It’s Mutual Fund Monday again, and I thought that I’d do something a little different this week. Rather than focus on a single fund or concept about funds, I’m focusing on a topic and sharing some of the interesting posts I’ve found on other blogs recently about that topic. The topic: ETFs.

ETFs, or exchange traded funds, first became available to investors in 1993 and have since evolved from being simple index trackers to being full blown portfolios or hedge funds of their own. There’s much mistaken knowledge about ETFs and much confusion. Hopefully these posts will help set you straight on ETFs. Even if you think you know all about them, there is probably a thing or two you didn’t know.

How to Choose ETFs for Your Portfolio from Oblivious Investor is a great place to start when beginning to add ETFs to your portfolio. He examines the usual suspects in regards to the important factors of an ETF, like expense ratio and which index it tracks; but he also covers some lesser known or often overlooked factors like the Bid/Ask Spread of the fund.

Not sure about ETFs, or too sure about them? Be sure to check out Ten Myths About ETF Investing from ETFdb before you make another decision about ETFs

Do you think Charles Schwab Might be the Best Choice for Passive Investors? Steadfast Finances does, and he explains why as well as why you should care. Very interesting post..

Lastly in our ETF posts this week is a post by Dividend Tree in which he reminds us of one of the single most important details about Investing in ETFs – Know What You are Investing In. Some of this is related I think to the 10 myths of ETFs from ETFdb above. Many investors think all ETFs are created the same and they invest in what the name suggests, but Dividend Tree shows that this is not always true.

• Mutual Fund Monday - Tips For Mutual Fund Investment. With thousands of mutual funds to choose from, picking the "right one" can be a daunting task. Most investors know not to fall for a short term hot streak - one or two years isn't a long enough track record to show superior skill of the management team over sheer......
• A Possible Change to Mutual Fund Tax Implications on Capital Gains. Investors in U.S. mutual funds might want to keep an eye on this. The Committee on Capital Market Regulation (CCMR) has recently issued a report by Harvard professor John C. Coates which recommends that mutual fund regulators eliminate the requirement for yearly capital gains distributions. The change would only affect......
• Mutual Fund Share Class Comparison Gets Easier. Investors who own shares of mutual funds are probably familiar with the 3 most common classes of shares: A, B, and C. But recent market conditions have led over 400 mutual funds to eliminate class B shares form their offerings. The reason for the elimination is cost. It simply costs......
• Reliability of Income, the New ROI. The 2008-2009 market crash and resulting bear market have been absolutely brutal to new retirees and soon to be retirees alike. For those in my age set (about 30 years out from retirement) it serves as a poignant lesson of what can go wrong. To Mary Beth Franklin, editor of......
• Top Morningstar Bond Funds for July 2009. Morningstar has released their top 3 Bond Funds for June-July. Here's the list: High-yield bonds. T. Rowe Price Spectrum Income (RPSIX) This is a fund of funds. The management team invests in up to 9 T. Rowe Price funds in order to get exposure to all of the sectors of......

• Lending Club Review 2010 –A Full Review of Lending Club’s Peer to Peer Lending Website As banks have cut the amount of lending that they do, individuals are increasingly turning to peer-to-peer lending companies, such as Prosper and Lending Club, as a source to get a personal loan from. Meanwhile, individual investors are taking advantage of the loan demand on Prosper and Lending Club......
• How To Choose A Bond Mutual Fund Choosing a bond mutual fund has a lot in common with choosing a good stock mutual fund.  Many of the same rules apply to both stock and bond mutual funds; however, bond funds are on the average even less complicated and easier to choose.  I'm going to assume for the......
• Weekly Roundup - Hands Off My Clunker Edition Videos are now beginning to surface showing the destruction of perfectly good automobiles thanks to the cash for clunkers program. I fail to see the stimulative effects of disabling the engine of a car with thousands of useful miles in it for it to be scrapped and piled in an......
• Best Canadian Stocks and ETFs From the Past Decade 1999-2009 The last day of the decade.  Markets have just closed.  We've got the top stocks from the past decade in now, as well as the ETF winners from 2009.  Here they are. These stocks remind one that buy and hold didn't die in 2009. Top Performing Canadian Stocks . These......
• Weakon 205: Mutual Funds, Introduction PF blog regulars have likely been met with "introduction to mutual fund" blog posts every couple of weeks. Its almost a right of passage for bloggers to write about as the mutual fund is generally accepted as the most important bucket your money will ever sit in. Wikipedia does a......

Would you sell your life insurance to a stranger? Millions would, and Wall Street wants a piece of the action.

A life settlement is the process by which an individual, usually of senior status or declining health, sells his life insurance policy to a settlement company in exchange for a lump sum. The settlement company then sells the policy or shares of the policy to investors, who then become the beneficiary when the insured senior passes away.

It’s marketed as a win-win because the senior receives an immediate settlement for a life insurance policy he would otherwise never benefit from, and the investor receives the potential for very high returns on his money.

Regardless of what your moral view may be on such a transaction, it is big money and that means Wall Street wants a piece of the action.

Investment banks plan to purchase these life insurance policies, and package them up for resale as bonds to institutional investors – pension plans, hedge funds, etc..

