My Account Store Store
SSG Tutorial

June 14, 2012 -

In This Issue:

The First Rule of Successful Mutual Fund Investing

Investing in mutual funds doesn't have to be difficult, as long as you steadfastly follow a few straightforward principles. Unfortunately, there are many opposing forces that get in the way of putting these rules into effect in your personal portfolio.

For example, your 401(k) retirement plan at work probably provides dozens — if not hundreds! — of mutual fund options for your retirement portfolio. With so many funds to choose from, and so little guidance provided by employers or 401(k) plan sponsors, it's no wonder that many investors approach their choice of funds as they would fill up a plate at a buffet restaurant. They pile on the funds, taking a little bit of this one and a little bit of that one — and doesn't that one over there look interesting? Before long, the collection of mutual funds in their 401(k) plan is looking (and performing) more like what pigs enjoy in their slop trough than a 4-star dining experience. Which is more appetizing to you?

ICLUBcentral's newest offering is a monthly newsletter called the Mutual Fund Informer. Each month, we'll present two mutual funds for you to consider in your IRA, 401(k), or regular brokerage account. But if the Mutual Fund Informer is to help you to use mutual funds to build a successful portfolio, you must be prepared to adhere to our "6 Rules of Successful Fund Investing." These principles are based on the commonsense advice that history's best investors have used and subsequently taught to students of the markets. Stray from these rules at your own peril!

Rule #1: Be an investor in your funds, not a trader.

One of the most common mistakes that investors make is thinking that they can manage the risk in their portfolios by attempting to move their money out of their stocks and funds when they perceive that they market is about to decline, and then move back into the market when signs of recovery are seen.

Why do so many investors think that it's so important to be ready to move in and out of the market on a moment's notice? It's largely a result of the fear fostered by the financial "experts" on Wall Street. The people who give you advice about the "best" and "worst" time to invest in the stock market are most frequently those who have something to gain from you if you follow their advice (yes, I'm thinking of brokers who are earning commissions on each trade you make).

The problem with this approach is threefold. First, if signals about the market's future direction were so easily observed, America would be a nation of millionaires. The stock market is volatile and unpredictable in the short term, and it is impossible to predict the direction that stocks or other securities will move with any degree of accuracy. Over the long term, though, it becomes more and more likely that you will earn a positive rate of return and acceptable levels of risk.

Second, if you are investing in a taxable account (that is, outside your IRA, 401(k), or other qualified retirement plan), the higher taxes you will pay on short-term capital gains will take a big bite out of your profits. Long-term capital gains currently are taxed at no more than 15%, while short-term gains are taxed at the same rate as your ordinary income, up to 35%. Fees and commissions incurred when using a trading strategy will eat up another chunk of any profits. If you are trading, you need to be much more successful with each investing decision in order to come out ahead of long-term investors.

Third, do you have the time to actively manage your investments daily? A short-term trading strategy may require you to be engaged every day in making buy and sell decisions for your portfolio. Most people have jobs, families, and hobbies that are a more productive way of spending time than sitting in front of their computer screen watching blips and dots and graphs. If you want an electronic activity merely to fill your time, we suggest buying a Nintendo Wii or xBox video game system. In the long term, it will be much less expensive than engaging in a losing trading strategy.

Most mutual fund managers realize that it's impossible to trade their way to success. They would like their shareholders to be of the same mindset. Fund managers want customers to provide them with the ability to prosper long term by not moving in and out of their funds, thus relieving the fund of the need to worry about massive customer outflows.

There are funds that specialize in short-term trading strategies. We won't be covering those funds in the Mutual Fund Informer.

Download a free sample issue of the Mutual Fund Informer and subscribe at a special Charter Subscription Rate today!

Next time, we'll discuss rule #2: "Focus on equity funds."

One Year Ago in the Investor Advisory Service: LKQ Corporation

In the June 2011 issue of the Investor Advisory Service, we recommended LKQ Corporation, a nationwide supplier of "alternative" replacement automobile parts. This midsized company had revenues in 2010 of $2.47 billion, and had grown earnings per share at an annualized rate of 34.8% since 2001. How have the company and its stock performed in the year since it was recommended?

We like unusual business models, as long as they produce good results. A nice example is aftermarket auto parts supplier LKQ Corporation (Ticker: LKQX), first introduced to IAS subscribers in November 2008. Shares traded at $13.60 then, and their performance mostly matched the broader S&P 500 for two years, but then began outpacing the market in mid- to late 2010. After a nice run-up, shares had paused in the mid $20s when we profiled LKQ again in June 2011 at $26.65.   

