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

If you Google the phrase, “is the stock market overpriced,” you’ll get more than 600,000 hits on how the market is ready to fall off a cliff. That search will find you article after article comparing today’s market to 1999 and even 1929. #-ad_banner-#Several articles try convincing their readers that the market is as much as 80% overvalued — as if that statement has any real meaning. Others say prudent investors should stay away from the stock market after it hits a new high. They reason that the market must revert to some mean level before it can sustain a… Read More

If you Google the phrase, “is the stock market overpriced,” you’ll get more than 600,000 hits on how the market is ready to fall off a cliff. That search will find you article after article comparing today’s market to 1999 and even 1929. #-ad_banner-#Several articles try convincing their readers that the market is as much as 80% overvalued — as if that statement has any real meaning. Others say prudent investors should stay away from the stock market after it hits a new high. They reason that the market must revert to some mean level before it can sustain a move higher. On that, I call BS. Here’s why… It turns out that, historically, the best time to buy stocks is after a new 12-month high as opposed to a new 12-month low. Now this may seem illogical or counterintuitive. After all, you’d think the market would have more upside potential after hitting a new low than a new high. But I have 90-years of data to prove that hypothesis incorrect. You see, the historical record going back to 1928 shows that stocks perform 160% better after hitting an all-time new high. Take a look at the chart below. The… Read More

One of the hallmarks of America is the near-universal belief that our nation is the land of opportunity. Despite the many problems in our country, we’ve always believed that our children would be better off than we were. #-ad_banner-#And for the better part of two centuries, that was true. But in the minds of many Americans today, that belief is dying… You see, more than 56% of Americans believe their children will be worse off financially than they are. Now, that’s an improvement from a similar survey in 2014, which found that 76% of parents feared for their children’s futures. Read More

One of the hallmarks of America is the near-universal belief that our nation is the land of opportunity. Despite the many problems in our country, we’ve always believed that our children would be better off than we were. #-ad_banner-#And for the better part of two centuries, that was true. But in the minds of many Americans today, that belief is dying… You see, more than 56% of Americans believe their children will be worse off financially than they are. Now, that’s an improvement from a similar survey in 2014, which found that 76% of parents feared for their children’s futures. But that still means that almost 60% of parents don’t think their children will achieve any lasting financial success. And that number is sure to grow as the United States edges ever closer to a financial abyss. This begs the question: Are these parents being overly pessimistic, or do their concerns have merit? Like many such questions, the truth lies somewhere in the middle. But being proactive against the threats to our kid’s futures is a sure-fire way to secure their financial well-being. Take Social Security for instance. Social Security was instituted by Franklin Roosevelt in 1935 as a tool… Read More

Major U.S. indices advanced modestly last week, with most tacking on 0.5% or less. This suggests expectations for lower corporate taxes and fewer regulations from a Trump presidency may be fully priced into the market.  If this is indeed the case, I believe it will open the door for a period of seasonal weakness during the first quarter, similar to the one we saw last year, which resulted in an almost 19% decline in the broader market S&P 500 from the Dec. 29 high to the Feb. 11 low. #-ad_banner-#From a sector standpoint, the market was essentially split down the… Read More

Major U.S. indices advanced modestly last week, with most tacking on 0.5% or less. This suggests expectations for lower corporate taxes and fewer regulations from a Trump presidency may be fully priced into the market.  If this is indeed the case, I believe it will open the door for a period of seasonal weakness during the first quarter, similar to the one we saw last year, which resulted in an almost 19% decline in the broader market S&P 500 from the Dec. 29 high to the Feb. 11 low. #-ad_banner-#From a sector standpoint, the market was essentially split down the middle last week, indicating investor indecision. Financials, technology, industrials and utilities outperformed the S&P 500, while real estate, materials, health care, energy, and consumer discretionary underperformed.  Keep Watching Overhead Resistance In last week’s Market Outlook, I pointed out that the Dow Jones Transportation Average was testing major overhead resistance at its 9,310 November 2014 high. I said that as long as this level continued to hold, it suggested the correction I’ve been expecting may finally be beginning. This week’s first chart shows the NYSE Composite also recently tested and failed to break overhead resistance at its 11,255 May 2015… Read More

2016 has been a great year to be a stock market investor. All the major indexes have moved solidly higher, providing profits for short-term traders and long-term investors alike. Dark, bearish fears of the regulatory regime change have been proven wrong as the indexes accelerate on the upside. There is even a chance for the DJIA to break 20,000 before 2017, an unthinkable accomplishment just a few months ago. Thanks to the monster bull market of 2016, nearly everyone is sitting on substantial profits as the year winds down. I can feel the excitement and anticipation whenever I speak with… Read More

2016 has been a great year to be a stock market investor. All the major indexes have moved solidly higher, providing profits for short-term traders and long-term investors alike. Dark, bearish fears of the regulatory regime change have been proven wrong as the indexes accelerate on the upside. There is even a chance for the DJIA to break 20,000 before 2017, an unthinkable accomplishment just a few months ago. Thanks to the monster bull market of 2016, nearly everyone is sitting on substantial profits as the year winds down. I can feel the excitement and anticipation whenever I speak with my fellow investors. The optimism and positive energy are truly off the charts wherever stock market investors gather. One thing that I have noticed is that many investors are so excited about their success, they forget about the taxes due by April 15. Investors of all types still must return a portion of their gains to Uncle Sam come Tax Day.  And some will be shocked at the amount owed! The good news is that there are several legal ways to mitigate your 2016 federal tax bill. Before we get started, it is critical to note that I am not… Read More