Despite Market Extreme Market Volatility, S&P 500 ends 2011 unchanged at 1257. Expect market to post 10% plus advance in 2012 and challenge 1400 as pessimism and yields on alternative investments provide favorable market conditions for equity market..........January 2, 2012.

Despite extreme volatility and market gyrations of ups and downs during 2011, the S&P 500 (broadest and one of most recognized US metrics in use) was unchanged for the year. Despite a flat year for the S & P 500 for 2011, this does not tell the real story as losers exceeded winners in the investment world. Winners tended to be the dividend payers while growth, commodities and international markets fared much worse. The International index posted a double digit decline for the year with China, Brazil, Italy and other specific country markets dropping over 20%. Gold and Silver ran up during the year only to pull back over 20% in the last quarter.

One thing 2011 highlighted and confirmed is that trying to time the market or consistently predict market direction is almost impossible (to do on a CONSISTENT BASIS). Most of the "experts" and hedge funds badly trailed the market averages from a return perspective as trying to time the market orived to be a difficult strategy to succeed at.  6 out of 10 Hedge funds lost money in 2011 and the number will likely be higher when all of the final reporting is done.  Many individual investors paniced out of the market during the summer sell off only to find the market recover in October and the final quarter and miss the recovery in the market. 

The market tends to climb a wall of worry and there is a certainly a mix of positives and negatives in the investment world today:

POSITIVES:

• US Companies have large cash balances on their balance sheets and have kept lean and mean after 2008-2009 downturn.
• US Stock market not overvalued by historical valuations with S&P 500 earnings forecast between $80-$100 per share equating to Price Earnings ratio of 11 to 14 times which is not expensive by historical comparisons.
• Interest Rates low to nonexistent meaning alternatives to the stock market are few. 10 year treasury rates are below the S&P 500 dividend yield for first time in many years meaning attraction of bonds to equities at low levels.
• Individual investors and other funds on record cash holding levels providing fuel for a market advance.
• Pessimism very high which is often a contrary indicator.

NEGATIVES:

• Unemployment remains stubbornly high and not likely to in meaningful way.  Declines in the unemployment rate are due to people leaving workforce rather than a greater percentage of people working.
• Real Estate not likely to improve with 25% of households upside down on mortgages meaning they owe more than their home is worth.
• Volatility in market is driving investors out of market and creating lack of faith in investing.
• Government inability to find common ground.
• Baby boomers will start needing to tap investments creating selling pressure.
• Europe downside unknown.
• Asia slowing.

2012 approach to investing should center around following themes:
Stay diversified through low cost Exchange Traded Funds (ETF's - See Approved Listing Page) as during period of muted returns expense ratios and fees become a more meaningful cost to have to overcome. More importantly, managed mutual funds, hedge funds and supposed market "experts" are not consistently beating the averages so scutinize funds invested in for performance and expense ratios vs comparable ETF options. Another dangerous strategy is to chase hot sectors or hot funds as this year's higher performers tend to be next year's underperformers.  A better approach is to build a diversified portfolio with exposure to a multitude of asset classes via an ETF portfolio for your equity portion (remember that choosing the allocation to the market is the #1 decision for investors and is the primary factor in determining expected return, risk and overall volatility to the market).  Once the allocation to the market is determined a portfolio of ETF's can be constructed in a diversified fashion within the following asset classes:

EQUITY ALLOCATION OF PORTFOLIO:

• Large Cap - 30%
• Mid Cap - 10%
• Small Cap - 15%
• Commodity - 5%
• International - 20%
• Yield Oriented Investments - 20%

Regarding Fixed Income the same approach holds true as a diversified portfolio of Exchange Traded Funds (ETF's) is suggested route as fees and expense ratios with Fixed Income universe constitute even greater portion of return in a very low interest rate environment. In the Fixed Income (or non EQUITY portion) of a portfolio, see the fixed income model portfolio suggestions tab for diversification ideas.

2010 markets end on highs....S&P 500 closes year at 1257 not far from year prediction of 1230. Expect 8-10% gain in 2011 or 1370 range on S&P 500............January 10, 2011.
With many market pundits calling for 1450 range on S&P 500 for 2011, investors should be a bit nervous and cautious as the crowd is often wrong. Nonetheless, the individual investor still is nervous about the market and the overall lack of volatility coupled with overall market skepticism should create a floor under the market. The market is also a leading indicator which points to better times again. Money Market rates of return are still close to 0% and pullbacks should be met with money managers trying to get their overall market allocations up. I continue to favor buying low cost ETF's and Highly rated Mutual Funds in a cross section of asset classes providing portfolio diversification.  Individual security recommendations include the following but the bulk of one's portfolio should be diversified along the line of the approved fund page on this site:

Dividend Plays:

ABT - $48...Div yield 3.7%.

PCH - $33...Div yield 6.5%.

ETR - $72....Div yield 4.6%.

NLY - $17.75...Div yield 15%. REIT.

PM - $56....Div yield 4.6%.

Growth and upside gain:

CACI - $52.

FXI - $44.

UNH - $39.

