The hottest trend this week is with the medical / biotech / pharmaceutical crowd. All of these funds are hanging around the bottom of my momentum list, but they have the strongest upward trends. Check out FSMEX, FSPAX, FPHAX, and FBIOX.
Click here for this week's momentum rankings.
There are no 'Buys' on this week's list. That means we are going to sit tight with our two-fund portfolio of Fidelity China Region (FHKCX) and Fidelity Select Communications Equipment (FSDCX). Fortunately, they had a nice big bump upwards yesterday.
I will attribute the big jump in Fidelity China Region to my recent purchase of a Milwaukee Drill / Impact Driver kit which were manufactured in Qidong City (a.k.a. Milwaukee), China. If you want to see what I'm building with said power tools, come back next week for pictures. As a teaser, I'll just say this - the Obama girls would be envious.
Speaking of building and whatnot, I've spent a lot of time at Home Depot and Lowes over the past few weeks, and they are much busier now than three months ago. Is the economy on the rebound? Who knows? My crystal ball is just as cloudy as the next guy's.
Friday, June 26, 2009
Friday, June 19, 2009
For Sale: Fidelity China. Will consider partial trades...
No changes to our Fidelity 401k momentum portfolio this week. We're sticking with Fidelity China Region (FHKCX) and Fidelity Select Communications Equipment (FSDCX). Fidelity China Region has been downgraded to 'Sell.' Fidelity Select Communications Equipment is still rated as a 'Hold.'Click here for this week's rankings: Fidelity Mutual Fund Rankings June 18, 2009
This is a good time to explain how the algorithm works. Normally, when we get a 'Sell' signal on a fund we have in our portfolio, we would sell it. The only problem this week is that there are no funds currently rated as a 'Buy.' This puts us in an awkward position.
Should we sell the fund and go to cash? Should we buy something that is rated as a 'Hold'? What shoud we do?
I've spent a lot of time studying these options, and the option which has historically provided the greatest return is sticking with the funds you've got (at least for another week). A knee-jerk reaction to sell every time the market takes a dip will crush you when using momentum investing. The strategy of buy high, sell low almost never beats the market.
Don't get me wrong, I'm not advocating the buy-and-hold sucker's strategy (do as I say, not as I do, says he with 100 shares of GM in his Roth IRA: Net Present Value=$0.00). We're just going to hold onto Fidelity China until next week. By then, one of three things will happen:
1) FHKCX is upgraded to 'hold' or 'buy', in which case, we keep it.
2) FHKCX is still a 'sell', but there may not be any 'buys', so we keep it.
3) FHKCX is still a 'sell' AND a there is at least one fund rated as buy - then we swap funds.
We'll find out next week what fate lies ahead for Fidelity China Region. Stay tuned!
This is a good time to explain how the algorithm works. Normally, when we get a 'Sell' signal on a fund we have in our portfolio, we would sell it. The only problem this week is that there are no funds currently rated as a 'Buy.' This puts us in an awkward position.
Should we sell the fund and go to cash? Should we buy something that is rated as a 'Hold'? What shoud we do?
I've spent a lot of time studying these options, and the option which has historically provided the greatest return is sticking with the funds you've got (at least for another week). A knee-jerk reaction to sell every time the market takes a dip will crush you when using momentum investing. The strategy of buy high, sell low almost never beats the market.
Don't get me wrong, I'm not advocating the buy-and-hold sucker's strategy (do as I say, not as I do, says he with 100 shares of GM in his Roth IRA: Net Present Value=$0.00). We're just going to hold onto Fidelity China until next week. By then, one of three things will happen:
1) FHKCX is upgraded to 'hold' or 'buy', in which case, we keep it.
2) FHKCX is still a 'sell', but there may not be any 'buys', so we keep it.
3) FHKCX is still a 'sell' AND a there is at least one fund rated as buy - then we swap funds.
We'll find out next week what fate lies ahead for Fidelity China Region. Stay tuned!
Sunday, June 14, 2009
Updated Fidelity Mutual Fund Rankings
I've updated the rankings for the week. I'm not making any changes to what is in our GreenestEgg Fidelity 401k Portfolio. We're sticking with Fidelity China Region and Fidelity Select Communications Equipment. Both of these funds are now at 'hold' status on the list.
Fidelity Rankings: Click Here
Fidelity Buy List: Click Here
Fidelity Rankings: Click Here
Fidelity Buy List: Click Here
Monday, June 8, 2009
Don't Save for College...at least not in a 529 plan
Hey guys, here's some contrarian advice to start your week off right. You know those 529 college savings plans that everyone is talking about? Personally, I think they are a racket. A scam. A complete waste of money.
High fees and good salesmanship. Few investment choices and subpar returns.
OK, sure, you do get some tax advantages, but what about if you lose money in the account instead of gain money? Can you write-off last year's 30% drop in value on your taxes when you cash out? I don't think so.
