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Investment Strategy Synopsis




Investment strategy is a little like religion in the financial advisor community. There are few situations that would get emotions boiling, fists flying, and require police action faster than putting a buy-and-hold advocate and a market timing zealot in a room and asking them to resolve their differences. The truth is that most strategies work some of the time, a few work most of the time, and only Bernie Madoff figured out how to make one work all the time, right up until he got caught. Investment strategies have two major parts: 1) what investments to buy, and 2) when to buy and sell. Because I’m an investment advisor and human, I have some built-in biases, but following is an attempt to objectively look at several common strategies with a minimum of sarcasm.

Allocation Strategies (what to buy)

Strategic Asset Class Allocation

Traditional asset classes include stocks, bonds and cash. These classes are then divided into subcategories based on geographic location (U.S., developed foreign countries, emerging markets), company size (small-cap, mid-cap, large-cap), and bond style (treasuries, mortgage-backed, high-yield, etc). Real estate, commodities, and hedge funds are sometimes added as additional asset classes. The idea behind Strategic Asset Class Allocation is to come up with a portfolio of non-correlated assets that meets an acceptable risk profile, and then stick with that allocation as the market goes up and down. The portfolio is typically rebalanced periodically to maintain the percentages of each asset class, but mostly the portfolio is left alone.

Most Common Supporting Arguments:

  • Easy to set up with mutual funds, which are typically aligned with asset classes.
  • Mutual funds provide diversification by owning many stocks with professional management.

My Rebuttal:

  • Many mutual fund managers tend to favor certain stock sectors at the same time, making the portfolio less diversified than it appears (e.g. overweighted in Energy or Financials).
  • Most stock asset classes are highly correlated when looked at over the last decade.

Semi-Objective Opinion:

Dividing the stock world by geographic location (U.S. & foreign) or by company size no longer results in a diversified portfolio. This has been a long-term trend developing and getting worse over the last 20 or so years. As an intuitive example, when oil drops from $150/barrel to $35/barrel, all energy companies get hurt, whether they are large or small, based in the U.S. or based in Brazil. However, it is true that an asset class allocation model is easy to implement with mutual funds, and the addition of non-correlated alternative investments can improve overall diversification.

Balanced Sector Allocation

As stated above, a major problem with Asset Class Allocation is that the major equity classes do not behave differently enough to do an effective job of diversification. Balanced Sector Allocation gets around this by diversifying across low-correlated sectors (Technology, Energy, Financials, Healthcare, etc). This is not a new concept. Just about any portfolio that uses individual stocks diversifies this way, and the strategy can be implemented using either individual stocks or sector-based Exchange Traded Funds (ETFs).

Most Common Supporting Arguments:

  • Spreading investments across non-correlated sectors does a much better job of diversification than dividing investments by company size or where their headquarters happens to be located.
  • Individual stocks and ETFs typically have significantly lower expenses than mutual funds.
  • Sector allocation can be precisely controlled.

My Rebuttal:

  • If Sector Allocation is implemented with a few individual stocks for each sector, there is a significant amount of company-specific risk added to the portfolio.

Semi-Objective Opinion:

In addition to showing a significant performance improvement over the last 10-20 years, Sector Allocation passes the “this just makes sense” test. Intuitively, a Healthcare stock and an Energy stock will do a better job at diversification than a large-cap Energy stock and small-cap Energy stock. The manager of an actively-managed mutual fund is typically doing sector allocation within a particular Asset Class (e.g. Large Cap Value), but if you own several mutual funds, there is obviously no coordination between the managers.

Tactical Asset Allocation/Tactical Sector Allocation

These strategies are similar, with the difference being that one uses traditional asset classes and the other uses stock sectors. In both cases, the objective is to predict which stock class or area of the market will perform better in the near future, and overweight the portfolio to take advantage of that market segment or segments. The basis for determining which asset class or sector to invest in or stay out of can be based on a computer model, economic indicators, or (more commonly) an advisor’s opinion or gut feel.

