Yahoo! Finance Story - Good Investing by Design: The Trend Desk - Yahoo! Finance

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Good Investing by Design: The Trend Desk - Yahoo! Finance
http://finance.yahoo.com/columnist/article/trenddesk/7674

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Yahoo! Finance Story - Why Mutual Funds Are Lousy Long-Term Investments: Why the Rich Get Richer - Yahoo! Finance

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Why Mutual Funds Are Lousy Long-Term Investments: Why the Rich Get Richer - Yahoo! Finance
http://finance.yahoo.com/columnist/article/richricher/6720

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-For various personal and professional reasons, I haven't been blogging lately. My apologies to people who actually check for updates. Regardless, this is an article worth reading.

My quest for information

Lately, I've been trying to look more into foreign stocks. And my biggest qualm is not being able to find out enough information about them. It all started a few days ago, when Aluminum Corp of China (ACH) plummeted from $103 (previous closing price) to about $97 (where it opened the next morning). I hate not knowing what's happening with my companies. I searched news sites all over for a reason in the decline. Google's Finance told me that Chalco (ACH's nickname) had an electrolytic aluminum project that had been commissioned. Doesn't sound too terrible, and it certainly didn't warrant the 5% drop in share price.

Unfortunately for you, the reader, that search went in vain. I found nothing other than the electrolyte project. But it got me thinking. How are people supposed to invest internationally if they can't even find out information about the company?

--side story--

A long time ago, I told myself that I would never pay for investment research ( - an outright refusal, actually). Information is so prevalent these days, what's the point? And finally after my ACH search went completely in vain (hours during my work day spent searching the web), I decided to see if the Fool had a good international newsletter to buy. It does. The Motley Fool International Stock Report, which gives you 14 "superior investments to super charge your portfolio!" for $59. That's only $4 per stock tip. Anyway, the international stock report is not too shabby. I would suggest it for those who want international diversification, but just can't find any good information on the companies.

--

Anyway, long story short, I never found out why Chalco's shares got dumped. But as an example of "I live what I preach," I bought more shares when it fell some more to $94. And judging by before the bell activity, I'd say those shares are up to around $97. It's all in the strategy and the confidence in your company. Because remember, you originally bought shares in a company for a reason.

Hello Again, Google!

It's been a long time since your stock showed such strength. If my memory serves me correctly, it was after you released 4th quarter earnings back in January. Shares plummetted from an all-time high of around $470 to this year's low of about $340. That's when everyone came out screaming at the top of their lungs that Google was grossly overvalued.

I didn't believe them, though. When a company with strong fundamentals issues a "bad" earnings release, it doesn't mean the end of the world. So when there was weakness in their shares, I picked up a few shares for some of the accounts I control. True, it dipped about $20 a few days after my purchase, but it didn't matter. Google is a "long-term hold" in my book. And lo and behold, we're back up to the high $440s and low $450s. See what being patient can do?

Anyway, Google reported a 60% increase in profit, driven largely by a 92% increase in sales. Analysts and brokerages alike are raising price targets and eps targets for Google left and right.

• JMP Sec. ups Google price target to $500 from $475
• Google price target raised to $530 at Lehman Brothers
• Goldman Sachs raised its 2006 earnings estimate to $9.39 from $8.87 a share and its 2007 earnings forecast to $12.70 from $11.85 a share. Goldman said it believes Google continues to maintain its edge over Yahoo

To me, analysts have to have a short term view. They can't just assume that everyone is a buy and hold investor like I am. So in that respect, I don't put that much stock into short term valuation. (Don't get me wrong, I still do. But that's not the main factor). One man's overvalued stock, is another man's high growth potential stock. For companies that are really trying to push growth, like Google (like Starbucks too), there'll always be a high P/E associated with it. Doesn't necessarily mean it's overvalued. Maybe their earnings per share is growing at a rate faster than their share price. And since Google is notorious for giving no guidance to analysts, you really never know. But you can see their growth - through a new Google This and Google That coming out practically daily.

Sorry, I digress. Anywho, the point is, if you really think your company is strong, a large pullback in shares could only signal a buying opportunity.*

*When shares plummet because of scandals or fraud, that's bad. You shouldn't buy on that type of weakness...

