ManagingMoney.com sat down recently with Jim King, The Director of Portfolio Management, for Rydex Investments. Rydex Investments manages in excess of $13 billion dollars in over 51 mutual funds. Long known for innovation, Rydex is currently one of the largest sponsors of Exchange Traded Funds (ETFs), and one of the few Fund Families offering Short and Leveraged Funds. Jim gives insights as to how investors can use Rydex's unique investment vehicles to gain market exposure to specific market sectors or control market risks.

ManagingMoney: Hello and Welcome to the ManagingMoney.com Interview Series. My name is Mike Diersen and I’ll be your moderator today. Our mission at ManagingMoney.com is to help you, our readers, listeners, and viewers to Save Money, Make Money, and better organize your Financial Lives. To that end, our interviewee today falls into the Make Money category. We are very pleased to have with us Jim King, the Director of Portfolio Management from Rydex Investments. Jim, welcome to ManagingMoney.com.

Rydex: Thanks for having me. It’s great to be here.

ManagingMoney: Jim, before we get into the hard questions, I’d like our listeners and readers to know a little bit more about you and Rydex. As I understand it, in addition to being the Director of Portfolio Management, you are also yourself a Senior Portfolio Manager responsible for a team of managers and analysts who manage all of the Rydex leveraged and inverse funds.

Rydex: That’s correct. Actually all the funds that we have are team managed. And so most of the members on the portfolio management team do report in to me. Under my umbrella, as you mentioned, are most of the funds for which we’re best known which are the leveraged index funds and the short index funds.

ManagingMoney: Very good. Now Rydex has been in business for over a decade, has over 51 mutual funds with 13 billion under management according to your website and you’ve been with the company for 8 years now. Correct?

Rydex: Actually about 9.

ManagingMoney: Actually about 9 years now. Alright presumably you’re pretty familiar with the Rydex story. We were wondering if you could give us a little bit of background as far as the history of Rydex and in particular what you consider to be some of Rydex’ core strengths.

Rydex: Sure. Actually the company was founded in 1993 by a gentleman named Skip Vera who unfortunately passed away 2 years ago.

ManagingMoney: I’m sorry.

Rydex: However, the company lives on and the dream lives on as well. He actually saw a niche that was not being filled at all in the market place and that’s how Rydex was born. At a previous employer he noticed that a lot of the more of the active, you know shareholders and money managers, in their mutual funds were getting kicked out because they were trading too much. He thought to himself, “Well, what if we were to build the portfolios to accommodate that sort of trading then we wouldn’t have to kick anybody out and it will be win-win both for the shareholders and for the company”.
His employer at the time didn’t like the idea. So he said, “Fine, I’m going to go out and do it on my own”. And the rest is history. He went ahead and got started building funds. Most of them sort of “indexy” funds, but Funds that were built to allow the type of trading that a more active investor requires without being disruptive to the fund itself.

ManagingMoney: So Rydex is the more active manager as opposed to a passive manager in that you’re constantly looking for what you perceive to be the best areas of value, etc?

Rydex: Well it’s actually our shareholders who are really the active ones. We do have some funds which are more active but our real bread and butter is the leveraged funds and the short funds where the fund always takes exactly the same stance. But shareholders can implement their views by getting in and out.

ManagingMoney: Alright I understand. So actually the shareholder. As opposed to many of the funds nowadays with very extreme switching policies etc., the Rydex portfolios might be a little bit better geared toward the investor who is out there calling their own shots. Is that right?

Rydex: That’s right. That’s right. We like to think we cater to a little more sophisticated investor. So we do have a higher minimum for initial investment. But because the investor has a model of their own we’re not going to be second guessing them by tinkering with the funds.

ManagingMoney: Alright, now speaking of sophisticated investors, I know that one of the areas that Rydex has been an innovator and has some strength in are the ETF’s, or Exchange Traded Funds. And ETF’s, I guess, have become quite popular in the last couple years and I was wondering if you might maybe touch on why you think ETF’s are growing in popularity like they are, and then secondly what are some of the ETF vehicles that Rydex has available, and how might investors use those in structuring their portfolio.

Rydex: Sure. ETF’s have gained quite a bit of popularity especially in the last couple of years. ETF, of course, stands for Exchange Traded Fund which essentially is not unlike a mutual fund except that it trades like a stock on an Exchange. So where as with the traditional mutual fund you typically would buy or sell it just once during the day at the closing price, ETF’s trade all day long and there is an active market. You can buy it and sell it to your heart’s content. Of course you’re going to pay your broker every time.

