DOE Market Recap 12.2.15 WTIC vs. Energy Trust Perf.

DOE Market Recap 12.2.15 WTIC vs. Energy Trust Perf.Good Evening, It was a good day for our SPX Futures traders…some netted 10-12 points per contract.  Great Job! The markets traded sideways for most of the morning then headed south while the FED. Chairman gave an update on the upcoming rate hike.  Before the open, Reuter's published a story with Citi's…

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DOE Market Recap 12.1.15 “Trading Tuesday” BTU

Good Evening, It looked like another day of selling when the disappointing ISM number was released.  Bad news must still good news since the major indexes closed in the green-charts from Finviz.com. An interesting take on the ISM number from associate Mike Shedlock. Our SPX Futures traders received a buy signal late in the day that turned into a five point/contract run.  See…

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Eye on the Market: Performance 102

Last week, I answered your question on the importance of comparing securities performance to the general market-the S&P 500.­­ Many investors ask “if it is better to have their money actively managed by a professional or to passively invest in a market index at a lower cost”? Today, we will examine the returns of some actively managed mutual funds and see how “the professionals” fared compared to the S&P 500 in the last year.

I designed a performance chart, testing some of the top US equity mutual funds (A Shares) by size in terms of net assets. For a fair comparison, I went to the Wall Street Journal and identified the top actively managed equity mutual funds by asset size. To alleviate potential bias from my broker friends, I selected the top five alphabetically and compared their returns.

In addition, I added the popular exchange-traded fund (symbol RSP) that tracks the “Equal Weight” performance of the S&P 500. My goal was to see IF actively managed mutual funds outperformed RSP, with a low expense ratio (.40%), zero front end sales load-commission and zero 2b-1 fees.

Per the front end sales load, the top five (A Shares) have a very hefty commission — $575 per $10,000. Some online brokers only charge from $7 to $10 to purchase shares of RSP and many other S&P 500 ETFs. Keep in mind, commissions are not illegal. It is your decision if you need or want to pay them. Upon request, brokers can sell institutional shares and bypass the commissions. These figures are from Yahoo Finance and are for educational purposes only. The total expenses can vary.

Since all five (A Share) equity mutual funds have a high front-end commission, I want to see if and by how much they outperformed the S&P 500 and RSP. I would hope with the high expenses/fees they would, at least, outperform the equal weight S&P 500 ETF by that amount to justify their additional expense.

Here are the top five-Actively Managed Mutual funds alphabetically, by name and symbol:

AWSHX American Funds-Washington Mutual A

AGTHX American Funds-Growth Fund of America A

AMECX American Funds-Income Fund of America A

AIVSX American Funds-Investment Company of America A

CAIBX American Funds-Capital Income Builder A

DOE chart

As you can see, three of the actively managed mutual funds (AIVSX-AGTHX-AWSHX) outperformed the S&P 500 (SPX-shaded green area). Two funds (AMECX-CAIBX) underperformed the market return of 16.36 percent. Only one actively managed fund (AIVSX) outperformed the equal weight ETF (symbol RSP). All of the other mutual funds underperformed this low fee S&P 500 exchange traded fund. Finally, past performance does not predict future results.

Last August, I ran a column that featured research from stock market researcher Joanna Pratt, concluding, “Only 24% of Active Mutual Funds managers beat the market over the past ten years.” In no way does this mean that actively managed mutual funds always underperform the market. With our performance comparison analysis, one can see this trend may be changing with three of these five mutual funds currently outperforming the market.

I work to eliminate personal bias when composing my columns. Today, I break my silence. Since so many investors hold these very popular mutual funds, I am pleased to see the tide may be turning performance-wise with these front end load (class A) share mutual funds. It would be great to see all five outperform the S&P 500 and RSP the next time I give this report.

Next week, I will compare the performance of some of the most popular exchange-traded funds tracking the S&P 500 to see if there is a difference. The results may surprise you. Plan your work, work your plan and learn to share your harvest!

