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John Atkinson is the co-editor of the world famous \’Investing
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Online Investing
Sep 11
Are you attracted to the idea of being in control of your financial future, but confused about how to start investing in the stock or share market, while avoiding costly mistakes?
Or maybe you\’re disappointed with your performance so far?
Does it sometimes feel like every time you take the plunge and buy into the market, the price goes down?
That\’s understandable…
You\’ve probably attended seminars, read other newsletters or broker reports telling you to buy this or buy that ….. you\’ve probably heard or read a lot of confusing and sometimes conflicting information?
The real surprising facts are that very few online investors actually make money long term.
You\’ve worked hard in your life to get your investment nest egg together so far – but now where to from here?
Maybe you want to develop some extra income or even manage your own superannuation retirement fund? For instance, from 1 July 2005, as a result of new rules on ?choice of superannuation fund?, for the first time millions more Australian employees will be able to choose a fund for their future superannuation guarantee contributions.
Maybe you\’re attracted to the charts you\’ve seen showing the power of compounding investments
Those goody bags Oscar presenters receive aren’t tax free gifts anymore.
“The gift basket industry has exploded, and it’s important that the groups running these events keep in mind the tax consequences,” said IRS Commissioner Mark W. Everson in announcing the tax agency and film industry has reached an agreement on Oscar goody bags.
Oscar presenters walk off with over $35,000 worth of goodies in their gift bags, including a $25,000 four night stay at Honolulu’s Halekulani Resort. But tucked deep in that bag will be a nice letter from the IRS.
In fact, the Academy of Motion Picture Arts and Sciences first contacted the IRS voluntarily due to the high value of the goody bags this year. The Academy was concerned with any potential tax issues for this year and previous years.
The Academy and the IRS have settled the tax obligations for all gifts through 2005, though no details were given as to how. Recipients of this year’s gift basket will be issued informational tax forms by the Academy and will be responsible for their own income tax obligations.
It doesn’t seem as if the “gift” should be taxed. After all, the goddies are given by the hotels, designers and manufacturers as a homage.
But the IRS says that at this level of cost, the gift bags have public relations value. This is business, according to the agency. The only option the stars have, according to an IRS spokesman, is to donate the gifts to a qualified charitable organization. If they do, they may be able to take a tax deduction, subject to the usual applicable limitiations and requirements.
This will affect many more people than just the Oscar stars. Celebrity fundraiser goody bags, celebrity golf, charitable organization and other entertainment events will all be handing out tax bills with their goody bags. The IRS is notifying all entertainment and charitable organizations that they must issue 1099-MISC forms at the end of each year to each celebrity or recipient of expensive gift baskets.
Those who wish to avoid the taxes must return the gift basket and have written proof of return.
What is taxable now? Everything recieved at a fundraiser — from things in goody bags, items picked up at a free shopping table to rooms given as a courtesy. Even gift certificates and vouchers are taxable.
And if you are a celebrity and receive a free outfit to wear to an event, you are going to have to pay taxes on it. You will be taxed on the fair market value of the gift. Don’t forget to keep track of all the goodies you receive during the year.
You remember (they show it on TV every year)
the running of the wild bulls in Pamplona,
Spain. Some of the nuttier people get out their
capes and stand in their path as they come
roaring down the street.
Our would-be matadors wave their home made
cloaks at the bulls hoping the bulls will charge
at it and not at them. The list of casualties at
the end of the day is sometimes quite large,
but, fortunately, not too many are killed.
These two participants, the bull and the
make-believe matador remind me of the those
same participants in the stock market. The bull
is Mr. Market and the matador is the
make-believe investor.
Why do I call him a ?make-believe investor?.
Because as a former 17-year exchange member,
floor trader and brokerage company owner I
have had many clients who thought they were
?investors?. As a professional I would watch
many of the dumb things (like standing in front
of a charging bull with a rag in their hand)
that clients would do with their money. Many
times I could talk them out of it, but others
they would insist on being gored.
The professional trader learns very quickly
that you cannot stand in front of a charging
bull who happens to have the shape of a stock
market that is going full speed either up or
down. Investors love those upward moves, but
a few will say I have a nice profit now so I?ll
cash in and take the money only to see their
stock, mutual fund or ETF (Exchange Traded
Fund) continue its skyward journey.
