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Although it may sound frightening and risky to many investors, if handled correctly, commodities could be the missing piece of an investor?s portfolio. What exactly are commodities? Commodities are any mass goods traded on an exchange or in a cash market including: cocoa, coffee, eggs, lumber, orange juice, soybeans and sugar just to name a few. Industrial metals are also included with copper, aluminum, zinc, nickel, silver, and lead ranking among the most popular industrial metals holdings. Finally, the most widely followed commodities include oil, natural gas and gold.

The diversification benefits equal or surpass those of other asset classes like fixed income and real estate. The primary reason for this is their correlation, or lack thereof, to the stock market as represented by the S

When life is OK, there won’t be a need to do anything. There is a saying that goes “If it ain’t broke, don’t fix it.” When things don’t go our way, however, then it is time to start acting for a change. As investors, the question we need to ask ourselves is what should we do if an investment does not go our way? What should we do when a stock price moves south?

Take A Deep Breath
One of the first thing investors need to do is to calm down and take a deep breath. Do not panic. The news are already out and stock price has been adjusted accordingly. Panicking over yesterday’s news will not do you any good.

Read The News. Keep Reading
There must be news available on the internet concerning the company’s stocks. Does management just announce a massive layoff, a product recall or an earning miss? As you read these kind of news, please keep in mind about the long-term implication it might had on your investment. For example a company announcing earning shortfall due to widespread flooding might not be as consequential as if competitors release a new type of products rendering your company’s product useless.

Assess The Financial Damage
Once you know the full scope of the news, you can then assess the potential damage caused by the news. Oftentimes, stock price will move due to extraordinary events which might not occur for another ten years! This has no impact whatsoever to the earning power of your investment. If the recent news had an impact on your company’s Read more…

Take a look at your investment portfolio if you have any. What does it consist of? What are the elements, mainly stock, options, bonds, commodities or mutual funds? And, how can you tell whether it is balanced?

An investment portfolio should be spread, like the saying preaches; don?t put all your eggs in one basket.
But for different people this means different things. First you must be aware of your risk profile. If you like to take more risks, the investments in your portfolio could be less diverse. You might concentrate more on one particular instrument (option, stock). Still, you may take more risks than necessary.
A mutual fund investor could spread its portfolio with only a few investment funds. The active trader could spread its investments over a short (trading) period.

The first thing we learn from this is that a so-called balanced portfolio is relative to the profile of the investor. Less untrue is the fact that in the investment game, there appear to be rules that are universal. If you have only some experience you know that you should ?never? build-up in one day your complete portfolio, but rather buy parts over time.

Then you have your portfolio. Now how do you know if it is balanced? There are more ways of checking this. One way is very simple and helpful. Again you need to check Read more…

No matter what age you are or even your level of employment or economic position, it may be a good idea to start preparing now, even in a meager way, for eventual financial security. Some people feel they need every dollar they make to get by from one paycheck to the next. While this may be true for some, there are others who squander significant sums on insignificant things. They could be socking that money away into an investment account that, over time, could lead to huge savings and a comfortable retirement.

It isn?t hard to get started. All you need is $100 to $500 to open an account, and anywhere from $25 to $50 monthly to continue building your stock or mutual fund portfolio. In fact, a young person aged 20 could deposit $2,000 and then not another dime. In forty years he or she might have tens of thousands of dollars. The stock market has followed fairly predictable patterns since its inception in the 1800s in New York City. Although historic events like the Great Depression and several global wars have impacted its activity, the gains and losses remain fairly consistent, with most investors earning a predictable return on their investment.

Of course, no one can predict what the future holds, or whether the pattern will continue. And none of us should invest more money than we can afford to lose?just in case the world economy crashes one of these days. But with steady deposits that continue to compound and earn interest over time, a sensible and prudent investor can substantially increase the amount of money going for retirement or a dream vacation at some future point.

If you are thinking about opening an investment account, do a little online browsing for more information. Visit sites like E-trade or Scott?s Trades to see how the process works. Start reading your newspaper?s financial pages for details about the latest stock prices and market trends. Do a little paper trading by following the daily stock news. Instead of actually purchasing stock, however, work it Read more…

Before giving our view on the best silver miner in the world a little background information is necessary. First, the reader should ask why invest in the mining industry at all? The answer to us is covered in our third rule of silver investing below.

This third rule of Silver Investing can be found in the global-investor book of Investing Rules.

This rule is one that many silver investors know quite well and the joys of watching your mining stock outperform the increase in bullion prices by a factor of two or three to one is exciting. However, leverage works in both directions and when the price of the precious metals fall back the mining shares fall back hard. This is normal market behavior and should be anticipated by the savvy metals investor.

