Every US based worker that has attended a 401K planning seminar has heard the same lecture. Diversify your money between US based Large, Mid and Small Cap stocks then mix in some International Stocks and Bonds. Your percent allocation to each sector will vary depending on your age. It must be sound advice if some many professionals agree on this approach. Most will follow this advice tweaking it every now and then. However, with a little more understanding you can outperform those advisors.

The objective of investing is to buy low and sell high which is not as easy as it sounds. At least in the stock part of your portfolio, it is slightly easier to do with your bond allocation. The key to bonds is interest rates. As interest rates go up, bond prices go down. As interest rates go down, bond prices go up. That is all the average investor needs to know about bonds.

Let?s say that you purchased a bond that was paying 3% interest and then interest rates increase to 3.5%. Why would a new investor buy your bond paying 3% – when a new one could be purchased that returned 3.5%? Thus, the only way to entice people to buy the 3% bond is to lower its price (rates goes up price goes down). Now the investor has a choice of buying the lower yielding bond at a lower price versus the new higher yielding bond at a higher price.

The Fidelity US Bond Fund (FBIDX) is available in many 401K plans. Its returns over the last 6 ? years is as follows:

 	          2000    2001       2002      2003     2004     2005    YTD 5/2006

 Total Return%    11.4     8.1       10.2      4.9      4.4       2.3     -0.8 

What happened to the returns? Interest rates were low in the first years of the decade; then the fed went on rate raising campaign that commenced in June of 2004. By knowing the relationship between bonds and interest rates, a savvy investor would act accordingly. Thus, bond allocations would increase in low interest rate environments and decrease in high interest rate environments. I bet you didn?t hear that in your 401K seminar.

Just a little financial education will carry you a long way and lead to better results. As we are nearing the end of the interest rate increases here is Bill Gross\’, often referred to as \”the Warren Buffett of the bond world,\” current position.

July 7 (Bloomberg) — Bill Gross, chief investment officer at Pacific Investment Management Co. and manager of the world\’s biggest bond fund, said the bear market in bonds is over. “The bond bear market is beginning to go into hibernation, which is the same thing as saying the bear market\’s over,\’\’ said Gross in a television interview from the firm\’s headquarters in Newport Beach, California. “It ended two days ago on Wednesday. While we\’re not about to reap huge capital gains, bonds will do better from here in terms of price.\’\’

As rates go down bond prices go up.

About the Author

Michael Dawson recently said goodbye to a 20 year career in Engineering, Marketing and Sales to focus on living his dream of financial independence. He has since founded The Time and Money Group as vehicle to encourage others to do the same. The company\’s mantra is \”Why trade time for money … when you can have both.\” Sign up for their free weekly newsletter, where he and others discuss the different paths to financial freedom and offer insights for your successful navigation.

http://www.thetimeandmoneygroup.com

Make sure to read one of Dawson\’s most popular articles: \”The No-Brainer Investment Strategy to Double Digit Returns\”

Writen By : Michael Dawson

Tags: commodities, equities, financial, gold, investments, money, stocks, trader, trading, wealth

In my recent article, The No-brainer Investment Strategy to Double Digit Returns, I opined that there is a 34 year cycle in the stock market. A 17 year bull market is followed by a 17 year bear market and that equities and commodities are inversely correlated. Based on this premise, a strategy could be devised in which equities and commodities are alternately invested during its appropriate time during the cycle. I also stated that the last equities bull market from 1982-200 ended with the bursting of the internet bubble and that we are now 5 years into the commodity up-cycle. Finally, I offered research to support this position and results through 2005. So, how is this theory performing over the first six months of 2006?