This is very similar to the securitization of sub-prime mortgages in the last decade. The thinking is that the risk of loss (i.e. the original elderly policy holder outlives his policy, and the investors lose money) is spread out among many investors.

As I said, the potential market for this is apparently pretty big. Industry predictions are that the market for these bonds could be a large as $500 billion, and firms like Credit Suisse Group (CS) have been entering the life settlement arena.

Also, Goldman Sachs Group Inc. (GS) has been developing an index of life settlements for trade, effectively allowing investors to bet on whether the insured senior will out live his policy or die sooner than expected.

While the potential for systemic collapse, like that caused by defaults in the sub-prime mortgage business, seems limited there are risks and repercussions involved with life settlement bonds.

For example, the trend of average life span is moving upward suggesting that the odds of the insured outliving the policy rises year after year. Additionally, the fact that the policies are now held by institutions and trusts that have no limit of mortality means that insurance companies will likely being paying out more claims than they would if the policy holder remained the insured. This will likely cause a rise in life insurance rates.

source

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• Best Funds To Invest In Now. These are peculiar times we find ourselves in. Here's a list of funds from Kiplinger that not only cover just about every bogeyman bandied about in the financial press these days, but hit upon some classic needs in a mutual fund as well. Inflation protection Sooner or later, the reckless......

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• Successful Investing-Not Magic This is a guest article by Ray, the owner and primary author of Financial Highway, where he discusses investing, saving and practical money management concepts. You can check subscribe to his RSS feed or follow him on Twitter. The past year and a half has been rough for investors, although......
• Reshop Your Life Insurance Policy and Save up to 50%. Life insurance is the one policy that you should happily pay even though you hope that the policy never pays off. Having good quality life insurance will make sure that your family and loved ones aren’t in a dire financial situation in the event that you pass away. It may......
• Socially Responsible Investing Over at the NRDC site, they have a very interesting article up about socially responsible investing. Some might immediately think that you could never make as much money investing in "green" ventures as big bad companies, but as it turns out, you can come close. At the expense of losing......
• Pros And Cons Of Variable Life Insurance When the time comes to purchase life insurance, there are several factors to consider before committing to one policy (how much, which type of life insurance, etc).  Life insurance is often a necessary expense in order to protect our loved ones from financial disaster after we are gone.  Whether you......

Listen up, investors!

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• Initial deposit must be received within 30-days of account opening.

• Commission-free Internet stock trades begin within 24 hours, and the $100 bonus will appear in your account within 2-3 weeks. (if funding with $25,000).

• If the account you open is a TD AMERITRADE retirement account, cash awards are valid within your IRA only and non-transferable to another existing TD AMERITRADE account.

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Those unfamiliar with TD AMERITRADE can take comfort in the fact that they are a member of FINRA/SIPC, so deposits and equities are as safe as they can be (meaning that value/return on investments is NOT guaranteed, but you would not lose those investments in the event that the broker went out of business.)

Accounts must be opened either online using this link, or by phone at (866)834-2539 using offer code 154.

Thanks for stopping by, and happy investing!

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• Top 5 Best Investors. Here are the top 5 Investors of all time, as picked by  Investopedia. But first, the criteria... The list is based on 4 factors: The investor is a long term performer - that is one with a long history of beating their bench mark index(es). The investor or manager must......
• ShareBuilder: 20% OFF Real-time Trades - Today Only! Here's a Cyber Monday shopping deal for all you customers of ING ShareBuilder - 20% commission rebate on all Real-time Trades that execute on Monday, November 30. You can make as many real-time trades as you want and get 20% off on each $9.95 commission. Just add the promotion code......

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• Consider Municipal Bond Funds for Your Fixed Income and Cash Investments Warning:  Municipal bonds can be boring. But, if you are looking to squeeze a little more yield out of your fixed income and cash-equivalent investments, keep reading.  But while you are reading, be sure you monitor all of the developments in the market that have occurred in 2008 and 2009. Freddie......
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• Seven wise uses for your $600 I did a Google search on "$600" and the first result was for an article on the "Top Ten Things to Buy With $600." This is exactly what the powers that be want us to do with our "economic incentive" money, and that's a misleading, if not downright self-serving, message.......

In honor of just closing the books on January, I thought it might be nice to examine the January Effect.

The January Effect is an investing term that refers to a general increase in the stock market during the month of January. This effect is typically attributed to an increase in buying caused by the addition of employees yearly bonuses being contributed to their 401(k) plans, and also due to investors getting back into the market after having sold in the previous December for tax purposes.

It is said that the January Effect affects small caps more than mid or large cap stocks, though this has been less pronounced in recent years as investors learn about and anticipate the January Effect.

It is also considered less important as there is less cause to sell laggard stocks for tax purposes, but that may change as taxes increase on investments and investment income.

Let’s hope it’s not a hard fast rule when we look at the S&P’s performance for this past January:

… and there IS hope: Check out this MarketWatch article on why January’s loss doesn’t automatically doom the rest of the year.