As the only nationwide supplier of "alternative" replacement parts—including a broad line of refurbished parts pulled from wrecked vehicles—LKQ wins contracts with insurance companies that hire the company to supply replacement parts for vehicle repairs and also to dispose of totaled vehicles. Through organic growth, combined with a multifaceted acquisition strategy, management has assembled a vehicle recycling franchise that does to cars what the Chicago stockyards did to hogs—making use of everything but the "honk" in this case. ...  


Handling Investment Club Member Withdrawals

Determining how best to pay off a member withdrawal often causes stress and strife in investment clubs. Members debate the merits of paying the departing partner in cash or by transferring shares of stock, or they argue over whether it’s best to raise cash by selling stock or requiring additional member contributions.

At this month's Investment Club Operations webinar, Doug Gerlach will discuss "Handling Investment Club Member Withdrawals." Here's your chance to ask Doug any burning questions you may have about full and partial withdrawals, including how to determine whether it's best to pay in stock or cash and the advantages of each method.

Get more information or register today!

June 14, 2012


We're ICLUBcentral Inc.
We develop high-quality software products and web services for individual fundamental investors, and powerful accounting tools used by the majority of US investment clubs.

711 W. 13 Mile Rd
Madison Heights, MI 48071

ICLUB Links:
ICLUBinsider Past Issues
Start A Club
Investor Advisory Service
Complete Roster

Events Calendar:
First Tuesday of each Month: Toolkit 6 User Group led by Doug Gerlach, ICLUBcentral Inc.

Third Tuesday of each Month: New Investment Club Orientation led by Doug Gerlach, ICLUBcentral Inc.

Doug Gerlach will also be speaking at the following events:

June 19, 2012: Investment Club Operations Webinar; Handling Investment Club Member Withdrawals
Doug Gerlach, Speaker

July 3, 2012: Toolkit 6 User Group Webinar; Diving Into Dividends in Toolkit 6
Doug Gerlach, Speaker

July 12, 2012: Retail Investors Conferences; Doug Gerlach, Speaker

July 17, 2012: Investment Club Operations Webinar; Passing the Torch: Preparing Your Club's Next Treasurers
Doug Gerlach, Speaker

Aug. 2, 2012: Retail Investors Conferences; Doug Gerlach, Speaker

Aug. 7, 2012: Toolkit 6 User Group Webinar; Margins of Safety: Analyzing Profitability in Toolkit 6
Doug Gerlach, Speaker

Aug. 21, 2012: Investment Club Operations Webinar; Superior Stock Selection for Investment Clubs
Doug Gerlach, Speaker

Sept. 4, 2012: Toolkit 6 User Group Webinar; Studying Small Companies in Toolkit 6
Doug Gerlach, Speaker

Sept. 13, 2012: Retail Investors Conferences; Doug Gerlach, Speaker

Sept. 18, 2012: Investment Club Operations Webinar; Managing Your Investment Club's Portfolio
Doug Gerlach, Speaker

Oct. 2, 2012: Toolkit 6 User Group Webinar; Managing Portfolios in Toolkit 6
Doug Gerlach, Speaker

Oct. 4, 2012: Retail Investors Conferences; Doug Gerlach, Speaker

Oct. 16, 2012: Investment Club Operations Webinar; Handling Monthly Club Treasurer Tasks
Doug Gerlach, Speaker

Nov. 6, 2012: Toolkit 6 User Group Webinar; Quarterly Trend Analysis (& the PERT Approach) in Toolkit 6
Doug Gerlach, Speaker

Submit Your Event!

Like 7-Eleven, we're not always doing business, but we're always open — go to the ICLUB Store and outfit yourself with the simple, yet powerful tools and services that smart investors have been using to grow their portfolios since 1989.

Got a Problem?
Support is here to help. You can reach them M-F, 9:30 AM-6:00 PM at 877-33-ICLUB (877-334-2582), or use the e-mail web form at ICLUB Support.

Join the Toolkit 6
Group on Facebook!




Newsletter Archive

Subscribe to newsletter

Unsubscribe from newsletter

About    Press    Management    Privacy Policy    Terms of Service    Contact

copyright © 1989 - ICLUBcentral Inc. or its affiliates