Most Common Supporting Arguments (some with questionable accuracy):

  • The advisor has a track record of picking the winning sectors.
  • When in a bear market, it’s better to be in bonds, cash, or defensive sectors (e.g. healthcare).
  • It is possible to time the market, it’s just that most people do it wrong.

My Rebuttal:

  • There are enough advisors trying new things that, statistically, some will be right on their predictions. When this happens, they get their own radio show. When they’re wrong, you never hear about them.
  • Unpredictable events or government intervention can make any prediction completely worthless.
  • Overweighting some sectors and ignoring others adds risk.

Semi-Objective Opinion:

In order to significantly beat the market, you have to take some additional risk, and this strategy does that. When called correctly, this strategy can make huge gains. It can also lose a significant amount of money while everyone else is making money. By picking the right sectors or asset classes at the right time, it is possible to make money in practically any environment. However, similar to flipping a coin and trying to get “heads”, I’m not sure past success is a great predictor of future success.

Buy and Sell Strategies


A pure buy-and-hold strategy involves buying a high-quality investment such as stocks or a mutual fund, and then holding the investment through highs and lows until either your investment objectives change or you find out the investment is not as high-quality as you thought it was. The rationale is that the overall market goes up over time, and you don’t want to miss a big up day in the market by holding cash.

Most Common Supporting Arguments (some with questionable accuracy):

  • The majority of market gains occur on a relatively few number of days, so if you miss one of these days, your returns will be significantly less.
  • “Time in the market” is more important than “timing the market”.
  • Warren Buffet is a buy-and-hold advocate.

My Rebuttal:

  • Missing the worst days of the market is far better than catching all of the best days. However, since no timing system exists that misses only the best days or misses only the worst days, both situations are ridiculous and using them as arguments stretches the definition of integrity.
  • Warren Buffet does not “buy-and-hold” like you and I would, unless you have the resources to buy a company, install the management, hold the management accountable for performance, etc.

When It Works/When It Doesn’t Work:

Buy-and-hold makes money when investments go up, and loses money when they go down. Therefore, it works well during bull markets and works poorly during bear markets. For this strategy to continue to work for the next 30 years like it did the last 30 years, you have to assume that investments will continue to go up like they have during a period of economic growth that was fueled by the Baby Boom generation, an Energy bubble, a Technology bubble, and a Real Estate bubble.

Market Timing (prediction-based)

Market Timing is one of the most loosely-defined terms in the financial industry. There are many advisors who deride market timing, and yet routinely practice market timing themselves. Broadly-defined, market timing is a strategy that makes changes to a portfolio based on predicted market performance. These changes may involve selling all investments and moving to cash, or simply adjusting the percentage of stocks and bonds because of economic conditions or anticipated market behavior. Prediction-based market timing bases decisions on an advisor’s assessment of future conditions. If high-inflation is anticipated, investments that hedge against inflation would be added. If economic contraction is anticipated, an advisor might move to a heavier cash position.

Most Common Supporting Arguments:

  • By using indicators such as inflation, unemployment, factory usage, etc, it is possible to anticipate which sectors have a higher chance of outperforming in the future.

My Rebuttal:

  • Economic indicators work when nothing interferes with them, but unexpected events such as government action or national conflict override any statistical probability used for predictions.
  • Overweighting some sectors and ignoring others adds significant risk to a portfolio.

When It Works/When It Doesn’t Work:

This method is highly dependent on the person or statistical model making the prediction. If the predictions are accurate, this strategy has a good chance of significantly outperforming other methods. If the predictions are wrong, the opposite is true. Because of the large number of advisors who make predictions, a certain number will get it right several times in a row, but statistically this will not indicate any greater likelihood that they will continue to be right in the future. As mentioned above, unanticipated news events or government action will instantly derail most statistical models.