Source-Stockcharts.com, davidoengland.com

http://www.nerdwallet.com/blog/investing/2013/active-mutual-fund-managers-beat-market-index/

Full Disclosure-I do not hold any securities listed in this column.

I have taught many my performance charting template, and you can learn as well. If interested in learning my performance templates for your securities, sign up for my next workshop Tuesday, May 20, at John A. Logan College. Take the time to learn how your securities perform compared to just investing in the market-low fee S&P 500 index funds.

This information is to be used for educational purposes only. If you would like to see my performance comparison using your security, simply send the symbol and I may work them into a future column.

Plan your work, work your plan and share your harvest!

Source: investopedia.com, stockcharts.com, davidoengland.com

Disclosure: I do not hold any securities mentioned in this column.

Eye on the Market: Performance 101

David england pic

Last week, I answered your question, “Using your system, what were the trading signals for Bank of America before this week’s sell-off?” Today, I am answering your questions on the importance of comparing securities performance to the general market-the S&P 500.

Recently, I had a workshop student wanting to compare her spouse’s 401 selections. I asked if they were diversified to make sure they didn’t have all of their eggs in one basket. The feedback was “of course.” When the student researched their current statement, she was shocked that they were not diversified, and all retirement monies were in one security. The available securities in their particular 401K were target-date funds.

Per Invetopedia.com., Target-Date Funds are; mutual funds in the hybrid category that automatically resets the asset mix of stocks, bonds and cash equivalents in its portfolio according to a selected time frame that is appropriate for a particular investor.

For example, a younger worker hoping to retire in 2050 would choose a target-date 2050 fund, while an older worker hoping to retire in 2025 would choose a target-date 2025 fund. Because it has a longer time horizon, the 2050 fund would likely be weighted heavily toward stocks, with a relatively small percentage of bonds and cash equivalents, while the 2025 fund would hold relatively more bonds and cash equivalents and fewer stocks so it would be less volatile and more likely to contain the assets the investor needs to begin making withdrawals in 2025.

Their choices of target-dated funds: VTWNX 2020 Fund, VTTVX 2025 Fund, VTHRX 2030 Fund, VTTHX 2035 Fund and VFORX 2040 Fund. The employee planned to retire in less than ten years, and they decided to invest in the VTWNX 2020 fund. Once the student plugged the securites into the performance template, she discovered their fund had underperformed the market by almost 6 percent and was the fund with the greatest underperformance compared to the market. To say the student was shocked “would be” an understatement.

What are the lessons my student learned? First, by studying their statement, she discovered they were not diversified and wanted to be. Second, their sole selection had grossly underperformed the market in the last year and the last five years. Third, the student was upset with their selection, but glad she took the time to do her “due diligence” and discover this underperformance factor now, instead of after the spouse retired. Fourth, if they had invested in the S&P 500 ETF Symbol (SPY) they would have invested in a fund that outperformed the market.

When considering a particular security, I compare the security price action with the performance of just investing in the market. When you properly design and plot your targeted securities compared to the market, this can be invaluable information to add to your buying decisions. Why buy securities that have constantly underperformed the market when there are many candidates that outperform the market on a regular basis? Of course, past performance does not predict future returns.

I have taught many my performance charting template, and you can learn as well. If interested in learning my performance templates for your securities, sign up for my next workshop Tuesday, May 20, at John A. Logan College. Take the time to learn how your securities perform compared to just investing in the market-low fee S&P 500 index funds.

This information is to be used for educational purposes only. If you would like to see my performance comparison using your security, simply send the symbol and I may work them into a future column.

Plan your work, work your plan and share your harvest!

 

Bank of America Mistake … Really?

Last week, I answered your questions concerning the length of our current bull market and compared it with others since 1932. Today I will answer the question, “Using your system, what were the trading signals for Bank of America before this week’s sell-off?” Keep in mind, I do not give buy or sell recommendations but will discuss signals many traders will be watching to help with their buy and sell decisions.