• Best Funds To Invest In Now. These are peculiar times we find ourselves in. Here's a list of funds from Kiplinger that not only cover just about every bogeyman bandied about in the financial press these days, but hit upon some classic needs in a mutual fund as well. Inflation protection Sooner or later, the reckless......
• Top Morningstar Bond Funds for July 2009. Morningstar has released their top 3 Bond Funds for June-July. Here's the list: High-yield bonds. T. Rowe Price Spectrum Income (RPSIX) This is a fund of funds. The management team invests in up to 9 T. Rowe Price funds in order to get exposure to all of the sectors of......
• 3 Tips to Make Your 401(k) Work for You. Morningstar has a terrific article (available to free members) titled Three Tips to Make Your 401(k) Work for You and I love it! Here's a brief sample of why: It's surprising there aren't many calls in the press to ditch the automobile. After all, think of all the dumb things......
• Investing Term Tuesday: Commodity Index. A commodity index is an index that tracks a collection of commodities in order to measure their performance. Commodity indexes are often traded on exchanges, such as the Chicago Board of Trade (CBOT). By being traded on an open exchange, investors gain access to commodities without having to deal in......
• Mutual Fund Monday - 5 Things To Watch When Choosing A Fund. Picking a mutual fund can be a daunting task, but here are 5 things to look for that I hope will help make the process a little easier. This is part of my weekly Mutual Fund Monday post feature. If you find this interesting or helpful, please read more. 1.......

• Rational Investing In Irrational Markets You can’t beat the market. You’ve heard that one, right? Why do they say that? What is the reason why you can’t beat the market? The market is rational. That’s the idea. To beat something, you must find a weakness in it. If the market sets prices rationally, there’s......
• Want to Be an Active Investor? Try a Fantasy Stock Market Game First! So you want to be an active investor? Maybe you think you have what it takes to cash in like the daytraders from the late 1990s trading those high flying tech stocks.  Or perhaps you think you can ride the coattails of those evil oil speculators that pushed light sweet......
• The market needs nothing Today was another lousy day for the Dow stocks (except for Johnson and Johnson (JNJ), the only winner).  In one article there was an interesting comment:"Yes, the market would probably move dramatically higher if they made a cut," said Linda Duessel, market strategist at Federated Investors in Pittsburgh. "But I......
• How to Re-Enter the Market as a Conservative Investor Many nervous investors left the equity markets at some point over the last year, either as an investment strategy or out of pure panic and fear. These feelings were magnified for baby boomers and others in the home stretch toward retirement. Others investors were like me. We did not sell......
• Stock Market Investing For A Motivated 15 year Old? Im currently 15, and I'm damn tired of waiting to get through high school and college to start making some serious money. I am a very motivated, smart teenager[4.0 with honors classes] and I believe that through some light research I have done, that the stock market is the way......

With thousands of mutual funds to choose from, picking the “right one” can be a daunting task. Most investors know not to fall for a short term hot streak – one or two years isn’t a long enough track record to show superior skill of the management team over sheer luck – but where should you start?

Step 1.  Figure out what you really need.

To be a successful investor, be it in mutual funds, hedge funds or whatever, you need to determine what your objectives really are and what asset allocation you’ll need to meet those objectives. And sorry to tell you this, but “to get rich” is not an objective.

Objective.

For your objective to be meaningful and achievable, it needs to be specific. If you can determine exact numbers, then you’re off to a great start. But even if the numbers are not exact or may even be unknowable, you can still use that as an objective.

For example, if your objective is to have $25,000 in 5 – 7 years for a new car, then you have a defined timeframe, and target amount. From that you can then figure out how much you can invest over that time  frame and see how much return on your money you’ll need to get there. (There are calculators for this kind of thing).

Even if your objective is a bit less knowable, say saving for retirement, you can use ballpark figures for determine the “best guess” for what you’ll need 15, 20, even 30 years out from today. The key is knowing that this is just a guess, based on current trends. In the case of retirement planning you reevaluate your goals and assumptions on a regular basis, every 5 -10 years for example.

The Takeaway. The point to take away from all of this is that your objective (amount and time frame) will be a key component in determining your risk level and asset allocation. You can (and should) invest more heavily in stocks for retirement which is decades away than for the objective that’s 5-7 years away.

Asset Allocation.

Put simply, an asset allocation is which types of investments you choose to put your money in, and in what proportions.

Different types, or classes of investments carry with them different levels of risk and average return. Bonds, for instance, are typically less risky than stocks, though that is a generalization since there are subclasses of stocks and bonds that can be very similar in terms of risk and reward.

Key points of concern are correlation (how much one investment be behaves like another), volatility, and risk.

The Takeaway. Some studies have shown that asset allocation alone is responsible for up to 90% of your total return, so be sure to study up on this stage and know what you’re doing.

Step 2. Picking mutual funds.

Since this article is about mutual funds, I will focus on that aspect of an asset allocation. But remember – if your investment goals are short term, then mutual funds may not be right for you.

Searching for a mutual fund.

If you have an idea of what type of fund you’re looking for, say a small cap stock fund, and you’d like to see what mutual funds fit that category, you can use Kiplinger’s Fund Finder. This tool allows you to select broad categories (like small cap stock funds) and narrow the results by a host of criteria, including:

• 1,3 or 5 year return.
• Morningstar rating.
• Return in a down market (i.e. worst loss).
• Expense ratio.
• Turnover ratio.
• Length of time the current management team has been in place.

And much more. It’s very handy for gathering a list of mutual funds to choose from, but you still need to do some comparison work, but more on that in a minute.