But here's the real disadvantage to a 529 plan - it will actually work against you when you file for financial aid. You are way better off to have that money in a 401k or Roth IRA when it comes time to fill out the paperwork.
What should I do instead? Pay off your house. If you pay off your house five or ten years before your kids hit college, you should be able to save for tuition and have better cash flow to pay the obscene tuition bills when they are there. Seriously, could it really be that hard to buckle down and put a few hundred bucks a month more towards the mortgage note? At the very least, you should be able to qualify for better loans since your credit will be impeccible.
Tax-Free Municipal Bonds. Not now. They are way too risky at this moment in time, but in five years, after you've paid off your house, they should be back to paying a sensible rate of return at low risk. Your kids' college education is too important to gamble in the stock market.
Cool it on buying new cars on credit. It's not nearly as patriotic as the GM ads will have you believe. Try to squeeze an extra year out of your old car. Make sure the tires are bald and the brakes are all used up when you let it go. And sell it on Craigslist. There's no need to take half the money for the 'convenience' of trading it in at the dealer.
High fees and good salesmanship. Few investment choices and subpar returns.
OK, sure, you do get some tax advantages, but what about if you lose money in the account instead of gain money? Can you write-off last year's 30% drop in value on your taxes when you cash out? I don't think so.
But here's the real disadvantage to a 529 plan - it will actually work against you when you file for financial aid. You are way better off to have that money in a 401k or Roth IRA when it comes time to fill out the paperwork.
What should I do instead? Pay off your house. If you pay off your house five or ten years before your kids hit college, you should be able to save for tuition and have better cash flow to pay the obscene tuition bills when they are there. Seriously, could it really be that hard to buckle down and put a few hundred bucks a month more towards the mortgage note? At the very least, you should be able to qualify for better loans since your credit will be impeccible.
Tax-Free Municipal Bonds. Not now. They are way too risky at this moment in time, but in five years, after you've paid off your house, they should be back to paying a sensible rate of return at low risk. Your kids' college education is too important to gamble in the stock market.
Cool it on buying new cars on credit. It's not nearly as patriotic as the GM ads will have you believe. Try to squeeze an extra year out of your old car. Make sure the tires are bald and the brakes are all used up when you let it go. And sell it on Craigslist. There's no need to take half the money for the 'convenience' of trading it in at the dealer.
Friday, June 5, 2009
Fidelity 401k Moving Up
No changes to our Fidelity 401k portfolio this week. Fidelity China Region (FHKCX) has been downgraded from 'buy' to 'hold.' Fidelity Select Communications Equip (FSDCX) maintains a 'buy' ranking.
Click here for all rankings.
Click here for buy rankings.
I find it somewhat ironic that Fidelity Select Automotive (FSAVX) tops my list the same week that GM goes bust. I'm still reeling from losing all of my GM stock. Do you think I could appeal to get real stock certificates as a momento? I'd like to use them as stationary to remind myself every day never to bet on a loser.
High technology and banking funds have been going like gangbusters lately while the government bonds have tanked. If you're looking to do some bottom feeding, Fidelity Select Biotechnology (FBIOX) has bounced off of its floor.
On another note, I hope you enjoy the new format of my rankings. I decided to bite the bullet and use SAS for organizing my data. It should save me a lot of time posting these rankings in the future.
Click here for all rankings.
Click here for buy rankings.
I find it somewhat ironic that Fidelity Select Automotive (FSAVX) tops my list the same week that GM goes bust. I'm still reeling from losing all of my GM stock. Do you think I could appeal to get real stock certificates as a momento? I'd like to use them as stationary to remind myself every day never to bet on a loser.
High technology and banking funds have been going like gangbusters lately while the government bonds have tanked. If you're looking to do some bottom feeding, Fidelity Select Biotechnology (FBIOX) has bounced off of its floor.
On another note, I hope you enjoy the new format of my rankings. I decided to bite the bullet and use SAS for organizing my data. It should save me a lot of time posting these rankings in the future.
Monday, June 1, 2009
Momentum Investing
I've been thinking a lot about the direction of this blog lately, and I've decided to go back to my original intention. That is, I want to help you use my trading algorithm for managing your Fidelity 401k, Vanguard 401k, or Roth IRA.
I'll be the first to admit that my algorithm got beaten up pretty hard last year. But I couldn't shake the voice of Bluto Blutarski when he said in Animal House, "Was it over when the Germans bombed Pearl Harbor? Hell no!"
I've been grinding away over the past couple of months on this algorithm. I've made a few revisions, thoroughly back tested it, and it's time to get back on the horse.
What is Momentum Investing?
The idea behind momentum investing is to put your money into the asset classes which are moving up at the fastest rate. The upside is obvious - you make better returns. The downside is that you invest in something which may already overextended.