Again, mining shares analysis is difficult and in the speculative area nearly impossible. Because of this fact, it is important to do your own homework carefully. Also you can subscribe to a service that provides insights into this area. We do our best to diversify and to give clear signals to area we think have merit. However, we are only human and have made errors in the past. It is the nature of investing that you cannot be 100% accurate, although for the first two years our report did have nothing but winners. Those days are over and in today’s market is it more important that ever to be careful and use proper money management.

If you do not wish to put in the time and effort required to succeed in this area of investing, we suggest you consider a gold mutual fund. Even with professional management not all companies are winners, but with proper diversification total results mirror the general gold equity market. Unfortunately, there is not a silver mutual fund at this time. This is a question we are asked quite often.

The Ten Rules of Silver Investing was available to paid subscribers only but we have decided to make it available for free to anyone that joins our free email list ?

Requirements of a well run mining company

The best Silver Miner in the world needs to not only anticipate the future but also contain as many costs as possible. This can be done to varying degrees but fixed costs are great expenditures and variable costs are becoming more ?variable? by the minute. The costs of power, water, and labor seem to be increasing without end.

The infrastructure needs to be examined for roads, power, water, and environmental concerns. The political climate is a prime factor in determining the merit of a project, especially in today?s global environment.

Naturally the geology is of prime importance. An accurate geological model needs to be developed which includes data from drill holes, test pit sampling, quality and grade analysis, and what additional drilling may be required. Enough data needs to be verified for a Canadian company to be National Instrument 43-101 compliant.

A preliminary financial analysis includes the anticipated cost of capital and what is expected for the prices of the minerals going forward. Guess wrong here and your whole project can be in jeopardy.

So by now you know most of the risks and would like our opinion of the best Silver Miner in the World. It is simply Berkshire Hathaway yes Mr. Warren Buffet may prove to be the best silver miner of all time!

Why would we consider Berkshire to be the best in the world?

1. No environmental impact statement was required for this mine.
2. No 43-101 statement was necessary
3. All geological data becomes unnecessary
4. Low overhead?very few employees
5. Political problems reduced substantially
6. Fix costs known?price of silver at time of purchase
7. Variable costs (known?) ?storage costs

Why is Berkshire the best miner? Profit, yes profit, even adjusted for inflation Berkshire has a profit in silver, this is not the case for almost the entire silver mining industry. Some will argue this is not a miner at all, and of course that point is obvious, what is not so obvious is how smart it is to let others mine silver at a loss, and then pick up the end fungible product at a cost lower than theirs.

Ted Butler did a nice article on the Buffett purchase of silver. What is so fascinating is that Buffett mined silver right off the exchange at a cost below what most miners are able to do. In fact as of last year not one primary silver miner showed a profit for the entire year. A few quarters of profit yes but on an annual basis no! This will change for fiscal year 2005 in our view and one of these companies has been in our speculative list for some time now. Please bear in mind we are speaking of total costs, not cash costs which miners are so fond of speaking about which neglect the actual costs associated with the mining of ore.

However, the point to be made is that a synthetic mining company is exactly what the marketplace needs at this time. The synthetic miner simply takes silver below the true (total cost)1 of production and stores in away. This would entail, a silver purchase program dealing with real silver obtained under strict requirements that should yield positive returns to investors.

At this time the preliminary work has been accomplished to begin such a synthetic mining company. The initial circumstances require that institutional investors only be allowed to participate, however once established another may be available to the general investing public. However to implement this plan silver would need to be near the current price in inflation adjusted terms. If silver shoots up from here, then the proposal simply would not be as effective. In other words, Buffett is a lock whether someone else can duplicate this remains to be determined. A free market approach to the proposed Silver ETF may be something the market needs currently.

In fact the proposed Silver ETF has some very interesting points we find for example:

The Official Sector

Unlike gold, there are no official statistics published by the International Monetary Fund, Bank of International Settlements, or national banks on silver holdings by national governments. The main reason for this is that silver is generally not recognized as a reserve asset. Consequently, there are very limited silver stocks held by governments. According to GFMS Limited in World Silver Survey 2005, at the end of 2004, government held silver bullion stocks total 164 Moz. Silver holdings held by the central banks and governments equal only a 10-week supply whereas for gold it is estimated that governments hold approximately the equivalent of 10 to 12 years of supply. Recently, countries like Russia, China and India have reduced their holdings of silver.

What is also interesting is what Read more…

You may recall that following the 9/11 attacks, the stock market closed for several days. It re-opened on 9/17 with the Dow down 7%.

That was it for one couple I know, Mary and Frank. The attack on the country, coupled with the attack on their personal finances, was too much. They were worried terrorism would sink our economy and stock market like the Titanic, so they sold all their market investments.

