Stock Market
Stocks are the growth engine of most long-term saving plans, so it pays to understand how they work. The articles on this page cover various aspects of the stock market and how to invest in stocks via stock mutual funds. Note also that a great deal more information on how to invest in stocks is available by using the "For Members" and "For Visitors" drop-down menus above.
A broad range of price and services exist in today's discount broker marketplace. While there's no one-size-fits-all recommendation when it comes to choosing the right broker, it's also true that some are much better suited than others to meet the specific needs of SMI investors. We offer an in-depth look at the top contenders for your brokerage account, and present a unique offer from a leading broker specifically formulated to save Upgraders money.
The way you divide your portfolio between stocks and bonds has a bigger impact on your eventual returns than any other single decision. Has the difficult first half of 2008 driven you out of stocks? Or are you persevering, trusting the traditional superiority of stocks will once again reassert itself? In this article, we look at historical patterns and how they can be used to guide your portfolio allocations as you plan for retirement.
Each January we update our category allocations based on where we think the best opportunities lie in the year ahead. See what fine-tuning we suggest to take advantage of opportunities in the New Year.
Relentlessly rising oil prices. Inflationary pressures building. Slow economic growth. And a stock market stuck in neutral. To veteran investors, it's starting to feel like the 1970s again. What should you do if the market repeats its 1966-1982 experience and stays stuck in the same range for several more years? Two simple questions can reveal the answer.
With the stock market showing meager gains over the past 10 years, many are talking about it having been a "lost decade" for investors. Sound like bad news? Dig beneath the surface and you'll find the seed of some very promising news for the next 10 years.
With so many different types of stock funds out there, how do you even begin to sort them all? SMI's approach is to categorize them first by the size of the companies they focus on, and secondly based on the style they follow. Combining these two risk frameworks establishes a useful "risk ladder" to work with.
Putting this market ideal into practice is tough on the emotions, but ultimately rewarding for your pocketbook
One of the premier "big picture" issues facing investors over the next decade is the demographic implication of the Baby Boomer generation reaching retirement age. Some experts think this shift will have a huge impact on the stock market as retirees dump their stock. Others think its effect will be negligible, pointing to the fact that a large amount of the stock is concentrated in the hands of wealthy owners who presumably won't be forced to sell. Which side is right, and how should you prepare? Here's a balanced look at both sides of the debate.
The conventional wisdom regarding mutual fund investing goes like this: diligently search for the "best" funds, buy them, then hold on for a very long time. But what if the conventional wisdom is wrong? If it is, then the reasons commonly cited for selling a fund are probably wrong too. We analyze five frequently discussed reasons to sell a fund, then compare how SMI's Fund Upgrading strategy more effectively handles each of the same concerns.
Lurking in the portfolios of millions of investors is a time-bomb threatening their financial security. This threat comes from the most unlikely of sources: your employer's stock. We explain the risk and offer guidelines to determine how much is too much.
If you're interested in investing directly in individual stocks, dividend reinvestment plans are a great way to get started. Here's a primer on how to build a portfolio of stocks one "drip" at a time.
Load vs. No-Load. Class A, B, C, R, Y, Z…what does all this mean? Selecting mutual funds can be confusing, but by learning just a few key principles, you can cut through the maze of confusion and find exactly the right funds for you. We deliver the basics you need to know about mutual fund types and share classes.
For the second year in a row, the stock market has subjected investors to a sharp summer swoon. Last year's version turned out to be a brief set back that set the stage for superb gains over the following twelve months. Investors are still holding their breath waiting to see how this year's version will end. At times like these, a basic understanding of bear markets and corrections can go a long way towards maintaining a sound mind perspective. If you fear the next big bear market, we have encouraging news to offer you.
Recent months have been scary for stock investors. Many question whether putting money into stocks is a good idea when the future direction of the markets looks so uncertain. Here, we examine how an investor would have fared starting an investment program just as the bear market of 2000-2002 began. We think you'll be encouraged to see how the powerful combination of dollar-cost-averaging and SMI's Upgrading strategy successfully counteracted even those worst of market conditions.
Every investor balances the competing forces of risk and reward in building a portfolio. We normally focus on this tradeoff through the lens of asset allocation — how much of your money is put in stocks vs. bonds. But strategy allocation can also help fine-tune your risk/reward balance. New research on combining two of SMI's most popular investment strategies offers some insight.
One of the many benefits of dollar-cost-averaging is it frees you from the worry of whether you're buying at the "wrong" time. But what impact does DCA have on your long-term investing returns? The results of our recent research may surprise you.
The biggest obstacles to successful investing often involve our own emotions. Logically, we know that buying stocks when prices are low makes sense. But we feel so much better about investing when the market is going up! As a result, many investors buy near market tops and stop buying during bear markets, exactly the opposite of what they should do. Dollar-cost-averaging is a mechanical strategy that helps avoid these pitfalls by removing emotion from the investing process. Here you'll learn five specific benefits of DCA and see how to implement a DCA investing plan of your own.
One feature brokers promote to unwitting customers is access to the supposedly valuable research their firm's analysts produce. But is brokerage research actually worth much at all? Come along for a peek behind Wall Street's curtain — a place where "Buy" sometimes actually means "Sell".
In investing, as in relationships, you're more likely to make serious progress if you're willing to make a commitment. Here are 7 advantages of automating your investing with a systematic investing plan.
Noted investor Charles Carlson once wrote that long-term investors get rich during bear markets — they just don't realize it until later. Why is it that when fear runs rampant through the markets, some investors panic while others make their fortunes? Jason Zweig's excellent new book on "neuroeconomics" explains the tricks our brain plays on us when it comes to finances and the emotions they inspire. In this article, he helps us understand that most dangerous of investing enemies — fear.
