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A shaky stock market can scare investors away at precisely the time when they should be investing. A booming stock market can lure investors in at precisely the time when they should be selling. So, how do we know when to go all-in and when to get out?
The answer is, no one really knows. There is always someone who claims to know. And, there are even a few who were right about the last bull or bear market. But, no one has been proven to consistently time the market. So, I don’t recommend this approach. There are more reliable ways to make money in a shaky stock market, without a crystal ball.
Dollar Cost Averaging
 Image by Nick Douglas Most investors know about Dollar Cost Averaging. This is where you invest the same dollar amount every month. Most financial advisors recommend it, because it benefits both the customer and the advisor. The big promise of Dollar Cost Averaging is that it forces you to buy when the market is down, so you are “buying low” as you invest in a down market. The bad news is that it also forces you to “buy high” in an overpriced market.
Here is why I like Dollar Cost Averaging and have been doing it for decades. Investing consistently is the key to accumulating wealth. It’s not so much the averaging of the share prices as the habit of investing that is the secret. Once you get used to investing every month, that habit quickly replaces the habit of spending all of your money. This is the first step on the simple path to wealth.
Yesterday, the Democratic establishment got a huge shock when the state of Massachusetts voted Republican Scott Brown into office for the U.S. Senate. Massachusetts is a staunchly Democratic state and Brown was elected to take Edward Kennedy’s seat. Kennedy was a big supporter of Government health care, which Brown and most voters are not. Brown’s election victory has revoked the Democrat’s super-majority and killed any prospects for a Government run health care system.
Most important, it has sent a message to politicians that voters will no longer be ignored. They are angry with the Government and they are doing something about it. They are voting out incumbents, as they did in November to the Governors of Virginia and New Jersey. I predict incumbents will lose a lot of seats in the next election and not just Democrats. Republicans have shown an equal am0unt of arrogance and incompetence. And, they share the blame for our Government’s failures.
Balancing the Budget
 The Federal Government is slow to catch on to what most Americans figured out last year. No one can keep spending money they don’t have. But, while most Americans have started to balance their own budgets and save for their futures, the Federal Government has gone on a wild spending spree, with the taxpayer’s money.
Just as the Government is attempting to raise the debt limit by another 1.9 Trillion dollars, Americans are starting to realize our precious tax dollars are being squandered away. There is very little benefit to Main Street Americans, because most of our tax money is finding its way to wealthy entities, like banks and energy concerns. Our economy cannot recover under the burden of a voracious Government. And, there are very few opportunities for the hordes of unemployed.
How it Works
 Photo by MV Hargan For those of you who aren’t familiar with The January Effect or a Santa Claus Rally, it is caused by investors who sell at the end of the year for tax purposes and then buy again in January.
This causes a surge in the prices of small-cap stocks, which may lift the broader market. It is also possible this surge is helped by year-end bonuses, some of which is invested in the market.
In the past couple of weeks, we have seen a lively rally in the stock market, courtesy of the January Effect.
- Russell 2000 +7.5%
- NASDAQ Composite +5.5%
- S&P 500 Index +3.1%
- Dow Industrials +2.6%
Continue reading How to Profit from the January Effect
Happy New Year!!!
 Photo by Optical Illusion Here is to a wonderful 2010. I read an article on Yahoo that most people considered 2009 a very bad year for America. I was fortunate in that I had a great year, both personally and financially. I am looking forward to 2010, with many exciting challenges and opportunities. And, I wish all of you a healthy and prosperous new year. May you be blessed with an abundance of success and happiness.
As for America, I think it was definitely a bad year. The problems that surfaced in our economy have exposed our Government as corrupt and incompetent at all levels. And, our very way of life is threatened, if the Government continues to mismanage our country’s finances. I’m not just blaming the current administration for this problem. The integrity and effectiveness of our government has been deteriorating for decades. I sincerely hope we can change this course and restore the courage and glory that America has demonstrated to the rest of world.
Without any further delay, here are my predictions for 2010.
Continue reading Hopeful Predictions for 2010
 Photo by Don Hankins One thing I have never posted on my blog before is that I was defrauded out of a large sum of money. It’s kind of embarrassing to admit this and I definitely should have known better. Here I am, handing out financial advice to others and yet I was taken in myself by a con artist.
However, I have decided to share my story with everyone, in the hope that others may avoid a similar fate. And, I have learned some very valuable lessons that I feel obligated to pass on.
There is good news to my story and some closure in my case. Many victims aren’t so lucky and they never recover their money or obtain justice from the courts.
Last week, after two years of lies, confusion and disappointment, I received an email from the District Attorney’s Office. The perpetrator plead guilty to one felony count and as part of his plea agreement, he will have to pay me full restitution. He will be sentenced near the end of this month.
How it Happened
Back in 2007, we decided to take a vacation to visit my wife’s family. My wife is from a small island in Micronesia and the plane tickets are incredibly expensive. We contacted Continental, who has a monopoly on air travel to Micronesia, and were quoted a price of $10,000 for four tickets. This was way out of our budget, so we talked to some of our relatives who had bought discounted tickets. They recommended a travel agent who was very knowledgeable about travel to the islands and he recommended ways to reduce the cost of the tickets by flying on certain days. He provided a quote of $6,756 for the four tickets and we purchased them.
My wife was leaving two weeks earlier than the rest of the family, so we drove her to the airport. We arrived at LAX, after a two-hour drive, and found out the e-ticket reservation number was invalid. The tickets had been reserved but never paid for by the travel agent. When we returned from the airport very angry, the travel agent wouldn’t answer his phone. After some back-and-forth messages and an apology from the travel agent, he provided a one-way ticket for my wife. We never received the rest of our tickets and I had to buy another one-way ticket to fly my wife back home. So, I was out more than $6,000 and our family vacation was ruined.
Continue reading How to Deal with Fraud
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