Was it the right move?

Nope. In less than two months, the situation changed drastically: Within 53 days, the market recovered all it had lost. And by the end of the year, the market was 12% higher than it had been when Mary and Frank had bailed out. Now their greatest problem was not having a strategy to get back in. In their uncertainty and confusion, they became paralyzed by fear of making the wrong move again.

You?re well aware that September 2001 was not the first time the U.S. weathered catastrophe that directly impacted investors. Among other events, we?ve been through a depression, World War II, the Cuban missile crisis and an assassinated president.

Yet the stock market has continued to thrive.

Despite market resilience, a lot of people lost a lot of money. It might be tempting to think that if investors had been more informed about what was happening geopolitically, they could have headed off personal financial devastation. But that?s a sucker punch. Now that we can be acutely aware of every twist and turn in the world, does it make sense to invest based on international political and military posturing? Not if you want to make money.

Here?s another example. Shell-shocked, Janice met with her financial advisor in March of 2003. She?d seen the market tank through the horrific bear market from 2000 through 2002. She?d read sordid tales of corporate theft that cost investors billions and, in many cases, their retirement. She was worried by accounting scandals. And, of course, there was this problem in Iraq.

Janice was convinced that any one of these events could mean disaster for her investments. In her mind, all of these things happening at the same time meant certain financial catastrophe. Demoralized, Janice sold all her holdings. And from an emotional standpoint, you couldn?t blame her.

But from March of 2003 through the end of 2003 the Dow rose 32%. Janice missed out completely.

Our market has survived everything thrown at it. Unfortunately, we?ll most likely always have a crisis to overcome. The current terrorist problem could be with us for many years, and that?s certainly a human tragedy. However, no one can revoke the business cycle. There will always be companies that make great products and high profits. Those companies will expand, and the value of Read more…

Maggie and Sam called my office last week, and I could hear the desperation in their voices. They?ve lost more than $1 million in the stock market since 2000 by ?investing conservatively.? Their broker assures them that buying high-quality mutual funds and holding onto them through rough markets will grow their money safely. Yet they can plainly see it isn?t working. In fact, they?ve watched a serious decline for a while now, and they?re starting to panic.

Their problem is not earning money to fund their retirement dreams. Both Maggie and Sam are smart and successful: She is a heart surgeon and he is a well-heeled attorney. Yet they?ve lost a fortune, and they can see that no matter how much they earn, it can?t possibly offset the damage done by listening to the advice of their broker, so they?ve turned to me to stop the bleeding.

These two aren?t the only intelligent, affluent investors I?ve met who are frustrated and frightened by their investment results, and 2000 wasn?t the only bear market investors had to face. Based on 60 years of evidence, a bear market ravages investors every 3.3 years, and the average loss is 27%. That?s enough to scare anyone. According to AARP, 35% of all retirees go back to work after they retire. Could it be because the market cracks and scrambles their nest eggs?

I?m reminded of my Uncle Jim, who wouldn?t listen to me and retired in 1999 with $700,000. His plan was to create income from his retirement package and to live happily ever after. Interest rates were too low for Jim, so he decided to invest in growth mutual funds to create the income he wanted. By the end of 2002, his $700,000 had dropped to less than $400,000 thanks to an inhospitable market. His savings had lost 43% of its value. Then, instead of $700,000 working for him, he had $400,000 working for him. That meant less income–a lot less income. Faced with this disturbing reality, Jim sold his beautiful home to buy a small condo and had to go back to work. Jim didn?t have 70 years to ?think long-term? as his broker and other financial ?experts? suggested he should. Jim needed that income today.

What can Jim, Sam, Maggie and everyone else do to protect themselves from catastrophic loss in the future? Since we know that a crash comes every 3.3 years on average and the typical loss is over 27%, it is critical for investors to invest only when the risks of doing so are relatively low.

Of course whenever you invest in the stock market you take on risk. However, we know that certain times are riskier than others. Just as you check the weather forecast before you embark Read more…

As a followup to a previous column, ?Irreconcilable Differences,? I received an e-mail from a reader asking how she could ensure, ahead of time, investment compatibility with a future spouse.

Unfortunately, like most issues in life, the direct approach does not work. Asking him, ?Sweetie, how will you invest our 401(k) funds?? will only result in getting the answer he thinks you want. ?Honey, whatever you think is best,? will be the answer you will hear. The thought that different investment strategies could result in irreconcilable harm to your future relationship seems remote to him. But we know better. He will say whatever you want in order to move the conversation to supposedly more important questions like, ?How many kids do you want, five or six?? Or, ?What religion should we raise the kids in?? We all know, however, as index investors, that our Investment Gestalt (IG) is the key predictor of future happiness. Fortunately, I have developed a test that will increase the probability of matching your IG with that of a prospective partner.

