The Stock Market - How Just One Question Will Tell You All You Need To Know About Your Stock Broker

Last time we looked at the real performance of the stock market (we used the Dow Jones as a reference point) and the apparent performance that makes the headlines and can be seen by a casual look at a chart or "ballpark" figures - briefly; the Dow went up, for example, less than 50 points between April 1999 and April 2005 - essentially 6 years with no growth!

But behind that seemingly "becalmed" Dow there were at least 10 significant moves each and every year totalling many thousands of points!

But did the Wall Street Moguls, the so-called "Masters of the Universe" make you any money from those huge movements?

No.

Of course they didn't!

Here's how I know...

The web is a goldmine of information. Knowledge that was just not available to the private investor or trader is now there at the press of a mouse button.

Forget the Freedom of Information Act - the Internet leaves it standing.

Foremost amongst websites offering information about the financial facts of life (the things that affect you directly - Mutual Fund performance etc) is Morningstar.com.

And amongst other things, morningstar.com publishes a league table of mutual funds on a weekly, monthly and annual basis.

If you check out the table that I have provided at my website (www.TriggerSystem.com - full link at the bottom of the article), you'll see the performance of the top 20 or so mutual funds over the last 10 years.

I've chosen the 10 year chart because mutual funds are essentially long term "investments", and which most people seem to keep almost for ever (the chart on my website is by it's very nature a little bit out of date, but things haven't improved too much since that screen shot was taken. If you want the up to date figures just go to www.morningstar.com and search their data base for the 10 year performance of mutual funds)

Take a look...

You'll see that the top rated fund, over 10 years, has shown a total growth of 23% - which at first sight looks fairly impressive; 23%; wow!

But the problem is, that 23% is total growth over 10 years, not growth per annum.

So the 23% total growth starts to look like a less than impressive 1.7% per annum compounded (hey, even the banks are giving more than that on deposit).

I'll be honest, I didn't believe it either - so I sent off an email to morningstar.com and they confirmed my worst fears - 23% is the total growth over 10 years.

Sheesh!

And the average growth of all 1304 funds? A less than impressive 7.3% over 10 years (less than one half of one percent)!

Check out that hiding place under your mattress - at least you don't have to pay exhorbitant fees to keep your money there.

The one certainty is that the Fund Managers will not, personally, have fared so badly - they will still draw their large salaries and enjoy all the benefits of charging you fat fees for their "professional expertise"

As Thomas Sowell wrote:

"It is hard to imagine a more stupid or more dangerous way of making decisions than by putting those decisions in the hands of people who pay no price for being wrong"

OK, I know not everybody has money "tied up" in Mutual Funds and some people prefer the higher returns of the Stock Market.

So what about the analysts and stock brokers?

Well, we all know about Enron and the others - the stocks in the early 90s that crippled so many of America's biggest pension funds.

Use the TriggerSystem link (shown below) to view the Enron chart screenshot, which is lower down the page (below the Morningstar.com screen shot).

You'll see that on 20 November 2000 there was a "technical sell signal" flagged for Enron when it was trading at just over $80 per share (don't worry about the term "technical sell signal" - it just means a sophisticated trading programme told it's owner that he should SELL).

Over the next 2.5 months, Enron's price fluctuated up and down without really going anywhere, until the middle of February 01 when it really started to slide (just as it appeared to have stabilized at $80).

As they say, a picture is worth a thousand words, and to save my typing fingers - the numbers speak for themselves.

Follow the chart to the right and you'll see that the major stockbroking houses and analysts were still saying "BUY" as the market lost 75% of it's value over the next 9 months.

It was only on October 19th 2001 - just 11 months after our "technical sell signal" that the first warning appeared from the Brokers and Analysts - and even then there was a further major BUY reccommendation before Enron slipped again to be worth less than 40 cents on 30 November 2001 - A decline from $80 per share to $0.26 per share in 12 months!

And all the time the major brokers and analysts were telling their ordinary customers to either Buy or Hold.

And as we later found out, the Brokers and Analysts were telling their biggest corporate customers a totally different story.

So, whilst the Stock Market is your best friend (trust me on this one, or look for my previous article) - the people who operate it may simply be their own best friend, and from your point of view, any advice you receive from them should be taken with a very large pinch of salt.