XBI - $64.

NIO (Muni fund for after-tax accounts only) - $12.70 with 6%+ yield.

As predicted market retreat provided opportunities to buy cheaper...market likely to remain in 1040-1200 range through 2011 ...........September 20, 2010.
As mentioned here, markets pulled back rather dramatically from the April 2010 high point for the year pulling back over 15% from these levels in August only to have a nice rebound through the first half of September putting the S& 500 at the 1,120 level. I continue to feel the a yearend level of 1,230 is possible or about 9-10% above current levels but still feel that a cheaper time to buy will come between now the November elections.  Despite the volatility and the S&P 500 being off close to 10% from the April highs for the year, the index is essentially flat for the year as buy and hold has been replaced by trading the range.  I would sell the APL and UTG April recommendations as both are up 50% and 20% respectively. I would continue to hold and accumulate NAT for dividends, VWO (emerging market ETF) for low cost growth, as well as dividend ETF's such as VIG, SDY and DVY...all high quality dividend payers as these offer good conservative equity options vs. the zero percent you get on cash...and stay away from government and corporate long term bonds which have had unprecedented increases over the past 18 months but represents a delicate risk / reward equation. I also like the ETF MLPN which invests in a basket of energy infrastructure stocks and offers a solid dividend yield (6-7%).On the tax front that is getting national attention....look for things to stay the same for the next few years.

Stock Markets climb wall of worry…Don’t chase markets as opportunities to buy cheaper will come ...........April 25, 2010.
The recent stock market climb (DOW 11,200 and S&P 500 1,217) has been nothing short of spectacular as many have watched from the sidelines or continued to predict a “correction”. As called below in the January sell off, it was an opportunity to buy as markets have raced higher over the past three months. We are already at my year end prediction for the markets and it would not surprise me if we finished around these levels +/- 5%. 1230 markets a key level on the S&P 500 and it will be difficult to get through this level in the short term.  Stock Markets climb wall of worry…Don’t chase markets as opportunities to buy cheaper will come ........... However, with the recent big move I would be hesitant to chase this rally as markets seem fairly valued and a market breather or pullback would be healthy at this stage. Continue to focus on investments that offer a yield as the zero interest rate environment will keep a floor on any market declines. As mentioned in the past, my personal favorites for yield are UTG, FEN and NAT for yield and APL for price appreciation.

Market Pullback in progress...6% off highs and expect another 5% retracement.............January 31, 2010.
The S&P 500 broke through 1085, a key technical level on the last trading day of January setting up for further market declines. Markets could easily trade back to the 1030 level or another 5% before support is found. The DOW 10,000 level will be difficult to hold in the short term and a 5-10% pull back from here should be used as buying opportunities.

Focus on dividends and yield, and the list below outlined on December 23rd, 2009, along with UTG (utility closed end fund paying 7.5%) and PMF (high yield opportunity fund yielding 13%). Aflac (AFL), Travelers (TRV), and BMC Software (BMC) are also favorites.

Although many in the know point to the January affect and as January goes (market declined close to 4% in January), the year goes, I am more optimistic and expect the S&P 500 and DOW to close 8 to 10% above these levels.....1175 on the S&P 500 and 11,000 on the DOW.

Year End in Sight.....Major Equity Indices and Gold both up around 20% for year in one of most volatile and historic financial years on record....December 23, 2009
With year end in sight, 2009 will go down as an historic one. The Financial market near collapse led to an S&P 500 level of 666 on March 9th to hover around 1,120 currently or 68% higher. Most people missed it as the herd piled in to cash in the first quarter and beyond as record inflows in to bond funds trumped equity fund additions. With yields on cash close to zero and markets still fairly priced at average historic valuation levels (Price Earnings and others), the market should hold around these levels for 2010. The new thinking is to stick ones toe in the water through high dividend stocks, closed end funds and ETFs to gain some yield with "lower risk". These would include utility stocks, master limited partnerships, and preferred stocks to name a few areas. Here is a list of my personal favorites (Stocks, ETF's and Closed End Funds):· NAT - $30.50. Yield 7.8%.· FEN - $24.50. Yield 7.6%.· ZTR - $3.88. Yield 10%· DSU - $3.55. Yield 10%.· BTE - $26.50. Yield 5.0%.· PFF - $36. Yield 8%· PGF - $16. Yield 9%· T - $27.50. Yield 7%.· ETP - $44. Yield 8%.· CSP - $8.70. Yield 8%.· WES - $18.50. Yield 8%.· XLU - $31 - Yield 4.3%.· XOM - $68.50 - Yield 2.5%.

Common, Simple Market Allocation Formula....Sept 8, 2009
A simple allocation approach to the stock market is to subtract your age by 100 (or 110 for the more aggressive investor) to determine your overall allocation to the market. So for a 45 year old that wants to play it straight, the allocation to the market would be 55% (100-45). Once your allocation to the market is determined, building a diversified portfolio with ETF's or equity mutual funds (examples of show choices highlighted on this site) is the way to go!! In the end, the most important decision is your exposure to the market but diversification requires selecting investments from a wide array of asset classes.