This is the scenario: Your friend (and I would keep the relationship at a platonic stage until after this first test of compatibility) is driving and you approach a toll on the New Jersey Turnpike. It?s 5:30 p.m. and traffic is backed up a quarter mile. Now watch carefully as your friend selects one of 10 lanes to approach the tollbooths. Does he scan the mass of opportunities and abruptly cut across eight lanes of traffic to get into the shortest lane? So far, so good, correct? No, don?t jump to any conclusions yet. Wait and see his behavior as his lane stops dead. Does he pull out and squeeze into the fastest moving lane two rows to your left? Even worse, does this behavior continue for the next 10 minutes as he chases the best performing lane? Stay away from this person. Don?t give him a kiss goodnight and don?t take his calls in the future. His approach is strictly short-term. He chases short-term performance (and he is rude too).

Still Read more…

In 1519, Hernando Cortes, beached on the shores of unexplored Mexico, made a fateful decision: he would burn the ships he and his men arrived in and attempt to overthrow Montezuma and the mighty Aztec empire. The decision was risky. The Aztecs were meant to possess large numbers of brave warriors while Cortes had only a handful of men. If Cortes had the slightest setback there would be no escape. On the other hand, Cortes had no choice. The powerful Governor of Cuba wanted his head. Cortes had defied the Governor time and time again and his best option for getting out of the situation was to win favor with King Charles by conquering a civilization rich in gold and other treasures. Since Cortes’ men might get a little antsy if the going got rough and decide they would prefer going home, Cortes decided it would be best to completely align their incentives with his. He did this by burning the ships. Anything but success would now equal death for Cortes and all of his men. Thus began the famous march from Vera Cruz to Tenochtitlan.

Your retirement is not the conquest of New Spain. All or nothing plays, though they can be wildly successful and can lead to conquistador like splendor, are not the kinds of risks you should be taking with your future. Putting all of your savings into a single speculative venture should be reserved for situations when there is truly nothing to lose.

When investing for the future you should take a much longer view of things. You should understand that the economy undergoes boom and bust cycles, fads come and go and sometimes you just plain get unlucky. To combat the vicissitudes of fortune you must diversify your investment holdings.

A lot of people go about their savings in a very simple way: they have their employer take money out of their paycheck and put it in a 401(k) plan. This is a good, tax advantaged way to save. The problem often comes, however, when the employee falls prey to the employer’s siren song of re-investing in the company. Perhaps the company has been doing well lately and the employee is bullish on the future success of the company. He or she then goes ahead and contributes 100% of his 401(k) to purchasing company stock. That is a potentially disastrous decision.

Most people’s livelihoods are not well diversified. For the most part people rely on their employer for their future well being. Your employer supplies your paycheck, you are counting on your employer for wage increases and you may also be expecting a nice little pension when you retire. That is already a lot of eggs in one basket. Companies fail suddenly, layoffs occur and you do not always have the meteoric rise in your career that you might hope for.

To subject your savings to the fortunes of the company that you already are so dependent upon is something you should do only after careful consideration of all the alternatives. It might be the right thing to do, but you are taking on a lot of risk in doing it.

So if you aren’t doubling down on your company’s future, what should you be doing with your retirement savings? The answer obviously depends on where Read more…

Trend following also called momentum trading is the simplest and safest method of stock market investing. It puts you in stocks and mutual funds that are going up and gets you out when they start down. Properly done there is no guess work.

How many times have you bought a stock or fund because of deep analysis? You have gone to Morningstar and bought their extensive reports ? many of which are months old, but you don?t know that. Maybe your broker sent you a bushel of pretty reports about how wonderful is this particular company. Unfortunately each time you bought it the stock or fund either did not go up or went down.

Once you are touted about some equity you can be sure you are not the first and you might be the last one who bought at the top of the move. What can you do to avoid this kind of Wall Street trap?

Where can you find a stock or fund that will actually go up after you buy it? One thing I will say is not to try to pick individual stocks. Leave that to the pros. The best place for your money is in a no load mutual fund (that?s no commission) or an ETF, Exchange Traded Fund (a type of mutual fund that trades like a stock). A fund has a professional money manager who should be capable of buying good stocks. He spends his whole life doing this where you have another occupation.

There are many places on the Internet that rank mutual funds by performance such as Yahoo.com, stockcharts.com, barcharts.com and many others. Performance means it is going up more and faster than all other mutual funds. You can also find a listing of funds in Investor?s Business Daily or you could subscribe to a service that does all this for you such as NoLoad FundX. Forget Morningstar and their star ratings which are meaningless.

To determine whether to Read more…