You may have wondered why your mutual funds have been going down for the past 2 years. The answer is very simple, but not one you will hear from Wall Street as they want you to send money.
In order for stock mutual funds to go up you must have a bull market. Unfortunately, that bull ended 2 years ago and is probably not going to return for a long time. Yes, there will be short-term rallies that can last from weeks to months, but the downward spiral will continue. For the past 100 years the Price/Earnings ratio of the S&P500 index has a mean average of about 15. With the current P/E running about 41 the rubber band has been stretched too far and is now contracting toward a more realistic level. It will take a time, probably several years, for a true bottom to be reached.
Mutual fund charters require the fund manager to be fully invested at all times. The fund may be required to be invested in tech stocks, pharmaceuticals, automotive, Asia or some other specific category. If that particular sector is weak and almost all stocks therein are headed down the fund manager has nothing to buy and is not allowed to sell to put the money in cash or bonds to protect the investors. Some are allowed to buy and sell what they wish; others must invest in stocks of a particular index such as the Dow Jones, S&P 500 or the Nasdaq. Most of the fund managers today are too young to have experienced a bear market and do not know how or what to do.
The small investor today has been taught to believe that the stock market always goes up. From 1982 to 2000 it did, but that was the end. All the talking heads on radio and TV have been telling you to buy the breaks and that the market always comes back - except when it doesn't. Almost none of them has ever seen or even studied a major bear market. The last one was 1973-74 just about the time most of these guys were in grade school or high school. They haven't a clue and don't know when or how to sell.
Today there are trillions of dollars in 401Ks, IRAs, pension plans, etc. run by professional fund managers, financial planners, bankers, etc. who have no idea how to protect their investors. More trillions are getting ready to go down the drain. Last year 90% of stock mutual funds lost money. The Grim Reaper is now the manager of your mutual fund.
For the little guy, that's you, there is only one way to protect your money. If you are in one of those plans you can tell them you want to have your funds in a money market account. At least it won't go down. If there are any fixed income or bond funds available to your account that is another safe venue.
Mutual funds are no longer a good long-term investment. The age of the stock mutual fund is over. Dead. Don't let your hard-earned money get away.
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 to receive his market letter for 3 months at www.mutualfundmagic.com to discover why he's the man that Wall Street does not want you to know.
Comments to al@mutualfundmagic.com
Copyright Albert W. Thomas All rights reserved.
weekly home cleaning Lake Forest ..Every stock market investor faces one primal enemy. An enemy... Read More
The trading method you employ to approach the stock market... Read More
You have heard about a particular mutual fund from a... Read More
A colleague of mine just returned from a scuba diving... Read More
Let's first define insanity. It is doing the same thing... Read More
Now where have I heard that before? I know. It... Read More
This is an extract of an article which was first... Read More
If you go to Haiti or other places in the... Read More
Do you have a financial planner? Does one of your... Read More
You have decided to buy some stock or mutual funds,... Read More
One of the great "secrets" of successful people is discipline... Read More
For the year 2000 we have seen hundreds of mutual... Read More
It is finally catching up with them. The brokerage companies... Read More
Mutual funds were moderately successful in creating a presence in... Read More
Should the market turn against you, it is important that... Read More
I was devastated!I just couldn't believe it. I was 10... Read More
Forget making a profit; instead focus on the income provided... Read More
When will the stock market stop going down and start... Read More
During the day I watch CNBC-TV, the stock market channel.... Read More
1. Do not spread your money too thin.My friend has... Read More
Jack and Jill went up the hill to fetch a... Read More
I go to the Money Show every year to visit... Read More
Investors who exclusively use broadly diversified, no load mutual funds... Read More
During our travel down life's path we come to many... Read More
When you become interested in a stock or mutual fund... Read More
best cleaning company Arlington Heights ..Well, not really. What I mean is I don't mind... Read More
Every day on CNBC-TV they show a 200-day moving average... Read More
Profitable day traders recognize that momentum trading is among the... Read More
"Buy and hold" is one of the most heralded investment... Read More
A common problem I often see when working with living... Read More
Wall Street has been preaching for years and years to... Read More
Disclaimer: Please note that I do not necessarily purchase, own,... Read More
If you want one.And I don't recommend any broker with... Read More
In 1960 an engineer working for a watch company in... Read More
An investor can find and research the best stock on... Read More
When most analysts, financial planners, fund specialists and investors try... Read More
We all know that emotions control every decision that an... Read More
Unfortunately, most of you who are reading my column are... Read More
Whenever I see mutual fund comparisons in the trade publications... Read More
Every Wall Street analyst, financial planner and broker will tell... Read More
Inverted interest rates? What's that? Who cares? Even if you... Read More
You remember (they show it on TV every year) the... Read More
What a great statement!I just heard someone use it in... Read More
TOO OFTEN, INVESTORS SIMPLY CHOOSE TO follow the crowd. This... Read More
Are you paying any attention to your retirement savings? Do... Read More
∙ Make every investment in the stock market a long-term... Read More
One of the most believed bits of conventional wisdom from... Read More
Most advisors will tell you they can beat the market.... Read More
It has fallen upon the consumer to make our economy... Read More
Stock investment advice is easy to find. Do you get... Read More
Stocks & Mutual Fund |