It's commonly believed that stocks suffer when oil prices rise. But is it true? Ken Fisher offers a different opinion on oil and its impact on the stock market than you've likely heard before.
Studies indicate that the way a portfolio is divided between stocks and bonds is the most critical determinant of investing returns. Pros call this the "asset allocation" decision. We examine the records of funds that focus specifically on this key element.
"Foreign stocks were up 25% last year? I wish I'd had all my money in foreign funds!" It's a familiar lament. But as natural as it is to wish you'd predicted last year's hot market segment, it's also unrealistic. We show why this is true, and explain how a diversified portfolio is the best path to long-term investment success.
The virtue of diversification is a foundational pillar of SMI's investing framework. Among stock investments, key diversification fault lines separate groups of mutual funds based on both the size of the stocks they invest in, and the management style used by their managers. Both of these fault lines have been quivering lately as market leadership has been reversing.
SMI is adding an exchange-traded-fund (ETF) to its recommended list for the first time this month. Why would we do that, and what does it mean to followers of our Upgrading strategy?
Misconceptions about past market events can lead to potentially damaging actions. Don't let scary imaginary risks drive you to take actions that put you in real danger from threats that are less obvious, but more likely.
While greater risk sometimes leads to higher returns in the long run, in the short run, investors often get frustrated with dramatic price swings and sell volatile investments. Here's a look at how SMI's "relative risk" score can help you identify the risk level of prospective investments and find the best fit for your investing personality.
Investors are naturally drawn to performance information. However, looking solely at an investment's returns can be misleading. To get a balanced picture, you must consider not just the return, but the risk involved to earn that return.
For many people, the hardest part of investing is simply getting started. The sheer number of choices and the complexity of it all can feel overwhelming. If that describes you, consider these single fund solutions designed to simplify the startup process.
In SMI's fund selection process, most of the emphasis is on the performance of each fund relative to its category peer group. But keeping an eye on the "relative risk" scores of each fund can alert you to key differences between the funds vying for a place in your portfolio.
When markets correct, it can be a very unpleasant emotional experience for investors. These 8 keys can help us remain calm even in the midst of a stomach-churning market decline.
When the markets are rough, as they have been lately, the allure of market timing becomes exceptionally strong. Who wouldn't want to take part in most of the market's gains, then step aside and avoid its painful declines? Unfortunately, reality is a little more complicated than that. Here, Austin relates lessons from his decade as a professional market timer and explains the keys to success for those who wish to pursue timing further.
Index funds can be excellent tools for building a portfolio, providing you understand exactly what you're working with. We outline four advantages and two disadvantages of index funds to help you determine if indexing is right for you.
Over the past decade, hedge funds have emerged as the new glamour investment. Occasional tales of spectacular returns, and spectacular implosions, have piqued the curiosity of many investors. But what exactly are these exotic investment vehicles, and should you be eager to participate in one if possible? We turn to a pair of former hedge fund managers for insight.
Those who study the financial markets quickly realize that everything is connected. Seemingly good news may be interpreted as either good or bad, depending on other conditions, and the ripple effects can send markets soaring or swooning. With interest rates on the rise, we examine what higher rates have historically meant for the stock market.
With the fresh outbreak of hostilities in the Middle East recently added to already nerve-wracking economic news, it's no wonder investors are skittish about the stock market's prospects. But how much impact do these type of news "events" really have on the market's direction? Austin explores this question and offers three lessons history can teach us.
Knowing when to sell your mutual funds is every bit as important as buying good funds to begin with. In theory, good investors recognize there are four primary reasons for selling, and act when a fund they own triggers one of those reasons. However, that theory is often interrupted by our fears, inattention, or lack of confidence. To encourage you to take a tough minded look at your current holdings, we've studied thousands of funds and present here a "Laggards List" of 800 that merit replacing without delay.
What are the "growth" and "value" styles of investing? Should you favor one over the other? Discover the meaning of these important investing terms, and learn how to best combine both approaches within your portfolio for maximum gain—and minimum anxiety.
In the investing world, risk and return are inextricably entwined. But many times investors evaluate opportunities with their focus solely on return, neglecting to fully consider the potential risks. That can be a big mistake.
Exchange-traded funds have quickly become a major force in the indexing market. We discuss three primary advantages, and two big disadvantages, of ETFs when compared to traditional index funds.
Some market analysts believe the bull market of the past two years has been nothing more than a brief respite in a continuing bear market. We briefly examine their argument and present five keys to preparing and prospering even if the bear market resumes.
Successful stock investing requires more than the ability to select which stocks to buy. It also requires knowing at what price each stock is a good value. Like any other purchase, buying at the right price makes all the difference. The price/earnings ratio can be a useful tool in projecting the future appreciation potential of a single stock, mutual fund, or even the whole market.
Building on the lessons from What the Price/Earnings Ratio Tells You About Risk, we take the next step of examining the forward-looking P/E ratio as a guide to future stock market performance.
The two main branches of market research take completely opposite approaches in producing recommendations. Is either approach useful, and what can be learned from each? We explain where SMI fits on this research spectrum.
What does it mean when the TV informs you "the Dow" was up 40 points today? As the oldest and most famous stock index, the Dow is frequently referred to, but many people don't understand what it really is. We explain in this easy to understand primer.
Virtually every piece of investment literature warns you to "carefully read the prospectus before investing." But with most prospectuses running dozens of pages in length and resembling legal textbooks, does anybody really read them? Here's an insider's guide on how to hit the important points in a fraction of the time.