Market Timing (momentum-based)

Momentum-based market timing uses technical indicators (stock charts and current market behavior) to determine whether the market is in a downtrend or an uptrend. Downtrends occur when more people want to sell than want to buy, and uptrends occur when more people want to buy than want to sell. Price movement and trading volume can determine whether there is more buying pressure or more selling pressure at any given time, and the theory behind momentum is that once a trend is in place, it tends to stay in place. For how long? Until it stops.

Most Common Supporting Arguments:

  • Price movement and trading volume offer strong clues about buying pressure and selling pressure, and whether large institutional traders are buying or selling.
  • Institutional traders do not establish or eliminate entire positions in a single trade, and typically spread trading over several days or weeks. Therefore, trends tend to stay in place for some period of time once they are established.

My Rebuttal:

  • This makes a lot of sense to me, so I don’t typically argue against it. However, it has some weak points (see below).
  • Some advisors can go over-board on technical patterns (head and shoulders, cup and handle, shallow birdbath with a floating stick…I made that one up). These advisors are traders looking for short-term movements. Trends, on the other hand, are determined more by a pattern of higher-highs or lower-lows, and it doesn’t need to be very complicated.

When It Works/When It Doesn’t Work:

There are some key components required for this system to work.

1) The method for determining trends must not be too early or too late. Stocks seldom move in a straight line. They typically make a strong move, and then rest or pullback. Assuming too early that a trend is being established or ending will result in jumping in or out during pullbacks or corrections. Waiting too long or for too many confirmation signals will result in missing a good portion of the trend.

2) Investments must be liquid. You must be able to act when your system tells you to buy or sell.

3) Whether you use Moving Averages, charting, or any other system to determine a trend, the trend will not always hold. Each system will break down under certain conditions, so the objective is to use a system that works under the widest set of conditions and/or breaks down under the narrowest set.

Market Timing (emotion-based)

This is not a strategy that is typically planned for or entered into intentionally, and is the form of market timing most often practiced by those who swear they hate market timing. Many practitioners of this strategy consider themselves to be buy-and-hold investors, but they end up moving to cash when the pain gets too great or the market is too scary. Typically, this happens after a significant loss is already on the books, which actually makes this a form of momentum. The rationale is that if my investments have already lost money, they may continue to lose money. The problem is that if emotion or fear drives the sell decision, then the decision to get back in is typically based on “feeling better”, which almost always happens at a higher price than the sell price.

Most Common Supporting Arguments:

  • Not too many people are active proponents of this strategy, but a lot of people practice it.

My Rebuttal:

  • Not much to rebut, other than pointing out that you can’t call yourself a buy-and-hold investor if you move to cash or change your stock allocation when the market gets scary, and no one should use this method as an example to “prove” that all market timing systems are doomed to failure.

When It Works/When It Doesn’t Work:

This strategy seldom works, and is the reason that the vast majority of investors buy when the market is high and sell when the market is low. It doesn’t matter which strategy you use; just about anything is better than basing investment decisions on emotion.

Disclosure (my bias)

I use a Balanced Sector Allocation strategy using low-correlated ETFs, and momentum-based market timing. The objective is to participate as much as possible in uptrends, and avoid as much of the downtrends as possible. This requires a set of rules that makes the decision points unemotional. A Balanced Sector Allocation guarantees participation in the hottest trending sector at any given time, but with a mechanism to get out of a sector when it starts heading back down.

Weak Points:

Because it takes a little while for a downtrend to show itself, sell decisions will never happen right at the top of a trend. The same holds true for uptrends and buy decisions. If the market gets indecisive and swings far enough that it keeps looking like uptrends and downtrends are forming but no follow-through happens, a condition could occur where losses are exaggerated. This would be a very specific and narrow set of conditions, and I have other checks that attempt to minimize this condition, but it still exists.


Source by Jerry Verseput


Where to Find Those Efficient and Hardworking Affiliates?