Quick comment on illegal immigration...

Businessweek Online has an article written by the S&P's chief economist and credit analysis about the affects of illegal immigration. (Econ 101 on Illegal Immigrants) I have to say, they missed a large point.

When you're in the grocery store, strawberries are already a few cents more expensive than your average apple. Why? Strawberries grow on the ground, apples grow on trees. People actually have to bend down all day to pick strawberries. You can climb up an apple tree and shake apples down. Let me pose a question. If you get rid of illegal immigrants, do you know how much prices of strawberries would skyrocket? The prices of strawberries are already ridiculously low considering the amount of effort put into picking them. How getting rid of illegal immigrants would "affect the economy" would be that prices in such semi-luxury produce items would increase by AT LEAST 10 fold. That is also under the assumption that you can get legal citizens to actually pick strawberries. I've seen most-likely illegal workers picking strawberries in fields in California. I guarantee you. After an entire day of bending down, a normal legal citizen would've long quit.

There's something to be said of illegal workers doing jobs that, I'm sorry, but legal citizens would be too "proud" to do. Can you honestly imagine giving up your day job to bend down 8 to 10 hours a day? And in the beating sun? I highly doubt that.

True, illegal immigrants do cause a strain on health care in the U.S. Yes, there are plenty of illegals that abuse the system. But are we going to massively generalize? Some illegals are honestly here to earn a better life. You don't know what they fled just to come into the land of the free.

Those Americans that are out protesting illegal immigrants, just stop. (What is America if it's not a melting pot of immigrants anyway? Unless you're a Native American, you can't say that you're not the son or grandson of an immigrant). You honestly don't understand how much illegals do help our economy. If you want your food to stay cheap, and your wallets to stay plump, close your mouth and honestly think of the consequences. Don't just see them as freeloaders. Not all of them are.

Will resume regular commenting in a week or so! I just need to survive this week...

--Missing in Action--

I have to apologize in advance. I'm going to be swamped until April 17, 2006, so check back sporadically for updates.

Another apology goes out to my friends who only knew my blog address from my AIM profile. I had no idea the link didn't work!

the facts (and my opinion) behind IRAs

An IRA, which stands for individual retirement arrangement, is a personal savings plan which allows you to set aside money for retirement (IRS Topic 451). The two main types of IRAs are traditional and Roth. But before I begin describing them, let me give you the details about both:

• must have "earned income" to contribute to either. If you're sole occupation is, for example, a landlord and physically don't earn the income, you cannot contribute. Or if all you do is sit and collect dividend or interest income, that doesn't count either. Sorry folks.
• The contribution limite for 2005 is: $4,000. If you're aged 50 and over (before 2006), your contribution amount is $4,500.
• Both have income limitations, as in if you earn too much money, it disqualifies you to contribute, although you're strongly urged to seek retirement savings elsewhere.
• If you withdraw money out of your IRA, BEFORE you turn 59 1/2, you may be subject to an additional 10% tax.
• Each year's contribution is due when that year's income taxes are due. So for your 2005 contribution, you have to make it before April 17, 2006. (April 15th falls on a Saturday this year)
• You can make your IRA contributions with brokerages, banks, and insurance agencies. It all depends on your needs.

So here's the difference between the two.

Traditional IRA - there is one main difference between the traditional and the Roth. Tax. With a traditional IRA, the contribution amount acts as a deduction of your income, so you'll pay less taxes this year. BUT! Whenever you withdraw your money (after age 59 1/2), you'll be taxed for the full accumulated amount. Think about the years of compound interest building on an ever increasing principle. Sure, you can save a few bucks on taxes now, but you could be paying out the wazoo for it later. So unless you have to contribute to a traditional (for income limitation purposes), you probably shouldn't. Very short sighted...

Roth IRA - Unlike the traditional where your current year's income taxes are lower, with a Roth IRA, there is no effect to your income taxes whatsoever. Since you're not deducting your contribution amount from your income, your income stays the same and your taxes stay the same (as if you made no contribution at all). BUT! When you do decide to withdraw your money out, it is completely tax free.

Whatever you decide is fine with me. Some people need the larger deduction this year - or the refund. But if you're thinking for the long term, the Roth is definitely the better way to go.