ManagingMoney: Of course.

Rydex: So on an all in basis it might tend to be more expensive for a very active trader. However, it also tends to boast a lower expense ratio than most mutual funds. So there is certainly some trade offs there but the ETF market place is growing very rapidly and there is a number of strategies in certain ETF’s that you don’t find in too many mutual funds.

ManagingMoney: And could you touch on a couple of those?

Rydex: Sure. One of our newest offerings in the ETF’s space is the Euro currency shares which is actually an ETF and within the ETF it just owns the Euro.

ManagingMoney: OK

Rydex: So if the Euro is appreciating versus the US dollar then the Euro currency shares, ticker symbol FXE, will go up. If the Euro is depreciating against the dollar then of course the FXE will go down. So that is really the first of its kind -- ETF that actually has currency wrapped up inside of it rather than typical equities.

ManagingMoney: Yes, because it’s actually difficult for the average investor out there to get access to the currency markets without maybe employing, you know, futures exchanges, etc. Correct?

Rydex: Exactly. You need to use futures probably and then of course you find yourself subject to margin requirements and margin calls and you really need to stay on top of it. Also the minimum investment for doing that is quite a bit for a lot of smaller investors, whereas with ETFs you can get in at a much lower dollar value.

ManagingMoney: Well now, you said something a second ago. You mentioned margin calls and that gets into the second area of your fund family that I would like to talk about. And I think probably one of the areas where you have got the most expertise in are in your short mutual funds and leveraged mutual funds. Now traditionally, I think, you probably agree that most investors would like to use those strategies but they may be intimidated by some of the risks involved or not feel that they have the particular expertise themselves. So how can Rydex then help someone who is wanting to either be short or be market neutral and maybe use leverage, etc?

Rydex: Sure. First I guess let me explain exactly what we are talking about when we say short and leveraged mutual funds. The best example of a short fund is our Ursa fund which latin scholars will know is the latin word for bear. So this is a fund which allows the person to take a bearish stance on the market. Each and every day for every percent that the S&P 500 goes up the Ursa fund will actually go down by 1%. And vice verse if the market is down a % then the fund will be up a %. So that is all we mean by a short fund or sometimes open inverse fund. It’s the opposite direction of the market. A leveraged fund on the other hand, which can be long or short, but a leveraged fund actually performs at some multiple of the market. So actually our very first fund was our Nova fund. That is leveraged 150% to the S&P 500. So, numerically each day that the S&P 500 goes up 1%, Nova will go up 1 ½. Of course, it also works the same way on the down side. A 1% decline in the S%P would be 1 ½ % decline in Nova.

ManagingMoney: But investors aren’t going to get a margin call right?

Rydex: That’s correct. The margin calls here. You basically buy the funds just like any other. Your losses are limited to what you put in just like any other fund. However, if you’ve got a strong feeling on the market, this is a way to take a leveraged position without going through all of the paperwork of a margin account. Or alternatively, this is the way to get the same amount of exposure that you otherwise would by putting up less money. You only need to put up 2/3 as much money in Nova to get the same amount of exposure. Which is a handy tool because then you can do other things with that cash.

ManagingMoney: And then Rydex on your end I presume that you are employing some sophisticated risk management tools to make sure you’re not over-leveraged or anything like that.

Rydex: Yes. As “40 Act” mutual funds, which these are, we certainly have plenty of regulatory constraints placed on us. First and foremost you can’t lose more money than you put in. So we actually have some, as you mentioned, fairly sophisticated options in there to protect us and some other strategies as well that will kick in and keep the fund from going below zero if something really nasty were to happen in the market. Or alternatively, if the market were to melt up rather than melting down we also need to protect short funds from going to zero. Which isn’t something you’d necessarily think of intuitively but there is just as much risk there that the market would double in a day perhaps and wipe you out on one of the short funds.

ManagingMoney: Now we’ve talked about some of Rydex’s, in some ways, esoteric offerings but Rydex also has a lot of traditional mutual funds. In particularly you have some expertise in the sector funds area. Correct?

Rydex: Absolutely. We offer 17 sector funds and thankfully the names are fairly self explanatory -- anything from our Financial Services Fund, or our Banking Fund, or our Electronics Fund. And just like the other Rydex funds, you don’t have to stay in them for more than a day. For active traders who maybe change their minds frequently on what sector they like are certainly welcome to do so.