The algorithm we're going to use has been tested back to 2002 with favorable results. Since I am a scientist by nature, I will be the first to admit that the way I built this model is cheating. I changed my parameters until it gave good performance in the past. What that means is that while we should be able to make a pile of money, I won't be able to publish my results in an academic journal. Oh well. Hopefully, we'll be too busy counting our money to care.
I'm only going to post results from January 2009 forward. I'll get charts and graphs up in the next week or two.
Details
Here are the rules. We're going to hold two mutual funds at a time. After we buy something, we're going to hold on to it for a minimum of 5 weeks. I'll post a listing of the Fidelity mutual funds every week with a "buy" "sell" or "hold" label on it. If we own a fund which says "sell", we will replace it only if there are any funds which say "buy". We never sell funds to go to cash - only to other funds.
Current Portfolio - as of June 1, 2009 (Up 5.2% since Jan 1, 2009)
Fidelity Select Communications Equip (FSDCX) Specialty-Communications
Fidelity China Region (FHKCX) Pacific/Asia ex-Japan Stk
Emotionless Trading
In the past, I've tried to outsmart my algorithms - and lost. This time, we're just going to go with the algorithm and let it do the fund picking for us. No emotion = better returns.
I'll be the first to admit that my algorithm got beaten up pretty hard last year. But I couldn't shake the voice of Bluto Blutarski when he said in Animal House, "Was it over when the Germans bombed Pearl Harbor? Hell no!"
I've been grinding away over the past couple of months on this algorithm. I've made a few revisions, thoroughly back tested it, and it's time to get back on the horse.
What is Momentum Investing?
The idea behind momentum investing is to put your money into the asset classes which are moving up at the fastest rate. The upside is obvious - you make better returns. The downside is that you invest in something which may already overextended.
The algorithm we're going to use has been tested back to 2002 with favorable results. Since I am a scientist by nature, I will be the first to admit that the way I built this model is cheating. I changed my parameters until it gave good performance in the past. What that means is that while we should be able to make a pile of money, I won't be able to publish my results in an academic journal. Oh well. Hopefully, we'll be too busy counting our money to care.
I'm only going to post results from January 2009 forward. I'll get charts and graphs up in the next week or two.
Details
Here are the rules. We're going to hold two mutual funds at a time. After we buy something, we're going to hold on to it for a minimum of 5 weeks. I'll post a listing of the Fidelity mutual funds every week with a "buy" "sell" or "hold" label on it. If we own a fund which says "sell", we will replace it only if there are any funds which say "buy". We never sell funds to go to cash - only to other funds.
Current Portfolio - as of June 1, 2009 (Up 5.2% since Jan 1, 2009)
Fidelity Select Communications Equip (FSDCX) Specialty-Communications
Fidelity China Region (FHKCX) Pacific/Asia ex-Japan Stk
Emotionless Trading
In the past, I've tried to outsmart my algorithms - and lost. This time, we're just going to go with the algorithm and let it do the fund picking for us. No emotion = better returns.
Thursday, May 21, 2009
If You Can't Do...Teach...er...Start a Mutual Fund
What do you do when your hedge fund loses half of its assets? Start a mutual fund of course. So far, so good for the folks at AQR Capital. Their Diversified Arbitrage Fund (ADANX) is up 3.2% since it launched this January.
You can get a snapshot of their holdings at the end of April by sneaking a peak at AQR's month-end statement.
It's too soon to tell if this fund is going to have legs, but the team at AQR sure has the right pedigree for the job. If you're interested in investing in this fund, you can put it in your Roth IRA with Charles Schwab amongst others. The minimum investment is $5000 and the fees are really high, but I'm giving a lot of thought to buying a chunk of this fund before they close it off.
You get the smartest guys in the room managing your money for about 2 percent a year. I'm not sure if you can put it into a 401(k), since their strategy uses all sorts of exotic transactions that I would need to spend another 7 years in grad school to fully understand.
The good news is that it is a real mutual fund, not an ETF. This means if there is a flood of buyers, the price is not going to knee-jerk itself upward and bubble. Let's watch and see!
You can get a snapshot of their holdings at the end of April by sneaking a peak at AQR's month-end statement.
It's too soon to tell if this fund is going to have legs, but the team at AQR sure has the right pedigree for the job. If you're interested in investing in this fund, you can put it in your Roth IRA with Charles Schwab amongst others. The minimum investment is $5000 and the fees are really high, but I'm giving a lot of thought to buying a chunk of this fund before they close it off.
You get the smartest guys in the room managing your money for about 2 percent a year. I'm not sure if you can put it into a 401(k), since their strategy uses all sorts of exotic transactions that I would need to spend another 7 years in grad school to fully understand.
The good news is that it is a real mutual fund, not an ETF. This means if there is a flood of buyers, the price is not going to knee-jerk itself upward and bubble. Let's watch and see!
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