Gathering information on a specific fund.

Once you have a list of funds, or maybe you’re looking for details about a specific fund in your 401(k), you can use FINRA’s Fund Analyzer to get the specifics about a fund.

These results include average return of a given investment amount over a specified period of time, and the total expenses. It also provides a breakdown of the allocation within the fund, investment style of the fund (i.e. growth, vs value, etc..) the Morningstar rating and much more.

Some thoughts on past performance not guaranteeing future results…

By now I’m sure you’ve heard that familiar phrase of investment marketing: “Past performance is not a guarantee of future return”, or something similar. It’s usually uttered as a means of protecting themselves from costly liability in court situations, but it is also a significant thing to bear in mind when picking a fund.

The thing to remember is that just because a fund had a rip-roaring 3 years does not mean it’s going to continue to rip and roar its way up the charts for the next 3 years. Maybe it was a small cap stock fund and the economy has just come out of a recession. If that’s the case, then you can expect those returns to level off a bit as the economic cycle matures and investors seek blue chip companies over small cap.

But long term performance can be a good indicator of a fund’s quality. Look for good for funds with good performance over a 5-10 year period.

Some thoughts on volatility…

Volatility is simple a measure of how much the fund’s price jumps around; it’s a measure of how much of a roller coaster ride the fund is. The lower the volatility, the smoother the ride, but not necessarily the higher return. The thing to keep in mind with volatility is that it doesn’t matter how bumpy the ride is if you don’t need the money for another 20 years. In other words, volatility is less important for long term investments.

Some thoughts on Managers…

Things you’ll want to know about the fund’s manager include:

• Does the manager admit mistakes?
• Does the manager respect the investors?
• Does the manager sound too greedy?
• Does the manager know what he’s talking about?
• Is the manager personally invested in the fund? (that’s a good thing)
• Does the manager stick to his stated strategy?

One last thought about fees…

Not all funds are created equal, and one of the biggest defining characteristics of a fund may be its fees. All other things being equally, higher fee funds will perform worse than lower fee funds. But things are rarely equally and the thing you need to find out is whether the higher fee fund significantly outperforms its peers over an extended period. In other words, is it worth the extra money? If it’s just doing the same as an index fund, it’s not worth the money.

source

• Diversification Is A Scam, Really? I came across a quote by Jim Rogers in SmartMoney magazine yesterday that almost made me blow my chocolate milk out my nose when I read it. In this interview, Mr Rogers says: "Diversification is something that stock brokers came up with to protect themselves, so they wouldn't get sued.......
• Reliability of Income, the New ROI. The 2008-2009 market crash and resulting bear market have been absolutely brutal to new retirees and soon to be retirees alike. For those in my age set (about 30 years out from retirement) it serves as a poignant lesson of what can go wrong. To Mary Beth Franklin, editor of......
• Mutual Fund Monday - 5 Things To Watch When Choosing A Fund. Picking a mutual fund can be a daunting task, but here are 5 things to look for that I hope will help make the process a little easier. This is part of my weekly Mutual Fund Monday post feature. If you find this interesting or helpful, please read more. 1.......
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• Best Funds To Invest In Now. These are peculiar times we find ourselves in. Here's a list of funds from Kiplinger that not only cover just about every bogeyman bandied about in the financial press these days, but hit upon some classic needs in a mutual fund as well. Inflation protection Sooner or later, the reckless......

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• 10 Things About Funds Investors Should Know About. Whether you invest in mutual funds, index funds or exchange-traded funds and whether those funds are held in your 401(k), IRA or 403(b) there are a lot of factors to consider when choosing the right fund. Here is quick and dirty break down of 5 different types of funds......
• The Problem with Targeted Date Retirement Funds Investing in the market is not an easy thing to do. You have to do all sorts of research on investing terms, compare different stocks, mutual funds and other investments, and trying to make heads or tails of all of it can really be a nightmare if you’ve never taken......
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Bonds have gotten a lot of attention over the past year and it’s easy to see why when you look at this chart.

What you’re looking at is a relatively smooth ride up until the world collapsed in October of 2008. The investorspeak for that smooth ride is “low volatility”, and it’s one of the main traits of bonds in general, when compared to stocks. But 2008 was anything but usual, and once panic hit the markets bonds collapsed just like stocks. It was a sensible panic in many ways. After all, no one was really sure what the true debt picture was and bonds are nothing more than debt that the debtor has agreed to pay back in a timely, and consistent fashion with interest. But what if the debtor suddenly wasn’t as financially stable as you were led to believe? What if the bond ratings were smoke and mirrors, and your bond wasn’t worth the proverbial paper is was once printed on?

The good and the bad.

So, you see around October, 2008 the steep drop in the prices of these bond funds.

So far, so good. That’s the unusually bad angle. The unusually good side of the picture comes in the months after the market bottomed, around March, 2009.

• BJBHX saw a return of approximately 45% from its March 2009 lows.
• FRHIX saw a return of approximately 15% from its March 2009 lows.
• PRHYX saw a return of approximately 40% from its March 2009 lows.
• DODIX saw a return of approximately 13% from its March 2009 lows.

(More on the individual returns below.)