ManagingMoney: Alright. Now I probably would be remiss, Jim, if I didn’t try to get some sort of market call from you. Now of course I understand you have to be careful about what you say, but now, for example, one of your sector funds you have are Real Estate funds. Correct?

Rydex: Yes, we do. We have a fund that invests entirely in REITs.

ManagingMoney: OK. Now REITs, of course, have been quite popular and a lot of money has been made in the real estate market. But we are also starting to hear some rumblings out there that maybe the real estate market has now topped out. And I was curious does Rydex have an opinion, for example, as far as whether there is still some value in the REIT market? Or are you starting to be a little bit more defensive in your posture now?

Rydex: Now, one of the nice things about working at Rydex is because we have funds that work both ways, the long side and the short side. We can almost get away with not having an opinion on the market and bringing that to our shareholders. Although rather than say nothing, a lot of times we like to sort of present both sides of the argument. I think that the argument has been well made that real estate, or that REITs in particular, may have gotten a little bit ahead of themselves. However, I think it’s important to note that when we’re talking about our real estate fund it is REITs rather than residential real estate.

ManagingMoney: Alright.

Rydex: And so I think that most of the risks that have been identified might be in residential real estate rather than office properties and apartment buildings which are typically REITs.

ManagingMoney: I understand.

Rydex: You could also almost make the argument, and I think in some places in the country you can, that a weaker housing market actually helps out apartment managers.

ManagingMoney: Makes sense.

Rydex: You know, so because if people get spooked about buying houses they may decide to rent a little while longer before they go ahead and take the plunge. In which case that would actually help to buoy the REIT market a little bit. Because again we are talking about a lot of apartment REITs as well as office REITs or even things as out of the mainstream as timber REITs where you are basically are buying a large swath of land to cut down the trees one day.

ManagingMoney: OK. Anything new on the horizon that you can talk about? Again, I’m not sure just exactly what you can say but I know Rydex is an innovator and is there anything in closing here shortly that you’d like our listeners to know about that is on the horizon?

Rydex: Yes. We always seem to have something in registration that is coming up which generally I’m not able to talk about. But one of our newer offerings that came out very recently is actually a series of 6 more ETF’s which we have had a lot of interest in. These 6 ETF’s actually attempt to track various style boxes. We‘ve got both value and growth in each of the 3 market capitalizations: large, medium, & small for 6 funds total. They are a little bit different than the other style box offerings out there because they’re benchmarked to the new S&P pure style indices. So rather than being market capitalization weighted they actually get a style score and they’re weighted on that score. So, for instance, in the large cap growth the “growthiest company”, if that’s a word, will have the highest weighting. In value the “valueiest company”, which I’m pretty sure is not a word, will get the highest weighting there. So it’s actually, again rather than market cap, it’s actually being weighted toward value or growth which is an approach that I don’t think any other ETF’s have taken before. We’re very excited about those products.

ManagingMoney: We appreciate the heads up on that. Jim we’re going to have to conclude the interview for now. We want to remind our users that they can find out more about your products and services at www.rydexinvestments.com. Also, they can find a transcript of this entire interview at www.ManagingMoney.com/weblog or by visiting the ManagingMoney.com Education Center. As always, we want to remind our users to consult with their Financial Advisors, if appropriate, before making any specific investments. And in closing from ManagingMoney.com we hope you Save Money and Make Money in 2006! Jim, thank you very much for your time.

Rydex: Thank you. I would love to come back sometime.

ManagingMoney: Very good. Bye.

Posted by Mike - Editor at 8:12 PM | Permalink

With the cost of gas now in the $3 per gallon range and in some areas even approaching $4, now would be a good time to start searching for ways to reduce your costs at the pump.

Let's be real though, you are not likely to stop driving anytime soon, start riding a bicycle, or run out and buy a new energy efficient hybrid. So what's left? If you have a good credit rating, our favorite is the Gas Reward Credit Card. There are numerous cards available from different issuers, each with their own particular strength and weakness. Some cards are only good for a particular brand of gas while others give benefits on any gas purchase. Most cards will give a rebate in the 2% to 5% range on a gas purchase with rebates also available on non-gas purchases. Savings are savings and 2-5% rebates can add up quickly. If you spend an average of $30 per week at the pump, at 2% that is $6 per week in savings. Multiply that by 52 weeks and you reduced your gas costs by $312 for the year. Stay away from cards with any annual fees and pay your balance off each month.