The problem was they were guessing that their
price was at or near the top of the move. Is
there any way to know what is the highest price?
Actually ?NO?, but there is a way to catch a
very large percentage of the price advance and
have Mr. Market tell you when to sell. How? Let
me show you the time-honored secret of the
long-term professional traders.
Stocks do not make an orderly procession to a
top and then turn down in an orderly fashion.
They move in stair steps up sometime 2 steps up
and one step back or 3 steps up and one step
back. Many times they will rest for long periods
and consolidate. What you can do is place a stop
loss order that should be moved up as your
equity advances.
Suppose you bought AT
Forecasting The Stock Market
Aug 18
Every day I see in the financial
section of newspapers how to forecast what the
market will do in 6 months, 12 months, several
years. ?Ten stocks that will double in the next 6
months.? Right! I have trouble trying to forecast
what it will do tomorrow. Do not trust any who
claims he knows what the future will be for the
market.
Of course, your broker will send you
gobs of slick material about various companies
that predict they will double or triple in the
next 12 months. On the New York Stock Exchange
there will be about one half of one per cent
(0.5%) of companies that will double this year.
Are you smart enough to pick those winners? I?m
not and I am considered a professional trader. And
I am sure your broker isn?t either. He just wants
to make a commission and is probably promoting a
stock his brokerage company wants to push.
Every investor wants to know the
future and will send money to some ?expert? who
will send him news about a company that only (?)
he knows. And pigs can fly. One thing about the
market. It is almost impossible to keep a secret
and everyone knows everything about other
companies. As soon as some ?analyst? finds a
cogent fact that can influence a stock price he
will share that ?secret? with a few close friends.
Within minutes the ?secret? is known by hundreds
of thousands and is immediately reflected in the
price of the stock.
If you do get sucked into one of these
money traps by some smooth-talking salesman or
newspaper verbiage I strongly suggest you
immediately plan your exit strategy. Without an
exit plan you can easily lose a large amount of
your ?investment?. This is not an investment; it
is a gamble and should be treated as such. The
first thought of any professional trader is ?if I
am wrong how much am I willing to lose?? Maybe 2%,
5%, certainly no more than 10%. Pros understand
that small losses are OK, but never take a big
loss.
From 1982 to 2000 it seemed everyone
was a financial genius. How many of those folks
kept those big winnings from 2000? Almost none.
Most lost 40% to 60% of their money. Brokers said,
?Hang in there. You are in for the long haul?.
Unfortunately he did not tell you that Modern
Portfolio Theory is based on a 40 year time line.
Yes, but understand you don?t need to
predict anything. Don?t forecast. What you can
easily learn is follow the major trend. You bought
in 1982 and you sold out in 2000. The trend can be
found in many ways with the simplest being posted
every day in Investors Business Daily newspaper
under the IBD Mutual Fund Index. When the Index
price is above the 200-day moving average you own
equities and when it is below you are in cash or
bonds. Nothing complicated,
Don?t try to forecast the market. Let the market
trend tell you.
Al Thomas\’ 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 at http://www.mutualfundmagic.com
and discover why he\’s the man that Wall Street does
not want you to know.
Writen By : Al Thomas
Stock And Fund Dividends
Aug 17
When is a dividend not a dividend?
The latest thing ?conservative?
brokers are preaching these days is to buy stocks
that pay dividends. Everyone likes dividends. I
know I do, but when Wall Street tells me something
I am automatically suspicious because they lie to
me every day. Is this a new scam? Let?s take a
look.
When you buy a bond or a CD at the
bank it pays interest and is a real dividend. You
might get a check every month, quarter or annually
or receive a credit to your account. The amount of
your principle (what you paid for it) remains the
same. Yes, that is a true dividend.
Companies make big splashes about
raising their dividend. It was 50 cents per share,
but we have raised it to $1.00. Big deal. Yes, you
will receive a check and at least you know the
company has cash available to pay you. That is an
indication the company is in good financial
condition, but there have been many of the big
names on the NYSE that have continued dividends
even when they have lost money. How can that be?