Everyone wants a hardworking affiliate, employee, associate, partner, or even spouse, and why not? It’s the next best thing to doing the work yourself. However with the massive outbreak of work and income opportunities available online, how can you beat everyone else and find that one (or more) ideal person who will make your online business explode with success? Here are some of the most ingenious and uncommon ways to snag the idea affiliates for your affiliate program

Direct Sales Agents

Direct sales people are really one of the most enterprising, hard-working individuals in business. They mostly work on commissions or rebates and are willing to literally go door-to-door offering their products to anyone and everyone they bump into. Imagine how much easier their job would be if they could be an affiliate and simply work via the Internet and a mobile device or desktop.

Also, most direct sales people tend to carry more than one brand in their product arsenal so signing up as an affiliate would be almost the same type of work but using a different approach.

Colleges and Universities

Many college kids would be interested in a part-time income opportunity if it would mean funds to help pay for their education, loan, or partying. All you have to do is make sure to offer them products they can endorse as a student.


Did you know that the U.S. Census Bureau’s latest annual report show that 75% of U.S. businesses used freelancers in 2011? Freelancers earned a whopping US$990 billion in 2011 which is a 4.1% increase from the previous year. The only industries where the number of freelancers decreased were in insurance, finance, and construction. Most probably your affiliate program isn’t a part of these 3 industries.

Furthermore, online business and finance experts are predicting the growth to increase incrementally every year even with an economy that is improving. People just want income security and more control over their earnings. With the spate of lay-offs, it’s understandable why many would prefer to work as an affiliate than as an employee.

Scout For Them At Affiliate Conventions

There are annual affiliate conventions held in different cities around the country. You should try to catch one when it is held somewhere near your location. The average turn-out for these types of conventions has increased regularly over the years. Last year, many of them were sold out weeks before the event.


The US Census Bureau has said that as of 2012, 15% of Americans are poor, 43% of young adults depend on their parents to some extent for money. Even more surprising is that the median income of young adults in 1982 was $31,583 and last year it was $30,604 for the same age group! Income is dropping and people are looking for ways to earn additional income outside of their 9 to 5 jobs. That’s where you can come in playing the hero and helping others realize their dream income.

Finally, go online and talk about your product. Make the affiliate marketers come to you and have the luxury of picking the best candidates. You will need some help in marketing your affiliate program so target a marketer who’s experienced in affiliate program and SEO.


Source by Lina Stakauskaite

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Recession Is Here… Six Costly Mistakes Home Sellers Make During Recessions And How To Avoid Them




The U.S. is officially in a recession. What is a recession? A recession is a business cycle contraction or general economic decline due to significant drop in spending and other commercial activities. Most pundits and politicians will blame Covid-19 crisis for the recession, but even pre-Covid-19 the proverbial writing was on the wall.

The U.S. had over 120 months of economic growth, which was the longest expansion in the modern history. Other indicators, such as negative yield spread on treasuries (long term bonds having lower interest rates than short term T-notes), were pointing to an imminent change of the economic cycle and an impending recession. The only real question was: when and how bad?

Then Covid-19 came… If the cycle was going to change anyway, Covid-19 acted as a huge and unexpected accelerant to make the recession much more immediate and severe.

Inevitably during recessions all classes of real estate, including residential homes and condominiums, will be negatively impacted as lower consumer spending and higher unemployment rates affect real estate prices and marketing times.

Here are the six costly mistakes home and other real property sellers make during recessions and how to avoid them:

Mistake #1: This will pass and real estate market will be hot again soon

First thing to remember is that real estate cycles are much longer than general economic cycles. Even if the general economy recovers, which eventually it always does, a typical real estate cycle takes as long as 10 to 15 years. The cycle has four key stages: Top, Decline, Bottom and Rise.