And if you still think you can trust the advice they give you, here's the simple "5 word question" I mentioned at the beginning of this article... Ring them and ask: "What Guarantee Do You Give"? Just pick up the phone and ask them about the guarantee they give you regarding their advice.

Once they've stopped coughing and spluttering and picked themselves up from the floor, you may hear this well worn mantra: "the value of stocks can fall as well as rise" etc etc.

If they're not prepared to guarantee their advice, then frankly their advice is not to be trusted.

More next time...

Geoffrey Cummins is a full time stock market trader and has spent the last 12 years developing what he calls his "weedy little spreadsheet trading system", giving him some unique insights into the working of the world's stock markets. Under pressure from friends and family, Geoffrey is now making his unique insights and trading signals available to a worldwide audience

And unlike your stockbroker, he guarantees you a minimum 300% return on your investment (ROI) Click here to view the charts referred to in this article

No wild claims, just common sense advice and the best Risk Free Trial (a full 90 days for less than $5 a week) on the internet all backed up by his unique 3 part / 300% guarantee.

If he doesn't provide you with a minimum return on your investment of 300% (the banks best offer is 3%. Not guaranteed) - he'll give you your money back. No questions asked. The TriggerSystem?

---

Are You A Stockaholic?

Today's society gives special recognition to alcoholics, sexaholics, binge-aholics, shopaholics,... Read More

Mutual Fund Expense Lies

When purchasing mutual funds we are cautioned to read the... Read More

Invest In The Stock Market For The RIGHT Reason, Using The RIGHT Choices

Invest in the stock market for the RIGHT reason, using... Read More

Red, Green, Yellow - or - Stop, Go, Go Very Fast: Which Describes Your Online Trading?

Ever notice how behavior in one area of life can... Read More

The Bottom?

Every day I hear someone on CNBC proclaim that "this... Read More

365/7/24

What does it take to be a stock trader? It... Read More

Duck

Duck! No I don't mean a quack, quack. I meant... Read More

War Market

There is no question that the stock market is being... Read More

Online Investing & Stock & Share Trading: 4 Reasons Why Most Online Investors & Traders Go Broke

Are you attracted to the idea of being in control... Read More

Dont Buy Worldcom! A Guide to Wise Bottom Fishing

Over the past few months, several investment professionals have brought... Read More

Paddle Your Canoe

At some time in your life you have been on... Read More

How We Eluded The Bear Of 2000

The date October 13, 2000 will forever be embedded in... Read More

Adding Funds

Someday you may want to retire and continue to live... Read More

The Problem With Hedge Funds

Are hedge funds a suitable investment for you? Hedge funds... Read More

Fake Money

Reach in your pocket and take out that big roll... Read More

401K-itis

Are you one of those many people who dread reading... Read More

The Importance of Using Stop Loss Orders When Spread Trading the Financial Markets

A Guide to Using Stop Loss Orders Stop losses are... Read More

Never Fall In Love!

Recently I watched my favorite football team lose a vital... Read More

Swing Trading Strategies

Using Swing Trading Strategies and Technical Analysis when Trading Stocks... Read More

Structured Settlement; Lawyers in NY and Mutual Funds

Minority Report the movie may not be far off if... Read More

Learn to Calculate a Stock?s Pivot Point

Stocks breakout from properly formed bases everyday but many investors... Read More

Seecrets on Investment: Tired of Making Huge Losses in the Stock Market ? Part 2

Fundamental analysis.Fundamentals analysis says the best way to predict the... Read More

Its Snowing

The Winter Games for the Olympics are coming up soon... Read More

Shadow Bull

As one of my regular readers you know I have... Read More

The Next Bull Market

We are already in it, but you can't see it.... Read More

What is the Most Important Indicator of All?

Most stock market traders have a favorite technical indicator.The one... Read More

Hill of Hope

Just about now everyone is confused as to which way... Read More

Downdraft

For the year 2000 we have seen hundreds of mutual... Read More

Commoditizing the world

Let's discuss commodities; with the latest Enron situation, it is... Read More

Intervention

Intervention. Now don't let that big word scare you. The... Read More

How To Beat The Mutual Fund Companies At Their Own Game

You'd have had to be living on a desert island... Read More

The Exclusive Club of Large Caps

Picture one of those clubs where only the real heavyweights... Read More

Getting Even

I know there are a lot of you out there... Read More