Bond funds don’t usually produce these kinds of returns, unless they’re junk bonds but they’re (usually) much riskier.

Are bonds still a good buy?

In a sense, all that stellar return was simple the market realizing the world was not coming to an end, and returning back to the norm. The chart above bears this out rather nicely.

So, it would seem that the major upside potential for bonds has played itself out and we have returned to something at least resembling normalcy. But that doesn’t mean that you should avoid bonds. You just shouldn’t be expecting the kinds of return seen in bonds over the past 8 months or so.

Meet the bond funds.

These bond funds come from 3 different categories, which in part explains their diverse returns. These categories are Municipal, High-yield (A.K.A. Junk), and Corporate bonds.

Municipal Bond fund.
My pick for municipal bond fund is the Franklin High Yield Tax-Free Income fund (FRHIX). This fund current yields about the same as 9.4% in a taxable fund (assuming a 35% federal income tax bracket). Tax free municipal bond funds don’t usually see a return of 15%, so this fund has definitely been a winner for those looking for tax free income because they’ve also gotten a very nice return on their investment along with the income.

High-yield bond fund.

Often times, bonds in this category are less than affectionately known as “junk”, but the Artio Global High Income (BJBHX) fund is far from junk. It boasts a 5 star Morningstar rating, and should be viewed more as a speculative, or higher risk bond fund than as junk. It currently sports a 7.4% yield, 1.00% expense ration and it delivered an eye popping (for a bond fund) 45% return from its March 2009 lows.

Another very good high yield bond fund is the T. Rowe Price High-Yield fund (PRHYX), which has a 4-star rating and a yield of 8.5%. It also delivered an eye popping return since its March 2009 lows – 40%. It has a 0.80% expense ratio, which isn’t bad considering its category.

Corporate bond fund.

My choice for corporate bond fund is the 5-star Dodge & Cox Income fund (DODIX). This fund has a 5.22% yield, 0.43% expense ratio and produced a relatively small 13% return. But remember – 13% is usually the realm of high-yield/junk bonds, but this fund is a corporate bond fund that targets only those rated A or better by either Standard & Poor’s Ratings Group or Moody’s.

Conclusion.

It would seem that the wild ride in bonds is over, at least for a while. So you shouldn’t expect such remarkable returns from these bond funds in the foreseeable future, but they are at the top of their class and should still provide a stable income in the years to come.

• How to spot an investment scam. In a single day, investment fraud can take away everything you've spent your life building. Couple that with the knowledge that scam artists are most active when times are very good, and when times a tough. You don't need me to tell you that times are tough these days, and......
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• 6 Tips For the Beginning Investor. Here's a list of some investing insight I've learned over the years that I hope will help accelerate the beginning investor's road to wealth. 1. Don't go all in at once. If you have a lump sum of money to invest and you are doing so when the market is......

• The Four Best Actively Managed Mutual Funds With Low Expense Ratios While Vanguard index funds are my usual investments of choice, I do recognize the value of a high-performing actively managed fund. I don't want to get into the actively-managed vs index fund debate here: suffice it to say they both have their uses. There are many reasons why you might......
• The Four Best Mutual Funds For Your IRA Yesterday, I gave some examples of mutual funds that would be ideal for your taxable account. Today, we'll explore the other side of the coin and find out which type(s) of mutual funds would be ideal for your tax-advantaged IRA. If you don't already have one, I suggest signing up......
• Leveraged Finance Defined Leveraged finance relates to funding a business, a company or another investment using more debt than would be considered normal. More than normal debt is going to imply by nature that the funding is a riskier prospect, and therefore more costly than normal borrowing in general. As a result, leveraged......
• Investing For Income Coming on the heels of massive losses over the past 18 months, income investing is back in vogue and probably here to stay for a while.  Most investors have learned the value of patience, at least temporarily, and are extremely keen on being "paid while you wait."  That is, if......
• Why Savings Bonds are Horrible Investments When I was younger, one of the wealthier businessmen in her small town me a small savings bond as a gifts to use for my college education. When age 18 came around, there was barely enough money in there to purchase one text book. Then I got to thinking, is......

Apple Inc has generated a lot of buzz recently with the hype over its latest geek-chic techno status symbol – the Tablet.

But is that hype really over-hype? Is Apple, and more important for investors – apple stock, going to benefit from this new gadget?

I personally don’t think so, and neither does Jeremy Glaser at Morningstar.com.

Apple stock looks overheated. Sure the loyal Apple fans will run out and buy the tablet because their social status depends upon it, but are they likely to have more demand than that? In this greatest of recessions, are people going to not only shell out big bucks to purchase the tablet but then pay to read book and newspaper content they can currently get online for free?

This just seems like another Kindle – another attempt to produce a new piece of technology to revolutionize our lives. But the technology that truly revolutionizes how we do things is typically never planned to do so, but rather happens by serendipity.

Besides, the tablet has been hyped for so long now, it’s already priced into the stock so the upside is limited.

Mr. Glaser goes on to argue that the market in general is over valued anyway, and so Apple is already close to fair market value and hence carries limited upside potential. Of course, that’s a value-oriented approach and many investors in the market today are focused on growth, so in the short term Apple may get a bit of a pop.