Posted by Mike - Editor at 6:11 PM | Permalink

The theory behind asset allocation is to spread your investments across different asset classes to help protect your portfolio from downturns in any one asset. Since different investments are affected differently by economic events and market factors, owning different types of investments helps reduce the chances that your portfolio will be adversely affected by a particular risk type. Does asset allocation really accomplish this goal?

To see how asset allocation can help reduce your portfolio’s volatility, consider this example. During the period from 1976 to 2005 (30 years), the Standard & Poor’s 500 (S&P 500) had an average annual return of 12.7%, while intermediate-term government bonds had an average return of 8.3%. The largest loss sustained in any given year for the S&P 500 was 22.1% in 2002 and 5.1% for intermediate-term bonds in 1994 (Source: Stocks, Bonds, Bills, and Inflation 2006 Yearbook, Ibbotson Associates).* The S&P 500 is used as a measure of common stock returns, since it is an unmanaged index generally considered representative of the U.S. stock market. Keep in mind that stocks and government bonds have different investment characteristics. Stocks can have fluctuating principal and returns based on changing market conditions, while government bonds have fixed principal value and yield if held to maturity and are guaranteed as to the timely payment of principal and interest.

To obtain the highest average return, you must invest totally in the highest performing asset, but that asset also has the potential for the greatest loss. However, don’t simply look at the least risky combination, since you are also giving up return for that reduction in risk. While a percentage or two may not seem like much, it can have a significant impact on your portfolio’s value over a long time period.

While each person’s asset allocation strategy will be unique, consider these points:

• Invest in both stocks and bonds. Stocks tend to have a low positive correlation with corporate and government bonds, meaning on average, movements in stock prices will only moderately impact movements in bond prices. Thus, owning both, as the example above shows, reduces your portfolio’s volatility.

• Consider increasing your stock allocation for long time horizons. By staying in the market through different market cycles, you reduce the risk that market volatility will adversely affect your portfolio’s performance.

• Diversify within, as well as among, investment classes. For instance, in the stock category, consider value and growth stocks as well as small- and large-capitalization stocks.

• Rebalance your portfolio at least annually. Since your strategy is designed to provide a stable risk exposure, it must be periodically rebalanced so the allocation does not get out of line.

• Keep sufficient cash on hand for short-term needs. That way, you won’t have to sell investments during market downturns.

• Evaluate new investments carefully, ensuring they add diversification benefits to your portfolio. Don’t keep adding similar investments, such as several stocks in the same industry. Not only does this not add much in the way of diversification, but it also makes your portfolio more difficult to monitor.

* Past performance is not a guarantee of future results. Returns are presented for illustrative purposes only and are not intended to project the performance of a specific investment vehicle.

Posted by Mike - Editor at 7:18 PM | Permalink

Posted by Mike - Editor at 1:57 PM | Permalink

Inflation has been tame for so long that it’s easy to ignore it when planning for retirement. However, even inflation of 2% or 3% a year, over a period of many years, can seriously erode the purchasing power of your funds. At 2.5% inflation, $1 today will be worth 78 cents in 10 years, 61 cents in 20 years, and 48 cents in 30 years. To combat the effects of inflation on your retirement income, consider these tips:

• Consider investment alternatives likely to stay ahead of inflation. Thus, a significant portion of your portfolio will probably be invested in stocks, which have typically earned returns in excess of inflation.

• Invest in tax-advantaged retirement vehicles. Look into 401(k) plans, Individual Retirement Accounts (IRAs), and other retirement vehicles. While each has different rules for taxing contributions and earnings, all provide some tax-free or tax-deferred benefits. Since you aren’t paying income taxes on earnings throughout the years, that typically means you’ll have a larger balance at retirement. Thus, you’ll start out with a larger retirement base to help combat inflation.

• Keep fixed expenses as low as possible. If you aren’t using a significant portion of your income to pay a mortgage, car payment, or credit card debt, you’ll have more flexibility to deal with higher prices.

• Make sure you have plans to deal with health-care costs. While Medicare will help once you turn age 65, it still does not cover many health-care costs. Look into Medigap policies and prescription coverage to help with those non-covered expenditures.