Let us consider the last real estate cycle, which lasted approximately 14 years:

  • 2006 – Prices hit the Top
  • 2006 to 2012 – Prices Decline
  • 2012 – Prices hit the Bottom (Trough)
  • 2012 to 2019 – Prices Rise*
  • 2020 – Prices hit the Top
  • 2020 to? – Prices Decline

*NOTE: In 2016 the national residential real estate price index reached its pre-recession 2006 peak levels. It took 10 years for the real estate market to recover.

The way to avoid this mistake is to recognize that real estate cycles take years to run and plan accordingly. Additionally, nobody knows for sure when the prices will hit the top or bottom until after the fact.

Mistake #2: Low interest rates will make the economy and real estate market rebound

Between 2006 and 2011 the interest rates (Fed Funds) were continuously cut by the Federal Reserve Board and went from low 5% to almost 0%. However, that did not stop the real estate recession and depreciation of property values.

Undoubtedly, low interest rates made the economic decline and real estate recession less severe and saved some properties from foreclosures, but it still took six painful years for the real estate market to hit the bottom and then four more years for the prices to go back to their pre-recession levels.

Some markets had never fully recovered. For example, residential home prices in some parts of California, Arizona and Nevada are still below their 2006 highs.

To avoid this mistake, one needs to realize that although low interest rates help stimulate the economy and the real estate market, they do not cure them.

Mistake #3: I don’t need to sell now, so I don’t care

If you do not need to sell until the cycle plays out, which typically is over ten years, then you will not be as affected, especially if you have a strong equity position, limited mortgage debt, and solid liquid assets.

However, it is good to keep in mind that “life happens” and either professional or personal circumstances can change and we may need to sell property before the downturn runs its course.

Furthermore, if a property has a mortgages and its value declines to the point being “upside down,” meaning the mortgage loan balance exceeds the value of the property, then the options of selling, refinancing or even obtaining an equity line of credit, will be significantly limited.

This does not mean that everybody should be rushing into selling their real estate if there is no need to do so, just keep in mind that circumstances may and often do change and property options will be affected, so plan in advance. As one wise proverb says: “Dig your well before your thirst.”

Mistake #4: I’m selling, but I won’t sell below my “bottom line” price

This is a common and potentially very costly mistake. Generally speaking, every seller wants to sell for the highest price and every buyer wants to pay the lowest price. That’s nothing new. When selling real estate, most sellers want to achieve a certain price point and/or have a “bottom line.”

However, it is important to understand that the market does not care what the Seller, or his/her Agent, think the property value should be at. The market value is a price a willing and able buyer will pay, when a property is offered on an open market for a reasonable amount of time.

Overpricing property based on Seller’s subjective value or what is sometimes called an “aspirational price,” especially in a declining market, is a sure first step to losing money. When a property lingers on the market for an extended period of time, carrying costs will continue to accumulate and property value will depreciate in line with the market conditions.

Additionally, properties with prolonged marketing times tend to get “stale” and attract fewer buyers. The solution is to honestly assess your selling objectives, including the desired time-frame, evaluate your property’s attributes and physical condition, analyze comparable sales and market conditions, and then decide on market-based pricing and marketing strategies.

Mistake #5: I will list my property for sale only with Agent who promises the highest price

Real estate is a competitive business and real estate agents compete to list properties for sale which generate their sales commission incomes. It is not unusual that Seller will interview several agents before signing an exclusive listing agreement and go with the agent who agrees to list the property at the highest price, often regardless if such price is market-based.

Similarly to Mistake #4, this mistake can be very damaging to Sellers, as overpriced properties stay on the market for extended periods of time costing Sellers carrying expenses such as mortgage payments, property taxes, insurance, utilities and maintenance.

Furthermore, there is the “opportunity cost” since the equity is “frozen,” and it cannot be deployed elsewhere till the property is sold. However, the most expensive cost is the loss of property value while the real estate market deteriorates.