• 5 Reasons Why Retiring Baby Boomers Won't Cause A Stock Market Decline. There's been talk about the "coming stock market crash" for years now, and one of the presumed causes is retiring baby boomers suddenly selling their stocks en mass. The reason seems sound enough. Baby boomers are no longer working and saving for retirement, and once their golden age arrives they......
• Diversification Is A Scam, Really? I came across a quote by Jim Rogers in SmartMoney magazine yesterday that almost made me blow my chocolate milk out my nose when I read it. In this interview, Mr Rogers says: "Diversification is something that stock brokers came up with to protect themselves, so they wouldn't get sued.......
• My 401(k) is Over Its Pre-Crash Value! I braved my last 401(k) statement yesterday and lo and behold, what to my wondering eyes should appear but a fully reconstituted 401(k) balance! It got pretty ugly around November of last year, and I quite frankly stopped looking. But that doesn't mean I ignored it completely. I ramped up......
• Mutual Fund Monday - What 2009 Trends Mean for 2010. Many investors take the change in calendar year as an opportunity to assess their portfolios and the future, and hopefully get their portfolios aligned with the future direction of the stock market. One way in which to do this is to look back on the year that's passed and see......
• Traders Still Buying GM Stock, Is This a Problem? A recent AP story highlights the fact that shares of the old GM (before the government takeover) are not only still traded, but spiked to 13.9 million shares about 2 weeks ago. What's that deal? Why would investors be buying shares in an ostensibly worthless company? The short answer is,......

• Is The Stock Market Overpriced? The Dow has currently been up 24 out of the past 27 sessions. From what I've heard, this is a record. Its NEVER done this before!!!!And its not like the US economy is rock-solid. According to Chuck Butler of Everbank.com, the US unemployment rate should actually be at 12% instead......
• Gold Jumps: Has It Become Correlated To The Stock Market? I've been an avid collector of gold and silver coins and have been following the prices for a years. Gold is supposed to have a negative correlation with the stock market. This year has proved otherwise. Of course, as we've seen repeatedly in the past, all asset classes correlate to......
• President-Elect Obama Roundup Another edition of the RCDL roundup. Congrats to President-Elect Obama for winning the election! Frugal | Money Saving Tips: The Christian Science Monitor takes a look at when gift-card promises go unfulfilled. Good points for holiday shoppers. Financial Ramblings writes this winter tip: The Most Beautiful Way To Save Money......
• Penny Stock Market Secrets As I am a novice to stock market trading, although I am always thinking about it with the aim of it being quite exciting to get involved. When I went through the Day Stock Trading Robot, I was excited and having bought it was ready to get the robot in......
• Stock market performance causes concern - new options sought As the current trend in the stock market continues to concern investors and watchers; and with the dillemmas of the sub prime mortgage market debacle and falling value of the dollar, many investors are individuals are becoming dissatisfied with the security and return that the stock market provides. More and......

According to Burton G. Malkiel, a Princeton economics professor, and Charles D. Ellis, author of ‘Winning the Loser’s Game,’ the only difference between them and Warren Buffet is that Warren Buffet hasn’t made these mistakes.

Of course, it’s more than that but since you and I (or Malkiel and Ellis for that matter) don’t have any chance of acquiring Buffet’s DNA, we’ll focus on this list – in the spirit of accepting what cannot be change, and having the courage to change the things that can be changed.

6 investing mistakes to avoid:

• Overconfidence
• Following the Herd
• Timing the Market
• Assuming More Control Than You Have
• Paying Too Much in Fees
• Trusting Stockbrokers

By way of proof of Buffet’s unique investment acumen and, more importantly, his ability to focus and remain true to his core investment philosophy, Malkiel and Ellis cite two prime cases when Buffet was tested by the markets and prevailing “common knowledge”.

Case number One was when Buffett avoided the dot com bust of 2000, simply because tech stocks fit neither his investment style, or his philosophy. But he held firm to his approach, even when it was called outdated by the rest of the investment world. As a result, his portfolio avoided much of the carnage that befell those more “enlightened” investors.

Case number two was when Buffett avoided mortgage-backed securities and derivatives in 2005-2006, because he found them too complex and “opaque”. As a result, he avoided the worst of the damage caused by the economic collapse that ensued.

In regards to the list above, you can see how Buffett’s sense of humility, and discipline have kept him from making many of the mistakes out lined in more detail in Malkiel and Ellis’ original article.

Burton G. Malkiel, Princeton economics professor and author of ‘A Random Walk Down Wall Street,’ and Charles D. Ellis, author of ‘Winning the Loser’s Game,’ have teamed up to write ‘The Elements of Investing.’