• Minimize withdrawals from your retirement assets. To counter inflation, you need to withdraw larger and larger sums just to maintain the same purchasing power. To make sure you don’t run out of funds late in life, keep withdrawals during the early years to a minimum.

Posted by Mike - Editor at 10:21 PM | Permalink

The most commonly cited measure of inflation is the Consumer Price Index (CPI). However, the government releases not one, but three, versions of the CPI: CPI-U, CPI-W, and C-CPI-U.

• CPI-U is the CPI for all urban consumers and the most commonly cited of the three indexes. It is based on expenditures of almost all residents of urban or metropolitan areas, including urban wage earners and clerical workers, professionals, the self-employed, the poor, the unemployed, and retired individuals. It represents about 87% of the U.S. population and does not include individuals in rural nonmetropolitan areas, farm families, persons in the Armed Forces, and those in institutions such as prisons and mental hospitals (Source: Bureau of Labor Statistics, 2005).

• CPI-W is the CPI for urban wage earners and clerical workers. It is based only on expenditures of wage earners and clerical workers in urban or metropolitan areas, representing approximately 32% of the U.S. population (Source: Bureau of Labor Statistics, 2005). This index is typically used to make cost-of-living adjustments for labor contracts and Social Security benefits.

• C-CPI-U is the chained CPI for all urban consumers, released in July 2002. It covers the same expenditures as the CPI-U, but is calculated in a different manner. Started during the 1990s, the CPI-U and CPI-W allow for modest consumer substitution of items within the same categories to compensate for price changes. The C-CPI-U, on the other hand, also allows for consumer substitution between categories. These calculation differences typically mean that the C-CPI-U will show a lower inflation rate than the CPI-U.

All three CPIs measure the average change in prices paid by consumers for over 200 categories of goods and services in eight major categories — food and beverages, housing, apparel, transportation, medical care, recreation, education and communication, and other goods and services. The CPIs are weighted averages, reflecting the importance of each category in the average consumer’s overall expenditures. For the CPI-U and CPI-W, the weightings are based on consumer expenditure surveys and stay fixed for a two-year period. The C-CPI-U index, on the other hand, uses contemporaneous monthly expenditure estimates. The CPI-U and CPI-W are calculated for the entire nation, for broad geographic regions, and for large metropolitan areas, while only a national C-CPI-U is calculated.

In addition to these three indexes, references are often made to core inflation, typically when monetary policy decisions are discussed. Core inflation typically means the CPI-U index excluding food and energy prices, which represents approximately 23% of consumer spending in the CPI. Food and energy prices are excluded because their prices tend to be more volatile and often change significantly over short time periods due to outside factors.

Posted by Mike - Editor at 8:42 PM | Permalink

It can be difficult to decide where to allocate your funds when you want to both increase your investment portfolio and reduce your outstanding debt. The decision typically depends on the potential return of the investment compared to the interest rate paid on the debt.

For instance, if you are considering purchasing a bond with a 5% interest rate, paying off a mortgage with a 6% interest rate, or reducing credit card debt with a 12% interest rate, you should probably pay off your credit card debt. When analyzing the situation, look at after-tax, not pre-tax, rates. In this example, interest income from the corporate bond is subject to federal income taxes, the mortgage interest is tax deductible, and there is no tax deduction for the credit card interest. If you’re in the 25% tax bracket, the 5% rate on the corporate bond will net 3.75% after taxes, the 6% mortgage costs 4.5% after taxes, and the 12% credit card debt costs 12% without an income tax deduction.

There are some situations, however, where you should consider other factors, including:

• When your employer matches your 401(k) contributions — Many employers match contributions to 401(k) plans, which is money you lose if you don’t contribute. Those matching contributions can make a big difference when deciding whether to invest or pay off debt. For example, assume your employer matches 50% of contributions up to 6% of your salary. If you’re earning $50,000, a 6% contribution equals $3,000, with a $1,500 matching contribution from your employer. Thus, you should typically take advantage of all matching contributions before using money to pay down debt.

• When you are paying down your mortgage rather than other debts — Often, there is psychological satisfaction in paying down your mortgage to build equity in your home. However, mortgage debt is usually the last debt that should be paid off, since interest rates are typically lower than other forms of debt and the interest payments are tax deductible. If you want to pay down debt, make a list of all your debts, the interest rates, and whether the interest is tax deductible. Start paying off the debt with the highest nondeductible interest rate. Once that debt is paid in full, move to the next highest interest rate.

