have to disclose their activities to third parties.

Hedge funds can be quite profitable if an investor uses the best techniques. One technique is risk arbitrage. Basically, buying stocks in a company that is in the process of a merger and acquisition. Companies announce a specific price the day of the merger, so if the stock is under the stated value before the day of the merger, it is a relatively safe plan to buy and wait. This does pose some risk, because some mergers do not go through.

Hedge funds are very secretive and do not have to disclose their activities to third parties. This allows hedge funds to be free from the regulations that mutual funds have to adhere to. This can be considered as beneficial because fund managers will perform better because they see a direct profit from the success of the fund. In mutual funds, this is not so. Also, large companies can move undisclosed amounts of money and gain significantly without authorities noticing. Actual numbers are not known, but HFR (hfr.com) reported that at the end of the second quarter in 2003, there were 5660 hedge funds managing $665 billion dollars around the world. The sheer magnitude of this number is shocking, but demonstrates the massive profits that can be made from successful hedge fund strategy. Unfortunately for secretive businesses that enjoy the secrecy of hedge funds, the U.S. Securities and Exchange Commission is attempting to successfully implement the requirement that hedge funds be registered with the SEC. If this continues and is successfully implemented, then all of the advantages to secrecy will be lost.

One negative aspect of the non-regulation of hedge funds is the fact that there are no official hedge fund statistics. Most hedge fund holders are large companies and so little is knows about their financial movements. Hedge funds are based in offshore jurisdictions, making them seem even more suspicious. Unlike mutual funds that have a base in large cities like New York, Hedge Funds are based in places like Bermuda, Cayman Islands, and the Virgin Islands. It may seem strange to call your fund manager in Bermuda rather than to call someone in New York City.

Another negative aspect of hedge funds is their high price tag. Hedge funds seem to be more suited for large businesses and companies that are merging than they are suited for the average worker. Hedge funds usually require an extravagant amount of money for initial purchase. If someone does have the money, however, they can gain even more money with this sometimes high-risk venture.

Hedge funds have the potential to help an investor gain quite a bit of money. However, hedge funds undergo a great amount of scrutiny because of the lack of regulations and the general secrecy surrounding hedge funds. Hedge funds are based offshore and have been rumored to hold as much as $665 billion. Some reports even state that at one point, 39 firms were managing hedge funds worth $1.1 trillion. These startling numbers show that hedge funds can be quite lucrative.

Jenny Delinga is very interested in hedge funds. You can find out more about hedge funds at Hedge Fund Reader ( http://www.hedgefundreader.com ).

That sounds like good advice doesn’t it? Don’t lose all your money.

After all what is an investor without funds in the brokerage account? Hint: BROKE!

On the subject of investing, this means getting out of a trade when it goes against you. Don’t lose all your money. This is the MOST important thing any investor can do. Cut your losses before you’re broke. It’s easy to do, but some investors find it hard to implement. Don’t become so attached to your buying decision that you ignore this advice.

Set a stop loss figure on every stock or investment you have. Decide on how much you are willing to lose before you buy. All brokerage accounts have a way to set a stop loss. You can do this right in your account so that it’s triggered automatically.

Use an actual price or a percentage. Take the time to learn how to set up a stop loss order or trailing stop in your particular brokerage account. Or if you have the time and stick-with-it-ness to monitor your account on a regular basis (like all the time), keep track of where prices are mentally.

Here is an interesting chart that shows how much an investment has to go BACK up for you to get all your money out.

Take a look at this…

If the price per share goes down 10% - the stock has to go back up 11% for you to get back to even. Not convinced yet?

…down 20% - the stock has to go back up 25%.
…down 25% - the stock has to go back up 33%.
…down 50% - the stock has to go back up 100%.
…down 75% - the stock has to go back up 300%.
…down 90% - the stock has to go back up 900%.

Looking at this would suggest you are gambling if you set a stop loss at more than 25%.

Bottom line is, don’t fight the trend and the hard reality of numbers - Use a stop loss to get out of any investment that goes bad. Don’t lose all your money!

Tom Donaldson shares his investing experiences on his Panglossian Investor Blog and invites you to join the Panglossian Investor discussion group.

The greatest stock market myth is the idea that investing in stocks is a form of gambling!

The financial markets are often compared to a casino. Put some money on X stock and you might as well be playing craps!

If that’s your impression, and it’s keeping you out of the markets, consider this: If investing is organized gambling, it’s one of the rare kinds where the odds are stacked in your favor!

Why is that?

Corporate profits are the key to understanding the investor’s edge. By buying a share of stock gives its holder an ownership claim on that company’s earnings. If those earnings go up, then the stock price will usually rise as well. Makes sense, doesn’t it? Ownership of a company that has higher earnings should be worth more than ownership of a company that earns less.

An investment in the stock market comes down to this: It’s a "bet" that corporate profits will rise! Based on the historical evidence, it’s a pretty good wager! Not a guarantee by any means, but one where you hold house odds.

Still not convinced?

Maybe you’re saying to yourself that just because corporate earnings rise in most years doesn’t mean there aren’t years in which they fall. True enough. But over the last 200 years, business profits have increased in far more years than they have decreased. And that’s because the economies in the developed countries have expanded at a fairly steady pace with only several occasional setbacks from recessions.

And that means stockholders with a good mix of companies are more likely than not to make money!

Gambling just transfers money from a loser to a winner because it produces nothing … excluding the severe doses of adrenaline!

On the other hand, investing increases overall wealth because the capital invested in stocks provides the initial funding for firms, which exist for the purpose to producing goods and services.

Copyright © 2005 I.E.C. Haramis

haramis@greekshares.com

http://www.greekshares.com

Ioannis - Evangelos C. Haramis was born in Greece and he studied in Greece, USA and in Belgium. He has been active in the stock markets since 1972. Since 2002 he is New Business Development Managing Director at an Investment Bank.

I was out of town this weekend in Southern NJ, Atlantic City to be exact. After finishing my business at the convention center, I traveled back to the newest casino, the Borgata where I was staying for the night. I don’t consider myself a gambler and have never enjoyed losing money at the tables. When I do gamble, my preferred games have always been craps and blackjack. Until recently, I had never played at a poker table in a casino environment but I enjoy the game of poker and have only played in backyard and basement games with old buddies. Many people consider the game of poker pure luck but this is not an accurate observation. Many factors run parallel with the game of poker and the game of stock market investing. Luck may play a part but rules, odds and money management are the largest components of the two entities.

When investing in the stock market, it is essential to have a sound set of rules or a system that has been tested in real time, no back testing or historical testing needed. After the system has been tested, the investor needs to follow rules in order to preserve capital and cut losses. The investor must also consider the odds of his/her stock making a gain or making a loss. Price objectives and targets should be a large part of every investor’s system. With proper money management and calculated expectancy, the investor should aim to trade only in situations where the odds are in his/her favor. In a strong bull market, it may not be wise to start shorting many stocks; the odds of making a big gain with this strategy could be very low. Another major component that works its way into investing is psychology and/or human emotion. Stocks are made up of human character traits, similar to the type of people that own them. Some stocks are risky and volatile while other stocks are conservative and predictable. The market repeats cycles and specific chart patterns because humans repeat their actions and character tendencies.

Now, back to the poker table; as I sat down and started to play, my first goal was to become familiar with the character traits of the players around me. With 10 players at the table, I had plenty of time to evaluate the people I was playing with, without risking a great deal of money. After several rounds of play, I was aware that the gentleman to my right would only bet high odd hands and would fold every other hand. He was very edgy and nervous and folded his cards with force when he was angry. The gentleman to the left would also play hands with high odds but I did see him call bets with some hands that were risky with lower odds. One gentleman across the table was the bluffer and always had a smirk on his face with a pair of dark glasses. I challenged this man on several occasions and paid to see his cards because I felt he had nothing. More times than not, I was right and still beat him with an average hand. I could go on but you understand the point I am trying to make: all poker players and investors bring their emotions to the table.

I won’t get into the exact rules of playing poker but I can tell you that only two players are required to bet per round while the other eight can view their first two cards without risking a cent. My game of choice is Texas Hold’em, the current craze across the country and one that excites me when I am in the environment. The two players required to bet represent the big and small blinds. If you are the dealer or anoy other players at the table, you can view your first two cards for free without an bet. If the hand is weak, you can fold and keep your gambling stake.

Here is where it gets interesting; if I have a decent hand, I can decide to call the larger blind and see the next three cards on the flop, which is still a low risk investment. If the flop doesn’t provide me with the cards I need, I can immediately cut my losses short by folding and wait for the next game. The same is true in investing; I can cut a loss short and wait for the next opportunity without risking the farm if I realize an immediate loss. If the cards are good and my probabilities of winning the hand are high, I can call the bet or raise the bet. A fourth and fifth card (the turn and the river) are placed on the table after the flop and betting continues with each round. Again, I can decide if I would like to call, raise or cut my losses short. The connection I am trying to make with investing in the stock market and playing poker relates directly to cutting losses short (capital preservation and money management) and my odds of winning the game (in the stock market this could be called expectancy).

In my opinion, the best game to play at the casino is $1-$2 no limit style. This means that the blinds are held to a minimum and it will only cost you a couple of dollars to see the flop in many cases. The “no-limit” aspect allows your upside potential to be unlimited which carries through to investing. If you cut losses short and ride your winner, the up-side potential in investing can also be unlimited, especially when using options (but that is for another discussion). Last night, I could see my first two cards for free, eight out of every ten hands and I could fold if they were no good. If they were good, I put money on the table after my idea. In the real world, the world of stock investing, you should always put money after your best ideas. The ensuing gain or loss will tell you if you are right. Again, for the umpteenth time in this article, the most important part of both games is cutting losses short and moving on without mixing emotions into the decisions.

All investors and poker players bring emotions to the table, some people control them better while other people employ better systems and understand the odds on a higher level. The bottom line is to understand the situation around you and to use a sound system to raise your odds. Never bet a hand that represents a low chance of winning and never ride a loss that could multiply overnight. Cut losses short and get out of the game and wait for the next opportunity because they are always around the corner.

Chris Perruna - http://www.marketstockwatch.com

Chris is the founder and president of MarketStockWatch.com, an internet community that teaches you how to invest your money with solid rules. We don’t stop at just showing you our daily and weekly screens, we teach you how to make you own screens through education. Through our philosophy, you will be able to create your own methods and styles to become successful.

Stock trading remains a very competitive field and the stock market doesn’t care if you are an experienced stock trader or an aspiring one. The rules and the trading opportunities are the same for all of us, so either youre going to make money when you pick a stock and make a trade, or you are going to lose some of it in favor of the more seasoned traders.

As an online stock trader your homework is all about studying and testing different online trading strategies that can help you take advantage of stocks and at the same time protect your profits. Just always keep in mind that a good stock trading strategy is simple and practical. Complicated stock systems will always make you slow in your decision making process or confuse you from the start.

There are some very good sites on the web where you can access practical stock trading strategies that are easy to implement. One of those sites is Stress Free Traders http://www.stressfreetraders.com

They focus on momentum stock trading strategies that can help you identify and handle hot stocks while reducing your trading risk.

All in all, online stock trading is all about picking the best stock opportunities and following your buy and sell signals with ease and simplicity. Once you learn to master your trading decisions, you can aspire to produce consistent profitable results.

Learn how to stock trade in a practical way at Stress Free Traders http://www.stressfreetraders.com

StressFreeTraders.com helps day traders from any part of the world how to pick and trade stocks to maximize profits.

If you were to find that you had some severe illness that required surgery, would you attempt to perform that surgery upon yourself? What if your car broke down and needed a valve job? Would you get out the Craftsman tool set you got for Christmas three years ago and start tinkering under the hood even though you know absolutely nothing about engines? Of course you wouldn’t do either of these things because there are times in life when we know we must seek the assistance of a professional. So why is it that so many people try to make their own investment decisions without consulting a professional stock broker?

A stock broker is a trained financial professional who knows how to watch the trends of the stock market, is kept up to date on financial developments by her brokerage firm, and knows how to make wise and sound investment decisions. When you work with a stock broker you have the benefit of not only the broker’s personal experience and expertise, but that of the entire brokerage firm. Since the brokerage firm and the stock broker do well when you do well, you know that they are working in your best interest.

When you’re ready to invest in the stock market, it is always advisable to seek the expertise and advice of a professional stock broker. It just makes sense to do so and makes much more sense than trying to “go it alone.” Choosing a stock broker can sometimes mean the difference between success and failure in the investment market. After all, if you wouldn’t dream about dismantling your plasma television to try and figure out why you can’t seem to tune in Wheel of Fortune for fear you could possibly ruin the set, why would you take the same chances with your financial future?

Visit the Global Investment Institute and signup for our free Investing For Beginners E-Course at http://www.Global-Investment-Institute.com

Investment webmasters or publishers, please feel free to use this article provided this reference is included and all links remain active.

I mean it when I say that. While plastic silverware is fine for picnics and parties, it is totally inappropriate in a surgeon’s hand with an open brain in front of him. Not only are plastic forks built incorrectly to perform delicate surgery, their cheap construction may actually cause further injury to the patient. I don’t know about you, but I sure wouldn’t want someone prodding around inside my head with one of those things!

Ok, I’m joking. The truth of the matter is that you already knew that plastic forks were not meant to be used for brain surgery. It was obvious. In fact, it was so obvious that it seemed silly when I told it to you.

You might have even laughed.

But what if I told you that - right now - you are doing almost the exact same thing as a surgeon operating with a plastic fork? Something just as inappropriate and just as harmful from a financial point of view. I’m not joking any more. Let me tell you what I mean.

Your current charting software probably has a bunch of technical indicators built into it. Moving averages, RSI, Stochastics. There are hundreds of them. Thousands of traders rely on these tools every day to help them make investment decisions. (And thousands of traders blow out their accounts each day, too.) What these traders probably don’t realize is that if those tools were people, they would be dead by now.

Yes, those indicators are old. In fact they’re dinosaurs. They were invented in the days before computers even existed. Even before calculators were around! They were designed to be calculated by hand, using simple formulas and daily closing prices. Add some numbers up and divide by something else. Any elementary school student can easily calculate any of those indicators in only a few short minutes. We’re talking kindergarten math here.

Modern Technology
With today’s trading computers running at Gigahertz speeds, don’t you think that it’s time traders started using some more advanced formulas in their trading? There’s no reason to keep things so simple anymore. We’ve got the speed and the power to calculate anything we could possibly ever want to, so why are all these charting programs stuck with the caveman tools?

Details…
http://kv.iwarp.com/wave.html

Kigo Kare
Stock Broker of long standing