Does Your Mutual Fund Manager or Financial Advisor Invest Alongside You?

Morningstar believes that money managers should "eat their own cooking." They call it, "The Cooking Test." In other words, how much money does the typical mutual fund manager have invested in the fund they manage?

Answer: Not much.

Here are the shocking stats from Morningstar and Lipper:

-Average mutual fund manager age: 24
-Average mutual fund manager tenure on a fund: 4 years
-Number of complete economic cycles experienced while managing: 0.2
-Managers with at least $100,000 invested in their fund: Less than 20%
-Managers with over $1,000,000 invested in the fund they manage: 3%

INVESTING LESSON
In an investing world full of "look alike" investment options, Ponzi schemes and two 48% stock market declines in the past decade, the only way to invest is right alongside an experienced professional who has significant "skin in the game." With 26 years of experience, I have over $1.5 million invested in the no load mutual fund that I manage. Believe me, I pay pretty close attention to how "our" money is invested!


Stock Buy Backs or Dividends, Which Is Better?

Companies often buy back stock and claim that it benefits shareholders. What you are not told is that companies often buy back shares with borrowed funds or are simply buying back shares to offset stock options exercised by employees.

Simple math tells us that if there are less shares and the same level of earnings, then earnings per share go up. Unfortunately, the value of a company is not determined by the number of shares outstanding, it is determined by how much a company actually earns. A company with only one share that is earning nothing will be worth $0. Just ask the shareholders of Enron, Lehman Brothers and Bear Stearns if share buy backs helped the value of their investment!

Dividends on the other hand are ACTUAL cash that is returned to the investor.

That is why I like to invest in high quality dividend paying stocks or Paid To Wait Stocks, as we like to call them here at WFG.

0% Rates Are Just Not Working

The FED has dropped short-term rates to 0% and is buying Treasuries to keep long-term rates low, yet economic growth is still very weak. Low rates will only spur growth if spending occurs. Unfortunately, no one is spending.

(1) Consumers are saving more and reducing debt. The consumer savings rate was at 5.8% in August 2010. Think about it: It was negative prior to the recession starting.

(2) Businesses are saving more and cutting costs (not hiring). Cash on the balance sheets of many companies is at record highs.

(3) Banks are holding onto cash as opposed to lending, due to uncertainty about potential changes to regulations.

Low rates only work if they cause consumers and businesses to spend. Low rates will not aid economic growth if everyone is just holding onto cash. Until spending picks up, continue to expect a weak economy.

Great Article on Two "PTW" Stocks Owned by WFG

Click on the blog title above to read about what www.theStreet.com has to say about two "Paid to Wait" stocks that WFG owns.

Investing Lesson

If you are going to invest in the stock market, why not get Paid to Wait for the future appreciation of the stock(s) that you own to unfold over time and ignore the day-to-day ups and downs!

If you are sitting on the sidelines, you are missing out, regardless of the future ups and downs of the markets.

What Does The Republican Momentum Mean For Taxes?

So much hinges on the outcome of the midterm elections: Will the balance of power in Washington change? Will Congress extend the Bush tax cuts? The most popular question we are getting from our clients is—what does all this mean for my portfolio?

ANSWER
The stock market operates in a anticipatory fashion, meaning that the expected election results are already baked into prices of stocks already.

As a long-time, card-carrying Contrarian investor, I expect the following after the elections:

Do not be a bit surprised if the market sells off and ends 2010 in negative territory. I would place the odds of that outcome at at least 50/50.

Investing Lesson
If you are going to invest in the stock market, why not get Paid to Wait for the future appreciation of the stock(s) that you own to unfold over time and ignore the day-to-day ups and downs!

If you are sitting on the sidelines, you are missing out, regardless of the future ups and downs of the markets.

As Close To A Legal Ponzi Scheme As You Can Get: Wall Street Products Designed For The Greedy and Gullible

Charles Ponzi is long dead, but the scams live on
and play out each week.

There is a corner of the stock market where products are designed to:
1) Sell some "sizzle" in advance of an IPO.
2) Remove some money from the investor's wallet (5%) at time of sale.
3) Appeal to the "greed" section of the human brain.
4) Offer you an ongoing "yield" (watch this word closely) that knocks the socks off everything else.
5) Pretty much make sure that over time your investment continues to decline.

What lies in this murky corner?

Answer: Closed End Funds (CEFs). Specifically, "Managed Payout" CEFs. It gets worse. Even reputable mutual fund firms have rolled out such funds over the past several years, all in an effort to "three card monte" the shareholder.

Click on the blog title above to read an outstanding blog from
Dividends For Life.

Note that WFG owns six of the stocks listed as superior alternatives to the scammy CEFs.

Investing Lesson
Greed and fear are the two greatest factors that typically separate investors from their hard earned capital.