• The One-Minute Portfolio. Here's the ultimate in super-simple investment portfolios, for those who don't have the time or inclination to pick and monitor individual stocks. The One-Minute Portfolio. The One-Minute Portfolio is comprised of just 3 asset allocations: Domestic Stocks, Foreign Stocks and Bonds. Here's a recommendation for each category: 1. Buy America......
• Investing Term Tuesday - January Effect. In honor of just closing the books on January, I thought it might be nice to examine the January Effect. The January Effect is an investing term that refers to a general increase in the stock market during the month of January. This effect is typically attributed to an increase......
• When it Comes to Investing, Simplicity Rules. There was a time when only the wealthy and well connected could invest in the stock market. Then IRAs and 401(k) plans ushered in a new era of the "common man" investor. Flash forward a bit more, to the Internet age, and we have a grand democratization of the stock......
• 3 Recommended Pimco Bond Funds. Bonds are an important part of any good asset allocation, and here are 3 bond funds from the Pimco firm as recommended in a recent Kiplinger magazine article. PIMCO bond total return (PTTAX). Manager Bill Gross sticks to investment grade, intermediate-term U.S. bonds for this fund. The expense ratio for......
• Investing Term Tuesday - Gift Of Equity. Since this is the gift-giving season, I thought it appropriate to share the Gift Of Equity in this investing term Tuesday. The Gift Of Equity refers to the sale of a home to a family member at a price below the current market value. Sometimes it can be a sale......

• Save Time, Money and Space in Over 80 Ways If you're looking for handy gadgets, tools and various items that can save you time, money or space (or all three!) this list of more than 80 top products is just what you need. Everyone's got saving money on their minds these days. Some of us are always looking to......
• How to Spot an Investment Bubble Did your investments get slammed because you bought at the top of the market only to curse them all the way down? Were you feeling anxiety because you listened to friends talk about flipping condos for a quick profit and felt like you were going to be left out?  Did......
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• Review: The Motley Fool’s You Have More Than You Think By David and Tom Gardener For many people, the ability to invest is a pie in the sky dream that will never be achieved, due to the fact that they may not believe they have “enough” money to invest. This book promises to allay those fears and help readers get a better view on personal......

The Mutual Fund Monday post this week is a highlight of a recent post from Kyle over at Amateur Asset Allocator .

Millions of Americans own mutual funds in their 401(k) plans, and many others own them in their IRA’s or even in a taxable, non-retirement account. But many people don’t have any idea of how to really compare the funds that are available to them. Here’s a hint – it goes beyond simply finding the highest return for a given time period (Ex: 1, 3,5 or ten years).

Kyle’s post is a great explanation of how to compare mutual funds, and their associated indexes. He explains how to compare apples to apples, and not apple to oranges (all mutual funds are not created equal!). He also explains the basics of knowing which index to compare a fund’s performance to, and why. And lastly, he explains how to compare two mutual funds – and more important, how not to.

So what are you waiting for? Head on over and give him a read.

• A Sample ETF Portfolio for 100% Foreign Exposure. Exchange Traded Funds (ETFs) offer broad diversity in a single package, and if the ETF is an index fund then they carry added tax benefits when compared to actively manage mutual funds. When ETFs first hit the investment scene, they were simple index tracking funds. They mainly targeted passive investors.......
• Mutual Fund Monday. I'm down with the flu this week, which means I'm taking it easy - but not too easy. I'm catching up on some reading and found some nuggets of knowledge regarding mutual funds that you may not already know about and you may enjoy reading. So, without further ado (because......
• Mutual Fund Monday: PIMCO Launching New Global Fund. According to a recent Edgar filing , PIMCO will soon be launching a new fund: PIMCO Global Opportunities Fund . It's going to be a global value fund of common and preferred stock. The fund will target equities in one of 3 countries, one of which may be the U.S........
• Mutual Fund Monday - Tips For Mutual Fund Investment. With thousands of mutual funds to choose from, picking the "right one" can be a daunting task. Most investors know not to fall for a short term hot streak - one or two years isn't a long enough track record to show superior skill of the management team over sheer......
• When it Comes to Investing, Simplicity Rules. There was a time when only the wealthy and well connected could invest in the stock market. Then IRAs and 401(k) plans ushered in a new era of the "common man" investor. Flash forward a bit more, to the Internet age, and we have a grand democratization of the stock......

• Post 4th of July Roundup How was everybody's 4th of July? Did you enjoy your fireworks, BBQs, and family time? Better still did you all keep on your diets and stay focused on your health goals during the celebration? Check out my Guest Post at MizFit: Food Glorious Food From the Fitness Health Network this......
• Mutual Fund Return Lies: Average Annual Return vs Compound Annual Growth Rate The mutual fund industry has a dirty little secret: the returns many fund companies advertise in the financial media and promotional materials are wrong. Well, not technically wrong but definitely misleading. Mutual fund companies love to quote their Average Annual Return numbers, which, not surprisingly, practically always over-state their funds'......
• The Four Best Mutual Funds For Your IRA Yesterday, I gave some examples of mutual funds that would be ideal for your taxable account. Today, we'll explore the other side of the coin and find out which type(s) of mutual funds would be ideal for your tax-advantaged IRA. If you don't already have one, I suggest signing up......
• Mutual Funds Stuck In Between a Rock & a Hard Place Think back to our two courses on mutual funds, Weakon 205 and 305.  For a brief review, mutual funds are companies that pull investments from many people together.  The advantage for the investor is access to a professional advisory, the reduction in expenses over buying your own stocks, and quick......
• Back to Basics and Mutual Fund Survivorship Bias We have friends visiting this weekend - the "went to high school together - stood up at your wedding - still likes you after 44 years" kind of friends that everyone should be so lucky to have. So I am not spending a lot of time writing. (I'm sneaking this......