As of 7/14/2006:

DOW 0.2%

S

Tags: commodities, equities, financial, gold, investments, money, stocks, trader, trading, wealth

Before we address the issue at hand, let

Tags: commodities, equities, financial, gold, investments, money, stocks, trader, trading, wealth

If you have read some of my past articles, you are familiar with my definition of financial freedom. It is freedom to focus on what is truly important to you and your family without trading time for a wage. It is enabled by a portfolio of income producing assets managed by you. In other words, your rental properties or eBay business pays the bills. It is not retirement or jet-setting around the world without any concerns. Although it is not those fantasies, I believe it is the next best thing. It definitely beats punching a clock. What do you think? Don?t answer to quickly. To give up the security provided by a job, not matter how good or bad, requires a certain ?something? that is hard to comprehend. If you hate your job you might be willing to give it a try, but if you like your job ? forget about it. Why take on the uncertainty? If you fail, you will feel stupid for giving up on that great job that is no longer available.

Well, I had not only a good job, but a great one. Made tons of money, worked with great people, traveled the US and Canada ? played golf with customers; dined at fine restaurants. So, why did I leave? I am still searching for the best words to explain it, but guess what ? that was not the first time I quit a job. The first time I quit a good job, not a great one; so that was a little easier. However, when my business failed and I went back to corporate America ? I didn?t feel stupid, a little poorer, but far from stupid. I learned more about myself and what I wanted in life by that experience than possible in any other manner.

That experience gave me the confidence to walk away from a great job.

Writen By : Michael Dawson

Tags: commodities, equities, financial, gold, investments, money, stocks, trader, trading, wealth

Donald Trump and Robert Kiyosaki have written a new book, ?Why We Want You to be Rich: ?If you believe that working hard, saving money, investing for the long-term in mutual funds and diversifying is good advice then this book may not be for you.? They were on CNBC a couple of weeks ago, a day after the book was released and it was already #1 on the Business Best Seller?s list. Their names alone cause people to act. I have read several of Kiyosaki?s books and one or two of the Donalds, but I haven?t read this one yet. I stumbled on a review of the book which didn?t say much about the book – other than it is their best one yet. However, in the review the writer discusses an email that he received from a money manager that floored me.

Jack said it even better: ?In 18 years in the business of managing money I?ve NEVER [his emphasis] met anyone who accumulated significant investment assets (seven figures, or more today) from following a financial or retirement or savings plan.? ?Several studies over the last 10 years have found little consistency in planning advice when researchers posing as prospective clients visit various advisers. Consumer?s Union has a summary of the research on its Web site. These plans are simply another sales angle for Wall Street and its salespeople.?

Jack spotlights a major weakness in the Trump-Kiyosaki book: In spite of all their wealth, they?re na?ve about solving America?s financial illiteracy. More education? They are obviously oblivious of the fact that Wall Street already controls so-called ?financial education? in America, manipulating it as a sales tool for its own interests, not the investor?s.

This is exactly what I have been thinking for years. I lost a ton of money following Wall Streets mantra ?buy the dips?, ?over the long term stocks will go up? and the infamous ?buy and hold.? Buying and holding hasn?t worked very well over the past 6 years. The one I hate the most is to diversify across market capitalizations based on your age. We have all seen the spread sheets – where you enter your age and it suggests your portfolio allocation across small, mid and large cap stocks. What a crock? When the stock market goes down small, mid and large caps all go down ? all be it at different rates. Since commodities are inversely correlated with stocks – how about adding some to your portfolio. At least while stocks are free-falling, the commodities will serve as a hedge. How about varying your allocation of stocks and commodities based on where we are in the business cycle? Few will provide that advice, because it is not in their manual.

I am convinced that you will not become financially free, by working hard and trusting your financial advisor. I haven?t read Trump and Kiyosaki\’s book yet, but that is essentially what their title says. The money manager in the review reinforced my beliefs. My favorite quote from the review is the following:

Investing is not what you think: Stanley and Danko emphasize that ?the majority of the millionaires we interviewed said it?s nice to invest in the market, but the mother lode of investing is in their own business.? Get it? Invest in ?You, Inc.? if you really want to get rich.

Financial Freedom is about investing in you. No one cares about your financial well-being more than yourself. You will need assistance from advisors and such, but YOU must take charge and set the course

Tags: commodities, equities, financial, gold, investments, money, stocks, trader, trading, wealth