MUTUAL FUND ARTICLES BY ULLI G. NIEMANN
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Your Worst Enemy to Successful Investing - the
by Ulli G. Niemann
How do you make your investment decisions and where do you
get your information? If you're like most of the people I
know, you look to the experts.
That's fine, however it's important to be aware that for
every expert, there's an opinion and for every opinion there's
an expert. I have a friend who says that opinions are like
noses: everyone has one but you wouldn't live in anyone else's
Around the first of the year, along with the New Year's
resolutions, come the New Year predictions for what will
be hot and what will not. As if that isn't enough to produce
a massive case of information indigestion, now we have the
cable financial shows with pretty much the opinion of the
What this is producing is a frenzy of buy and sell activity
for stocks in general, and now for mutual funds as well.
I don't think this approach serves either the investors in
particular or the funds in general.
The big problem with this for mutual fund investors is that
all the experts are recommending different funds. It might
be one thing if experts had a solid basis for their perspective.
If they did, then you would think their recommendations would
line up and they'd all be touting the same thing.
But they don't and they aren't. Oh sure, each one of them
can make a good case for their pick. But so can the next "expert." And
usually both of them won't be right (if either of them is).
So, where's the value in this for you? Beats me.
Another problem with this approach is that many experts
recommend different funds at different times, and, in an
effort to be in the hot fund, investors keep moving from
fund to fund.
In the same breath, the experts are telling us to invest
for the long term. Well, I can't figure out how to do both:
be in the latest hot fund, and hold what I've got for the
The downside of all of this for the funds is that sometimes
a fund touted as the hot one to be in attracts so much investment
attention (i.e., money) that it grows beyond its original
intention. At that point, it loses its direction and the
very thing that made it strong is sacrificed. And guess what
happens to the performance?
So, in the midst of all the hawking and hype for this fund
or that, what's an investor to do to make intelligent choices?
For myself and my clients I use a trend tracking methodology,
which identifies long-term trends in various markets. I research
funds for stability and reliability as well as current performance.
Then, when our trend indicator signals a Buy, we select our
mutual funds based on momentum figures for various time periods
to arrive at the most promising fund(s) to use for this cycle.
This gives us a head start and sometimes, weeks after we've
bought a fund, I see it written up in financial papers as
being one of the best performers.
Does this approach always put us in the number one fund?
Maybe not. But we are almost always in funds that are doing
very, very well. And do we get in at the bottom and out at
the very top? Again, maybe not.
However, I can tell you that, using this methodology, my
clients and I followed the sell signal we got in October,
2000, and were safely invested in solid money markets when
the stock market crashed and burned.
Is this approach for
you? It depends on how much adrenaline rush you like when
you watch your investments. Personally,
I fulfill my thrill quotient with other things in life
and enjoy sleeping at night when it comes to my investments.
© Ulli G. Niemann