Labor Day 2009...Equity Markets show resilience as most market "experts" call for stock market correction or muted gains for remainder of year....September 2009
Equity markets climbed a "wall of worry" for most of the summer as the DOW and S&P 500 hover near 9-10 month highs. Many market experts have called for a market pull back saying the 50% bounce of the bottom has happened much too quickly and the economic backdrop does not warrant such an advance warning of a correction to come in the difficult historical months of September and October. Keep a few things in mind before cashing out...1) there is still a record amount of money sitting in cash at close to a 0% yield, 2) Many have missed this rally and on pullbacks will be quick to get in and find a floor for the market, 3) one could argue the 660 reading in the SP500 on the March 9th low was a panic low and not a point for which to draw percentage increases from....we have still only increased 10%+/- since the beginning of the year, 4) the market likes to climb a wall of worry and market experts or the "herd" is are rarely correct on timing the direction of the market.

A Healthy market pull back would probably be welcome here to continue to build the base for a longer term recovery. Let's face it....markets are at levels they were 10-12 years ago and rarely move in a linear fashion but tend to move in a steps. Just something to keep in mind as the year plays out.

As always...market allocation decision and diversification are the keys to long term investment success.

Number One (#1) decision in investing is still "What will be my allocation to the market?"...July 2009
To often one is caught up in the latest hot investment when in reality the number #1 decision an investor can make is what will be my overall allocation to the market....the stock or equity market that is. Equities carry greater risk and greater potential loss or gain meaning an allocation weighting of 20% will carry substantially less volatility and potential for gain or loss than a portfolio with an 80% weighting to the market. What the portfolio holds in terms of actual equity investments will have much less impact and determination on the performance of the portfolio than the overall allocation or weighting to the market in the first place.

Take the time to understand and feel comfortable with your overall weighting and allocation first before you decide what you will invest in.

Best Approach still diversified basket of Exchange Traded Funds (ETF's) and Mutual Funds..July 2009
Once you have answered the number one question of "what is going to be my allocation to the stock market?” the next step is building a diversified portfolio that encompasses exposure to a wide range of assets classes. For example, one traditional approach would be to allocate your equity "stock market" allocation along these lines:

- Large Capitalization ETF's or Equity Mutual Funds - 35%
- Mid Cap - 15%
- Small Cap - 15%
- Balanced - 10%
- International - 25%

The preferred and recommended approach is to accomplish this through the use of both Exchange Traded Funds (ETF's) and mutual funds. ETF's have the advantage of greater liquidity and lower cost and the Approved Funds section of this website has some potential options. Mutual Funds carry ratings normally meaning you can gauge their performance relative to other funds in their particular style of investing.


Market decline impacts both equity and fixed income markets...Summer 2009
The past few years have shown us firsthand that regardless of how safe you think your investments are, unless you are own government guaranteed or insured investments there is always a potential for loss. Some investments carry greater risk than others as evidence by the decline in world stock markets which on average dropped between 40-50% in March of this year 2009 (over past 12 month period). Other investments such as investments in commodities, emerging markets, closed end income funds for example declined much more during the panic of 2008/early 2009.One of the consequences of the financial crisis of past few years has been the effect on interest rates as the stock market declines and poor economic conditions have driven interest rates to low levels creating a dilemma whereby moving your money to safer ground (cash. CD's or bond funds) has resulted in very low investment returns. For example, most treasury money market funds have interest rates below 0.5% (one half of one percent) with many quite a bit less than that. One year CD's are under 1% and holding cash with Schwab, Fidelity or Vanguard is at yields less than 0.5% as of this writing. This current reality is also something you need to understand as although your risk of loss is greatly reduced by investing in cash and fixed income investments, your expected investment returns will be low by being in the safer fixed income investments such as cash, money markets, CD's or bond funds.

Best Ideas for Remainder of 2008 & 2009..............December 4, 2008:
By now everyone knows how brutal the financial markets have been. With October and November in the books and markets down 50% and more around the world the patient and strong of heart could make (and I underline could) some serious returns. The recommended approach as of this writing is put 75% of your equity money in a diversified basket of ETF's or equity mutual funds that cover the broad spectrum of asset classes (SEE APPROVED FUNDS). Use the remaining 25% to buy a combination of beaten down, dividend paying, high risk/return stocks and closed end funds such as these:

• MO $15. Yield of 9%.
• PPR - $3.20. Yield of 12%.
• KBR - $12.75
• YHOO - $11.25
• EDD - $8.50
• CSX - $34.50
• PGH - $8. Yield 12%.
• JQC - $4. Yield 20%.
• PFE - $16.75
• GE - $17.50 Yield 8%.

At some point in the next 6 months investors will realize a 1-2% return on cash is not a long term solution to retirement, education or overall diversification....look for these names above to explode (as well as a lot of others) when this does occur. Looking for some double your money stocks then turn to TEX ($13), TSO ($8.60), and RIMM ($38) all capable of doubling within the next 6-9 months.

OCTOBER 31 2008 UPDATE: