Let’s not beat around the bush… You’re probably not going to like what I have to say in today’s issue.  But that’s OK. Many of you need to hear it.  #-ad_banner-#It’s time for a little tough love in today’s issue. If you’ve been thinking to yourself lately that you could use a good pep talk, then today is your lucky day. As for everyone else, feel free to tune out.  Even ‘Perfect’ Portfolios Experience Painful Losses I’d like you to consider for a moment an interesting find made by the folks at AlphaArchitect, a prominent “robo-advisor”… Read More

Let’s not beat around the bush… You’re probably not going to like what I have to say in today’s issue.  But that’s OK. Many of you need to hear it.  #-ad_banner-#It’s time for a little tough love in today’s issue. If you’ve been thinking to yourself lately that you could use a good pep talk, then today is your lucky day. As for everyone else, feel free to tune out.  Even ‘Perfect’ Portfolios Experience Painful Losses I’d like you to consider for a moment an interesting find made by the folks at AlphaArchitect, a prominent “robo-advisor” firm. (A robo-advisor is an online wealth management firm that uses complex algorithms to custom design portfolios for clients.) The question: If you were God, could you create a hedge fund so good that you would never get fired? The study assumes you are able to know the returns for all stocks in the S&P 500 for the next five years ahead of time. This level of omniscience comes with a catch, though. You have to hold your positions for the entire five-year duration. Only then can you rebalance the portfolio by selling those… Read More

Flying an airplane is one of my passions. The view from 4,500 feet on a clear day is just unbelievably refreshing. Despite my passion for flying, there are inherent risks in taking an aircraft 10,000 feet above the earth. Everything from weather to mechanical issues can provide a brutal end to an otherwise beautiful day. #-ad_banner-#So safety is paramount when planning a trip. Whether the trip is to practice landings or a cross-country trip, emergency planning is the rule. Now, think about what equipment you’d want when flying — beyond the most basic stuff like fuel and a properly functioning… Read More

Flying an airplane is one of my passions. The view from 4,500 feet on a clear day is just unbelievably refreshing. Despite my passion for flying, there are inherent risks in taking an aircraft 10,000 feet above the earth. Everything from weather to mechanical issues can provide a brutal end to an otherwise beautiful day. #-ad_banner-#So safety is paramount when planning a trip. Whether the trip is to practice landings or a cross-country trip, emergency planning is the rule. Now, think about what equipment you’d want when flying — beyond the most basic stuff like fuel and a properly functioning aircraft. The most obvious piece of equipment is a GPS. A good GPS provides the pilot with information about the position of the aircraft in relation to the earth, but most models today provide weather data as well as charts identifying backup airports in the event of an emergency. Another piece of equipment essential to the safe operation of an aircraft is a radio. The ability to communicate with air traffic control — especially when the weather unexpectedly turns — is critical. And that alone has saved thousands of lives. So what does flying have to do with investing? It… Read More

Many investors spend their time trying to find a dark horse stock that will come out of nowhere to provide monster gains. While this can yield spectacular results for a lucky few, the majority of investors fail most of the time. I take the exact opposite approach to investing. In my premium newsletter, Maximum Profit, I look for stocks that have already proven themselves to be winners, waiting till they have a big lead before placing my bet. To most investors, especially those considered value investors, this probably sounds ludicrous. We have all been taught we need to… Read More

Many investors spend their time trying to find a dark horse stock that will come out of nowhere to provide monster gains. While this can yield spectacular results for a lucky few, the majority of investors fail most of the time. I take the exact opposite approach to investing. In my premium newsletter, Maximum Profit, I look for stocks that have already proven themselves to be winners, waiting till they have a big lead before placing my bet. To most investors, especially those considered value investors, this probably sounds ludicrous. We have all been taught we need to “buy low, sell high.” So how can buying “high” possibly make for a sound investing strategy? #-ad_banner-#Well, I’ve never been a big gambler, but I do know a thing or two about odds. And I’d like to explain my strategy using a horse racing analogy.  Imagine you’re at a horse race, and while everyone else is placing their bets before the race, you get to bet after the race has already begun. In fact, you get to place your bet when there’s already a clear leader who looks likely to win the race. After all, experienced bettors know horses that… Read More

This may sound obvious (or not), but my Maximum Profit system profits from what’s working in the market at any given time — stocks that are already winning. After all, who would you rather pick in a straight-up contest, the hot team with the 10-game winning streak or the opponent who hasn’t won a game in the last four tries? The two picks I’m about to reveal come from the S&P 500’s strongest sector year-to-date: technology. Now, there’s a lot that goes into the system and its algorithms, but in simplest terms it finds winning trades by using two of… Read More

This may sound obvious (or not), but my Maximum Profit system profits from what’s working in the market at any given time — stocks that are already winning. After all, who would you rather pick in a straight-up contest, the hot team with the 10-game winning streak or the opponent who hasn’t won a game in the last four tries? The two picks I’m about to reveal come from the S&P 500’s strongest sector year-to-date: technology. Now, there’s a lot that goes into the system and its algorithms, but in simplest terms it finds winning trades by using two of the most powerful indicators from the worlds of technical and fundamental analysis. The first of these is known as relative strength. Relative strength (RS) — not to be confused with the relative strength index (RSI) — forms the foundation of my system. Relative strength is one of the few true edges available in the investing world. Even Eugene Fama, father of the Efficient Market Hypothesis (EMH) — which says that markets efficiently price stocks using all available information — called relative strength an “anomaly” (in a good way!). It’s been proven that stocks with high RS scores — stocks that… Read More

It’s the number one question asked by first-time investors… Where do I start? It may seem simple, but unless you’re the one actually having to think strategically about your goals, doing the research and then deploying cash into a portfolio, it’s easy to forget just how paralyzing this situation can be. There are many reasons this paralysis sets in. With literally thousands of mutual funds, ETFs, bonds, stocks, and other financial products to choose from, it could simply be the tyranny of too many choices, as it were. It could also be that the memories of losses experienced during the… Read More

It’s the number one question asked by first-time investors… Where do I start? It may seem simple, but unless you’re the one actually having to think strategically about your goals, doing the research and then deploying cash into a portfolio, it’s easy to forget just how paralyzing this situation can be. There are many reasons this paralysis sets in. With literally thousands of mutual funds, ETFs, bonds, stocks, and other financial products to choose from, it could simply be the tyranny of too many choices, as it were. It could also be that the memories of losses experienced during the most recent financial crisis are still too raw. And now, especially with major market averages near all-time highs, it can be even more difficult to know what to do. #-ad_banner-#Whatever the reason, simply not knowing where to start is the single biggest problem investors face. It’s also the one I’m personally asked about most often — and one I was personally confronted with just recently yet again. My grandmother had asked me to help her invest a small sum of money for her. It’s certainly not a fortune — but it’s no small sum either, at least not to her… Read More

Since last year, a new opportunity to create amazing amounts of wealth has been available to everyday investors. The passage of Regulation CF (crowdfunding) last May gave everyone the right to invest in equity crowdfunding. In short, equity crowdfunding gives you the ability to buy shares of the next Facebook or Snapchat well before they go public through an initial public offering (IPO). This means that you can experience first-hand the fortune-creating growth that these companies undergo in their early stages. Since last October, my team and I at Pre-IPO Millionaire have been analyzing the newest startups to find companies… Read More

Since last year, a new opportunity to create amazing amounts of wealth has been available to everyday investors. The passage of Regulation CF (crowdfunding) last May gave everyone the right to invest in equity crowdfunding. In short, equity crowdfunding gives you the ability to buy shares of the next Facebook or Snapchat well before they go public through an initial public offering (IPO). This means that you can experience first-hand the fortune-creating growth that these companies undergo in their early stages. Since last October, my team and I at Pre-IPO Millionaire have been analyzing the newest startups to find companies with industry-disrupting potential — then passing those picks on to our subscribers. This involves an attempt to forecast the future success of a company from its earliest days, which is no easy task. But while no two startups are alike, there are common themes that lead to bad pre-IPO investments. In my ten years of working with venture capital and angel investors, I’ve seen three problems resurface time and again that cause investors to invest in bad companies that sink portfolio returns. These failings in startup investing are the reason more than half of angel investments return less than the… Read More

Nobody likes to be wrong. And it’s that sentiment that causes many investors to lose their shirt — taking a loss is proving exactly that… that you’re wrong. It’s been proven that investors tend to sell their winners too early, satisfying their desire to be right, and hold on to their losers too long, hoping that they will not have to take a loss and be wrong. The simple fact is that we as investors will be wrong from time to time. But it’s whether you admit your mistake and move on that will determine whether you’re an average investor… Read More

Nobody likes to be wrong. And it’s that sentiment that causes many investors to lose their shirt — taking a loss is proving exactly that… that you’re wrong. It’s been proven that investors tend to sell their winners too early, satisfying their desire to be right, and hold on to their losers too long, hoping that they will not have to take a loss and be wrong. The simple fact is that we as investors will be wrong from time to time. But it’s whether you admit your mistake and move on that will determine whether you’re an average investor (generating only 2% per year) or an extraordinary investor. Or as investing legend George Soros once said, “It’s not about being right or wrong, rather, it’s about how much money you make when you’re right and how much you don’t lose when you’re wrong.” #-ad_banner-#Investors have a hard time controlling their emotions, which often leads to small losses turning into large ones. When a holding is down 25%, most investors tell themselves either that A) they’re not going to take any action because they’re in it for the long haul, or B) they’ll sell once the price gets back to… Read More

In 1980, economist Julian Simon had had enough. For the past decade-plus, he had watched Stanford biologist Paul Ehrlich make all sorts of grim predictions about the human race. For example, in 1968, Ehrlich predicted that 20% of the world’s population would starve to death by 1985. Later, he predicted that England would not exist as a country by the year 2000. This kind of thinking has its roots in the theories of Thomas Malthus. (Not that you asked, but I think Malthusianism has had far too much influence in both academia and the larger public for far too long. Read More

In 1980, economist Julian Simon had had enough. For the past decade-plus, he had watched Stanford biologist Paul Ehrlich make all sorts of grim predictions about the human race. For example, in 1968, Ehrlich predicted that 20% of the world’s population would starve to death by 1985. Later, he predicted that England would not exist as a country by the year 2000. This kind of thinking has its roots in the theories of Thomas Malthus. (Not that you asked, but I think Malthusianism has had far too much influence in both academia and the larger public for far too long. It’s one of those theories that has a nasty habit of influencing some of history’s absolute worst ideas.) #-ad_banner-#Despite all of the hand-wringing and pearl-clutching, nothing seemed to ever come of these prognostications. So Simon thought it was time to make a little wager with Ehrlich… If the predicted world population explosion transpired, leading to the vast depletion of natural resources, then the prices of commodities would naturally skyrocket. So Simon challenged Ehrlich to buy $1,000 in any mix of commodities he chose. Then, after a 10-year period, if prices were higher, Simon would pay the difference. If prices were… Read More

Finding great stocks can be a daunting task. While many investors are happy letting a financial adviser select their stocks, others rely on tips they read in magazines or on the Internet. Given the amount of market volatility day to day, picking promising stocks seems more like a matter of luck than the result of any real due diligence. But this doesn’t have to be hard. In fact, finding stocks that will outperform the market is much easier if you keep three principles in mind… Good Companies Earn Money Reliably At the end of the day, successful companies earn… Read More

Finding great stocks can be a daunting task. While many investors are happy letting a financial adviser select their stocks, others rely on tips they read in magazines or on the Internet. Given the amount of market volatility day to day, picking promising stocks seems more like a matter of luck than the result of any real due diligence. But this doesn’t have to be hard. In fact, finding stocks that will outperform the market is much easier if you keep three principles in mind… Good Companies Earn Money Reliably At the end of the day, successful companies earn money year after year. Now, one of my favorite metrics I use to find stocks is a high return on invested capital (ROIC). ROIC is calculated by subtracting taxes from operating profits and dividing the result by invested capital. #-ad_banner-#ROIC makes a superior metric because it is a more consistent measure of profits than net income. Additionally, ROIC excludes non-GAAP tricks like using one-time charges and write-offs that muddy the accounting waters. So what’s a good ROIC reading? Well, good companies generate a ROIC greater than 10% annually. But really good companies have an ROIC of 20% or more over… Read More

It’s hard to believe, but we just wrapped up the first full week of trading since Christmas. And one of the major questions for 2017 has been when the Dow Jones Industrial Average will hit the major psychological milestone of 20,000. #-ad_banner-#The Dow has been flirting with the 20K mark since December, moving as close as 50 points on Wednesday, January 11. But what does hitting 20,000 really mean for investors? The short answer is “nothing.” It’s simply our fascination with large round numbers — Y2K, when your odometer clicks to 100,000 miles, making over $100,000 or $1 million in… Read More

It’s hard to believe, but we just wrapped up the first full week of trading since Christmas. And one of the major questions for 2017 has been when the Dow Jones Industrial Average will hit the major psychological milestone of 20,000. #-ad_banner-#The Dow has been flirting with the 20K mark since December, moving as close as 50 points on Wednesday, January 11. But what does hitting 20,000 really mean for investors? The short answer is “nothing.” It’s simply our fascination with large round numbers — Y2K, when your odometer clicks to 100,000 miles, making over $100,000 or $1 million in annual income, etc. On a more psychological front, Dow 20,000 means that those large 1,000 point moves aren’t what they used to be. You see, when the Dow finally doubled from 1,000 to 2,000 in 1987, that move represented a 100% advance. But a climb to 20,000 from 19,000 is a meager 5% rise.  It just so happens that the Dow nearing 20,000 comes at the beginning of a New Year, when analysts and investors try to predict what’s in store for the next 12 months. If you’re interested in this sort of “fortune-telling,” here are a few predictions:… Read More