• When you’re using money from your retirement savings to pay off debt — Many 401(k) plans allow loans at relatively low interest rates. Thus, you may be tempted to take out a loan and use the proceeds to pay off your high interest rate credit card debt and auto loans. One of the dangers of this strategy is you’ll start to regard your retirement savings as a piggy bank that can be dipped into whenever you need money. It’s typically better to leave retirement savings alone so the money can compound for your retirement. Also, you don’t want to take out a loan, pay off your credit cards, and then start running up balances on those cards again.

Posted by Mike - Editor at 10:58 AM | Permalink

While investors want the highest returns possible, returns compensate you for the risks you take — higher risks are generally rewarded with higher returns. Thus, you need to assess how much risk you are willing to take to obtain potentially higher returns. However, this can be a difficult task. It is one thing to theoretically answer questions about how you would react in different circumstances and quite another to actually watch your investments decrease significantly in value. What you are trying to assess is your emotional tolerance for risk, or how much price volatility you are comfortable with. Some questions that can help you gauge that risk tolerance include:

• What long-term annual rate of return do you expect to earn on your investments? Your answer will help determine the types of investments you need to choose to meet that target. Review historical rates of return, as well as variations in those returns, over a long time period to see if your estimates are reasonable. Expecting a high rate of return may mean you’ll have to invest in asset classes you aren’t comfortable with or that you may be tempted to sell frequently. A better alternative may be to lower your expectations and invest in assets you are comfortable owning.

• What length of time are you investing for? Some investments, such as stocks, should only be purchased for long time horizons. Using them for short-term purposes may increase the risk in your portfolio, since you may be forced to sell during a market downturn.

• How long are you willing to sustain a loss before selling? The market volatility of the past few years will give you some indication of how comfortable you are holding investments with losses.

• What types of investments do you own now and how comfortable are you with those investments? Make sure you understand the basics of any investments you own, including the historical rate of return, the largest one-year loss, and the risks the investment is subject to. If you don’t understand an investment or are not comfortable owning it, you may be tempted to sell at an inopportune time. Over time, your comfort level with risk should increase as your understanding of how risk impacts different investments increases.

• Have you reassessed your financial goals recently? Due to the significant market volatility of the past few years, your financial plan may need to be revamped. Otherwise, you may find you won’t have sufficient resources in the future to meet your goals. Based on your current investment values, determine what needs to be done to meet your financial goals. You may need to save more, change or eliminate some goals, or delay your retirement date.

• Do you understand ways to reduce the risk in your portfolio? While all investments are subject to risk, there are some risk reduction strategies you should consider for your portfolio. These strategies include diversifying your portfolio and staying in the market through different market cycles.

Posted by Mike - Editor at 12:11 PM | Permalink

Gold hit $600 per ounce this week with many experts predicting $1,000 per ounce over the next five years. Should you buy, sell, or do nothing?

We have honestly never been too enamored with gold as an investment, particularly when one looks at it's historical volatility. Timimg is everything in the gold market. However, "how you buy it" certainly changes the dynamics and risk profile. For the most part you can either buy the bullion, buy "processed" gold such as gold coins or jewelry, or buy a gold stock or mutual fund. The first two options are our least favorite unless you believe the world is ending and people will no longer accept your currency. Although that is a possibility, we would suggest it is a low probability and guns would likely make a better investment then than gold.
Our main problem with bullion or coins is that the only way you make money is if the metal goes up in value. There is no income and in fact you may incur costs with holding it such as the expense of a safety deposit box. In the case of coins or jewelry you also pay a premium for the "processing" which means it has to rise some just to break even.
However, gold stocks or mutual funds actually represent infinite life businesses with other opportunities to make money without just relying on the spot metal going up in price. You may earn a dividend and if management is adept at hedging their risks you may still have stock appreciation even if the metal price itself stays flat or drops. Also, management always has the ability to find other markets for the product or even to diversify into other metals reducing their exposure to just gold. Finally, stocks and funds are easy to sell but actually selling bullion or processed gold is much more difficult and usually has higher expenses associated with selling.
So, again, should you buy, sell, or hold? We're not going to make the specific market call for you, but most financial planners say a portion of one's assets should be invested in "hard assets" like metals or timber as they often move opposite the stock market and historically have provided a good inflation hedge. When markets are high, sometimes a good strategy is to dollar cost average in, buying small amounts periodically at varying prices. That way you never pay the most or least but have an average price that is competitive as long as the general trend is up. Again, we believe there is a higher probability that the general trend up is more likely to incur owning the actual business as opposed to just the metal itself. Let us know what you decide.:)

Posted by Mike - Editor at 11:35 AM | Permalink

Ark 252 announced this week the introduction of the first micro-payment IRA Account. Called the Daily IRA, the account allows investors to invest as little as $1.00 per day into an IRA mutual fund account.