During the last recession, we have seen multiple cases where overpriced properties stayed on the market for years and ended up selling for 25% to 40% below their initial fair market values.

The solution is to make sure that your pricing strategy is based on the market, not empty promises or wishful thinking.

Mistake #6: I will list my property only with Agent who charges the lowest commission

Real estate commission rates are negotiable and not set by law. A commission usually represents the highest transactional expense in selling real properties and is typically split between Brokers and Agents who work on the transaction

Some real estate agents offer discounted commissions, in order to induce Sellers to list their properties with them. But does paying a discounted commission ensure savings for the Seller? Not necessarily.

For example, if the final sales price is 5% to 10% below property’s highest market value, which is not that unusual, due to inadequate marketing, bad pricing strategy, and/or poor negotiation skills, it will easily wipe out any commission savings and actually cost the Seller tens of thousands of dollars in lost revenues.

The solution is to engage an agent who is a “Trusted Advisor,” not just a “Salesperson.” A Trusted Advisor will take his/her time and effort to do the following: 1) Perform Needs Analysis: listen and understand your property needs and concerns; 2) Prepare Property Analysis: thoroughly evaluate your property and market conditions; 3) Execute Sales and Marketing Plan: prepare and implement custom sales and marketing plan for your property; and 4) Obtain Optimal Results: be your trusted advocate throughout the process and achieve the best possible outcome.

Finding such a real estate professional may not be always easy, but it certainly is worth the effort and will pay off at the end.

In conclusion, this article has outlined six costly mistakes real estate Sellers make during recessions and how to avoid them. The first mistake is not understanding that real estate cycles are long and take years. The second mistake is a misconception that low interest rates alone will create a recovery. Another mistake is not realizing that circumstances may change and not planning in advance. Mistakes number four, five and six pertain to understanding the market value, proper pricing and selecting the right real estate professional.

By understanding and avoiding these mistakes, real estate Sellers have significantly better chances of minimizing the negative impact of a recession while selling their properties.


Source by Robert W. Dudek

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Useful Tips To Build The Best Gaming Computer




Every gamer will want their computer to be the best gaming computer among their peers. Sometimes, with a little knowledge and tips and tricks, it is possible to build the best gaming computer and show it off to your peers. This article will show you how:

1) You can’t get the best gaming computer from computer retailers

If you want to get the best gaming computer, you have to build your own. Different gamers have different requirement for their gaming machine. Unless you are willing to pay a high price, you will not be able to buy a commercial computer that fulfills all your gaming needs. The only option you have is to build your own gaming computer.

2) You don’t have to be rich to build the best gaming computer

It is not necessary to burn a hole in your pocket to build the best gaming computer. With some due diligence, do some market research and compare prices around the marketplace. Merchant such as TigerDirect and NewEgg give regular discount to their products and you could save a lot of money if you catch them during their promotional period.

3) Most expensive parts do not have to be the best part

Sometime, the latest model or the most expensive model does not have to be the best part for your computer. It requires various components to work together to form the best computer system. When choosing a computer part, what matters is how well it can integrate with the rest of the components. Compatibility is more important than individual performance. What use is there if you spend lot of money on the latest quad-core processor and find that your motherboard doesn’t support it?

4) You don’t need to change the whole PC to own the best gaming computer

It is a misconception that you have to change the whole gaming machine to build the best gaming computer. If you already have a good barebone system, what you need to do is to upgrade the necessary parts and your gaming computer can roar back to life instantly.

5) Brand is important

Unless you want to see your computer system malfunction every few days, it is important that you purchase the parts from branded manufacturers with strict quality control. Motherboard brand such as Gigabyte, ABIT, ASUS are some quality brands that you can consider

If you follow diligently to the tips stated above. You will be on your way to build the best gaming computer. While price can be an issue, it is better not to scrimp on important computer parts such as motherboard, CPU, RAM and graphics card as it will cost you more to upgrade in the future.


Source by Damien Oh

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