Currently Microsoft has announced a
dividend of $3.00 per share. The talking heads on
CNBC-TV tell us they are loaded with cash and want
to distribute it to their stockholders. Many
people buy the stock in anticipation of the
dividend as they think they will be getting an
extra $3.00 per share. They are in for a big
surprise.
The day that dividend is paid
Microsoft stock (symbol MSFT) will automatically
drop $3.00 per share. Today $27.00; tomorrow
$24.00. Folks, this is NOT a dividend. This is a
distribution of capital. You are being paid in
your own asset. The fool that believes the Wall
Street mumbo-jumbo will not have one extra penny
after the dividend than he did before. In fact he
will have less. Why?
The stockholder will now be allowed to
pay income tax on the ?dividend? distribution. To
make that ?dividend? seem even better the Bush
administration has reduced dividend taxes from
38.6% to 15%. Thanks, Mr. Bush. Thanks for
nothing. I can?t blame him for more Maul Street
smoke and mirrors. He has just made it cost less
to get back your own money.
Companies seldom pay large dividends
and they are paid quarterly. A $30 stock that pays
a 4% dividend ($1.20) on a quarterly basis shows a
decrease in the stock price that day of 30 cents
per share and is lost in the noise of trading. Few
notice that part of the price change is due to the
?dividend?.
When you own the stock of any company
the most important criteria is to find one that is
in a long term upward trend. Never buy a stock
that is showing a decline no matter how ?good? the
company may be. Even sideways movements should be
avoided. Keep in mind you are buying the stock to
make money. Forget the dividends and all other
?reasons? and remember if it isn?t going up, don?t
buy it!
F*R*E*E investment letter. http://www.mutualfundmagic.com
Copyright 2004 Albert W. Thomas All rights
reserved. Author of \”If It Doesn\’t Go Up, Don\’t
Buy It!\” Comments to al@mutualfundmagic.com
Former 17-year exchange member, floor trader
and brokerage company owner.
Writen By : Al Thomas
Race Horses And Mutual Funds
Aug 17
For years investors have been taught to look
into the composition of a mutual funds. In other
words the \”experts\” want you to take the time to
analyze the stocks within the mutual fund
portfolio, categorize them by industry group and
try to understand the objective of the fund
manager. This is nonsense.
When I go the track I look to see what the horse
has been doing for the last several races. I
don\’t give a hoot what he had for breakfast. All
I want to know is has he been fast? Is there a
good chance he will finish in the money in the
next race? I only want to know how he has been
performing.
Most mutual fund managers, except those who
follow index funds, are always trading. You have
no idea that what is in the portfolio today was
there yesterday or will be tomorrow. Some fund
managers trade more than others, but you can
prove this to yourself by looking at the fund
prospectus at the beginning of the year and one
of the updates that funds publish quarterly.
Many of the stocks will still be there, however,
you don\’t know if the percentage holdings are
the same.
By the way, don\’t bother reading a mutual fund
prospectus. They are worthless when it comes to
making money. Consider that most of the
information in it is about a year old by the
time you read it. Think about this seriously for
a minute. Is there anything you can find out in
the document that will show up in your bottom
line? I\’ll wait while you think. OK? There
really wasn\’t anything was there? All
prospectuses are basically worthless.
But you say the SEC (Securities and Exchange
Commission) in Washington approved this. No,
they did NOT. They don\’t approve of anything;
they just read it to be sure it meets the
regulatory requirements for disclosure. There is
almost no difference between the prospectus for
the worst mutual fund and the best mutual fund
and both of them may have been read by the same
Dilbert in his cubicle at the SEC.
There is one excellent way to find out which
fund to buy. It is based on performance. How
much has the fund increased in price during the
past 12 months? Just 12 months. Many financial
analysts want you to look at 3-year, 5-year and
10-year performance. Remember that horse? I
don\’t care how many races he won 3 or 5 years
ago. Can he run NOW? There are many publications
and web sites that tell you the best performers.
Investor\’s Business Daily prints a list of best
performing funds each day. You might have to see
the paper every day as they sometimes just tell
about the long-term performance. You want the
last 12 months and the last 3 months.
Three years ago you could have bought the best
performing fund on the street and today have a
dog. I call a dog any mutual fund that is not
outperforming the S