To answer this question, I designed a one-year chart for Bank of America (symbol BAC). I used weekly price bars, along with my blue signal line and the S&P 500 in the background, to see how BAC trades in comparison to the market. I have also included, in the bottom box, my favorite institutional buy and sell momentum indicator.

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When trading a particular security, I compare the security price action with the direction of the market. One can see BAC closely mirrored the direction of the S&P 500 (shaded tan area). This continued until the end of March when BAC dropped while the S&P 500 maintained its run. In technical analysis terms, this is called a divergence and signals possible price weakness ahead.

Referring to the chart, we can see traders began taking profits at the end of March when the price traded under my green trend line and blue signal line, accompanied by institutional selling (red bars). Those who used this system would have sold around the $16.50 area and would have bypassed the large price drop last week.

For buying, many traders will be watching for the price to close above a short- term trendline and my blue signal line, accompanied by taller green bars in the lower box, representing institutional buying that drove the price higher. Those who have taken their time to learn my systems have tools for better-educated financial decisions.

In a recent seminar, veteran economic professors who only use fundamental analysis scoffed at my buying and selling systems. Keep in mind, there is no system that is 100 percent. If anyone can send proof of how the fundamentals changed in late March, signaling strong sell signals, like with my systems, please send them my way-I would like to see them!

Sadly, this chart shows many (insiders) knew something many in the general public did not (as far back as the end of March) and sold. This helps to prove “there is an uneven playing filed” while investing in the market.

What should investors do to protect their “nest eggs”? Take the time to learn which technical indicators give the best signals for buying and selling for each of your securities. Know which indicators gave accurate sell signals in 2000 and 2008 and be prepared for when they show up in the future. It is not a question of if, but when. Will you be prepared?

I have taught many my buy and sell systems, and you can learn as well. If interested in learning my systems for your securities, sign up for my next workshop Tuesday, May 6, at John A. Logan College. Take the time to learn which indicators give the best signals for buying and selling for each of your securities.

This is not an open call to buy or sell BAC, but information to be used for educational purposes only. If you would like to see this strategy using your security, simply send the symbol and I may work them into a future column.

Plan your work, work your plan and share your harvest! Source: stockcharts.com, davidoengland.com

Disclosure: I do not hold any securities mentioned in this column.

 

Eye on the Market: Cut and run? Part III

Last week, I answered your question, “Is the S&P 500 making a market top?” and suggested questions to ask before buying or selling any security. Today, I will answer your questions concerning the length of our current bull market and compare it with others since 1932.

Per the chart from shortsideoflong.com website, one can see our current bull market is now the second longest in the last 80 years. In March, this current bull market edged out the famous 1982-87 and 2002-2007 bull markets in terms of length. Does this mean we should hit the sell button on everything Monday morning? Absolutely not. This bull market could run for years to come.

Longer-term bull markets, do not generally end with a whimper but rather serious downturns. Wall Street does not publish these statistics, since they make their money on the amount they manage, but these are stats every investor should be aware of. These statistics will definitely get your attention.

1920s bull market lasted 8 years and crashed by almost 90 percent

1980s bull market lasted 5 years and crashed by 40 percent

1990s bull market lasted almost 8 years and eventually crashed by 50 percent

2000s bull market lasted 5 years and crashed by 50 percent

No one has the ability to know how much further the current bull market will last or how much it will drop and correct when the run is over. I have always found, the harder it runs-the harder it will fall. One thing for sure, the closer we are to retirement the more important it is to not lose our hard earned retirement dollars.

What should investors do to protect these “nest eggs?” Learn how to protect your portfolio for when the market takes a downturn. Take the time to learn which technical indicators give the best signals for buying and selling for each of your securities. Know which indicators gave accurate sell signals in 2000 and 2008 and be prepared for when they show up in the future. It is not a question of if, but when. Will you be prepared?

Plan your work, work your plan and share your harvest!