The Daily IRA will allow you to transfer a minimum of $1.00 every day for the 252 days per year that the stock market is open. The amount can be increased, decreased, or paused at any time. There are no minimums to open the account and the fee for the service is $1.00 per week. Everything is done online and takes about 10 minutes.
The actual mutual funds available for investments are from Fidelity Funds, specifically their Lifecycle Funds. The Fidelity Lifecycle funds are age-based funds that invest according to a maturity date. Investors merely choose a fund that has a maturity date that roughly corresponds to their anticipated retirement date. The fund manager then divides the fund assets between the appropriate mix of stocks, bonds, and cash that have a risk profile commensurate with the time horizon of the account.
We think this is a pretty "nifty" idea, particularly for the smaller investor or individuals who have trouble coming up with their entire IRA contribution at once. All that is really necessary is to maybe give up your daily Starbucks latte in exchange for a secure retirement. As usual, we suggest potential investors always consult with their Financial Advisor before implementing any specific investment or investment strategy.

Posted by Mike - Editor at 12:57 PM | Permalink

One of the best "teaser rates" we are seeing in the Internet Banking space is the EverBank FreeNet Checking Account.They are currently offering 5.51% APY for the first three months for new customers. The account also comes with free online banking, free check writing, and a free Visa® CheckCard. At the end of the three month period EverBank guarantees you'll continue to earn a yield that ranks in the top 5% of competitive accounts as tracked in the Bank Rate Monitor National Index™ of leading banks and thrifts. With a minimum of only $1,500 to open an account, FDIC insurance, no monthly fees , and a 100% satisfaction guarantee, this is probably worth a look.

Posted by Mike - Editor at 12:58 PM | Permalink

Consuelo Mack on Wealthtrack recently interviewed three top value managers, David Winters, Susan Byrne, and John Montgomery. David Winters is portfolio manager for the Wintergreen Fund and specializes in global value investing, Susan Byrne is CEO of Westwood Management that runs the Westwood Large-Cap Equity Fund and focuses on large-cap U.S. stocks, and John Montgomery with Bridgeway Funds uses quantitative computer models in his search for value. Each gave their perspective as to where they are finding value despite stock markets and interest rates both at recent highs.

Click Here to Read the Interview Transcript

Posted by Mike - Editor at 12:33 PM | Permalink

Fidelity Investments has announced that they will be closing their Contrafund to new investors effective April 28th. 2006. The Contrafund is currently Fidelity's largest fund, surpassing even their better known Fidelity Magellan Fund.
Why are they doing this? Is this a good thing?

If you are already an existing investor in the Contrafund you should be thrilled that the fund is closing, but if you are not an existing investor you might be disappointed. After the 28th, existing investors will still be allowed to add to their account but no new investors will be accepted. The fund has put up a decent track record recently, posting a 22% average annual return over the last three years according to Morningstar, Inc.
Believe it or not, it is easier to manage smaller amounts of money than larger amounts, especially for mutual funds. We should all have such problems. As a fund gets larger from new investors, finding quality stocks to buy in reasonable quantities becomes more difficult. Two things happen. Because of regulations and risk control, mutual funds are limited as to how much of an individual company's shares they can purchase. Also, as the fund gets bigger, "hiding" their purchases so other managers don't get "wind" of what they are buying becomes more difficult. It is somewhat similar to the "elephant trying to tiptoe through the glass store" without anyone noticing.
If a fund doesn't close at some point, their returns will tend to match that of the overall market because they will in fact "own the overall market". An investor might as well buy an Index Fund then and not bother to pay a manager. For the existing Contrafund investors, this means that management can focus on those securities they feel will offer the highest return and still be able to take meaningful enough positions in those holdings without having to over diversify. If you are a potential investor, check with your Financial Advisor first, and if appropriate, open a new account before 4/28 because the door slams shut then!

Posted by Mike - Editor at 11:42 AM | Permalink