Morningstar has a terrific article (available to free members) titled Three Tips to Make Your 401(k) Work for You and I love it! Here’s a brief sample of why:

It’s surprising there aren’t many calls in the press to ditch the automobile. After all, think of all the dumb things people do with them. They drive much too quickly and sometimes after drinking lots of alcohol. They even drive while sending text messages, putting on makeup, and reading the newspaper. The consequences can be dire: More than 40,000 Americans die in auto-related deaths each year, with nearly 3 million suffering injuries of some kind.

Few things in the financial media annoy me more than the recent calls to 86 the 401(k) plan. And the above paragraph illustrates the absurdity of the move to end 401(k) plans quite nicely.

The article goes into greater detail about the push to eliminate the plan, but it also offers some real actions that investors can take to help get their 401(k) balances back on track, or to keep them on track so that they will function as intended – as a means to save for retirement, not get rich in the stock market (as too many seem to think).

Tip #1. Save More.

Yeah, I know, this sounds trite but it’s important not to simply gloss over it. My 401(k) balance dropped by about 30-35% from its 2008 high by the time the market bottomed in March of 2009 – and this was also at a time when my company canceled 401(k) matches! Things looked not so good, to say the least. But I didn’t get discouraged and start blaming the system. Partly because I have over 20 years left until I need that money, and partly because I know the stock market ebbs and flows. True, the market doesn’t usually drop by as much as it did by early 2009, but that also meant that there was near unprecedented opportunity for big returns in the coming months.

So, I looked at what I could do to change my situation and decided to increase my contributions. I knew that this would maximize my ability to buy more stock at those low levels, and also help offset my employers decision to break their promised benefit to me (i.e. contribution match).

I saved more. And the result was that my balance was over its pre-crash value in September, 2009.

Tip #2. Invest Wisely.

Most 401(k) plans are quite limited in the options open to investors, but that doesn’t keep them from screwing it up! For example, some employees “play it safe” and put all of their money in the money market equivalent. That’s stupid, unless you’re looking at retiring in the next 2 year, but even then you shouldn’t have all of your money in cash equivalents because you’re not going to suddenly withdraw all of your saving upon retirement. You need to keep some of it in stocks for long term growth so you don’t run pout of money in retirement.

So, basically, examine the options open to you in your plan, and diversify properly according your time away from retirement and other factors such as other assets available upon retirement – ex: home equity, pension plan, etc..

Tip #3. Be Flexible.

The best laid plans can often fall short due to factors beyond your control, so while it’s important to have a plan and stick to it, it’s also important to remain flexible and be ready to adapt to new realities as the economy (both U.S. and global) enter uncharted territory. This may mean working longer than you originally thought, or working part time jobs in retirement. Regardless, don’t get caught up in the way you think things ought to be and lose sight of the way things are.

• A Sample ETF Portfolio for 100% Foreign Exposure. Exchange Traded Funds (ETFs) offer broad diversity in a single package, and if the ETF is an index fund then they carry added tax benefits when compared to actively manage mutual funds. When ETFs first hit the investment scene, they were simple index tracking funds. They mainly targeted passive investors.......
• How Often Do You Rebalance Your Investments? I had always heard that investors should rebalance their portfolios at least once a year, maybe twice a year and at the same time every year. But I never heard that everyone should rebalance at the same time of year, yet that's exactly the basis of a recent Wall Street......
• Investing Term Tuesday - January Effect. In honor of just closing the books on January, I thought it might be nice to examine the January Effect. The January Effect is an investing term that refers to a general increase in the stock market during the month of January. This effect is typically attributed to an increase......
• A Sample ETF Portfolio for Long Term Growth. Here's an all ETF portfolio that's sure to see some volatility. It's geared toward long term growth, and as such it invests heavily in small cap stocks, foreign markets and commodities. The fund total is 90% stocks, 10% commodities and is best left to investors with long time horizons and......
• Rate Your 401(k) Plan With BrightScope. Have you ever wished there was a rating system for 401(k) plans? I've had a reason to in the past. I was looking at two job offers recently and one of the things that set the two apart was the benefit package. Obviously, a big part of any benefit package......

• Tips for Retirement Planning Some days I think that I get so bogged down in dealing with our day-to-day finances that retirement seems too far away to even think about. I know that my husband and I won’t be old enough to retire for almost thirty years. Who has time to think about retirement......
• How Good Is Your 401(k)? Test It Out Against Other Plans. So, want to see just how good your 401(k) is compared to other plans? Well, you might be in luck as a new service called BrightScope should be able to help you out. Here is what the Huffington Post had to say about this service: Until now, an objective evaluation......
• Top Retirement Planning Blunders Planning for your retirement doesn't have to be a game of chance. There is simply no way you can predict exactly how long you will work, how much money you will be able to accumulate or what expenses you may face in retirement. One thing we can each count on......
• Successful Investing Tips and Techniques The true, most basic motivation behind investing is to grow our investment. People who have invested before will take their time, looking at the differing companies and the market, trying to predict how a stock will do in a year or two. Those investors whom are without the experience to......
• Understanding Investment Returns for Retirement Planning One of the problems that many investors have (and that I used to have) is how to interpret and practically apply investment return data published by the mutual fund companies. I frequently read statements made by uninformed investors about historical annual rates of return that cause them to be over-confident......