Investing With Wisdom!

To become financially independent, you must turn part of your income into capital; turn capital into enterprise; turn enterprise into profit; turn profit into investment; and then investment into financial independence.

-Jim Rohn

Your Key To A Successful Retirement - Part 2 of 2

Last time I promised to give you some ideas on setting-up a more or less worry free retirement program so you can keep ahead of inflation and taxes. And we'll do this using conservative, income-producing investments.

The very first thing to bear in mind when considering any investment for purchase is to always analyze risk first. Always remember that whenever you lose 50% of your money on an investment, you will have to make 100% next time out just in order to get back to even once again. And more likely than not, this probably means that in reality, you have actually made a zero return on your investment over an extended period of time!

Counting on a double-your-money recovery is a long shot at best. So the most important thing for you to do is to be certain that you understand the risks inherent in any investment before you invest. Do your homework, and ask plenty of questions.

The second thing to bear in mind when considering any investment is cutting costs. And you can positively control your costs at the very outset just as you can limit your risk. While it's far more difficult to know what the future return on your investment might be, the cost and the risk you can know with certainty.

If you invest in mutual funds for income, you should stick exclusively with funds that meet these guidelines: (1) they should be no-load funds; (2) they should be funds with no 12-b-1 marketing fees; and (3) they should be funds with low expense ratios. And what is a low expense ratio? Generally, the expense ratio should be at 0.50% (50 basis points) or less.

If you are building a conservative income-oriented retirement portfolio, then the foundation of that portfolio ought to be Treasury securities, which are the safest in the world. And you can purchase U.S. Treasury securities directly from the Treasury Department via your own personal Treasury Direct account. (We have a link for this on our WeBlog.)

Another good choice for a conservatively oriented retirement portfolio is preferred stocks. When you understand the giant yields available with blue-chip preferreds, as well as the investment grade quality of many preferreds, and their great liquidity, you will learn to love preferreds. But once again, let me remind you that you must do your homework and understand how to invest in preferred stocks.

Common stocks are also favored by conservative investors seeking a reasonably high level of current income. If your interest lies with common stocks, and if you are willing to accept the price volatility that is a fact of life with common stocks, then your foundation for common stocks should be constructed as a cash generating machine. Direct your interest in common stocks towards dividends, and not as an investment made with the idea of later selling securities to someone else at a higher price. The comfort level as well as the odds are better by locking in a nice stream of expected total return right from the start. And you will discover that as a company's dividend increases over the years, the purchasing power of your portfolio is maintained. And it also follows that a company that increases its dividend year after year will experience an increase in its share price. So the combination of a steady dividend, regular dividend increases, plus appreciation in the price of the stock, are all very comforting contributions toward any retirement portfolio.

When it comes to bonds, Treasurys make the most sense. You should avoid bond funds because they never mature and you get poor leverage in a bond fund. Also the majority of bond funds are sold with sales loads and 12-b-1 fees. And many bond funds have unacceptable expense ratios. Also you should avoid corporate bonds because they are suited only to institutional investors.

And, there is one fund in the mortgage-fund category that you really should include as part of a conservative retirement portfolio. It is the Vanguard GNMA Fund, and it has ranked #1 in performance for every period under review.

Finally, look upon your core stocks as long-term investments. You want to always keep your focus on the long haul. Invest equally in the stocks you own and don't buy a stock unless you first sell a current position. Force yourself to have discipline. Never allow yourself to be sold an investment by some salesperson. Have confidence in yourself and take your time making up your own mind. Also keep your portfolio turnover to under 10% per year. Portfolio turnover results in costs such as commissions and taxes, and costs are to be kept to a minimum.

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Your Key To A Successful Retirement - Part 1 of 2

I was prompted to write on this subject because of something contained in the current (February 28, 2005) issue of Business Week. They posed this question to a group of millionaires: "How much (money) guarantees a worry-free future?" Here's what wealthy individuals said they would need:

Those with $1 Million+ could live comfortably on a $2.4 Million nest egg.

Those with $5 Million+ could live comfortably on a $10.4 Million nest egg.

Those with $10 Million+ could live comfortably on an $18.1 Million nest egg.


Now the question is this... How about you?... Do you want to have a comfortable, even luxurious, retirement?... And if so, do you know the steps necessary to bring you to that point?... We'll talk about this today as well as in our next message but first of all let me show you an example of just how quickly you can lose a million dollars if you allow the twin ravages of taxes and inflation to run unchecked.

We have been very fortunate in recent years to experience a rather benign core rate of inflation which has ranged between 1% to 4%. And in fact, the rate of inflation for the first four months of the current fiscal year has increased by only 0.2% per month - giving us a projected annual rate of inflation of 2.4% for 2005... But let's take a look at just how inflation might affect a hypothetical millionaire whom we'll refer to as "Mr. M" for this discussion. This "Mr. M" has a comfortable million dollars in cash assets, this is over and above the value of his home which is mortgage-free. And let's assume that our "Mr. M" will earn 10% this year on his $1 million cash.

Mr. M is likely going to be faced with paying both State and Federal taxes on his $100,000 gross income from that $1 million in cash. So let's say that he will have $70,000 left after taxes (also known as passive income) which you might say is not too shabby an amount for a retirement income... The guy is all set you may be thinking... but is he really? What about the inflation that I mentioned previously?

One very important fact that many people forget about is the idea that you must not spend your way into a retirement poorhouse. And how do you avoid doing that? You avoid that by setting aside enough capital so as to maintain your purchasing power. Thus if the core rate of inflation is 4%, our "Mr. M" would need to add 4%, or $40,000, to his $1 million capital pool in order to maintain his purchasing power. However, in doing so, "Mr. M" would then have reduced his spendable income to only $30,000 ($70,000 minus $40,000) which suddenly makes his after-tax spendable income look not so good!... But if you think that's bad with an inflation rate of 4%, then try running the figures using 10% in the above example.

If our "Mr. M" decided to ignore inflation by spending his entire 10% each year and not putting enough back in order to replace what is lost to inflation, he would lose slightly more than half his purchasing power over 15 years time, and his annual income at 10% would be reduced to just under $30,000 before taxes. And his savings would be reduced as well because he was forced to dip into those savings in order to maintain his level of purchasing power!

In case you didn't get it up to this point, the message here is very clear: Preserve Your Principal! And one way to do this is by increasing your portfolio income. In the case of our "Mr. M" - if he were to increase his portfolio income by just 1%, he would then have $110,000 in gross portfolio income. Taking away the same $40,000 in order to maintain his purchasing power, and paying the same rate of taxes, this would give "Mr. M" $40,000 in spendable income (up from $30,000) which would be an increase by one-third, and this all resulted by simply increasing his portfolio income by an annual one-percentage point!

Next time, we'll talk about some ideas that you can use to set up a worry-free retirement program that will help you to stay ahead of both inflation and taxes!

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Doing Your Own Investment Research

You can stay on top of the latest business and economic developments by going to the Web site of the Institute of Supply Management at: www.napm.org (listed in our "Links" section).

If you go this site, click on "ISA Report on Business." Then click on "Latest Manufacturing ROB." This will give you a large amount of data based on monthly surveys of 400 manufacturers.

This site offers a wealth of information on broad economic as well as specific industry trends. For example, you can see that the PMI for January (56.4%) indicates that the economy is growing at a 5% annual pace. Also, you can easily find out if a particular industry is growing or contracting... and why.

So if you're the kind of investor who enjoys doing your own research, this Web site will make your task much easier!

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Everything You've Learned About Investing Is Wrong!

Well... how is that for a rather startling statement?... An e-mail from one of our members suggesting that I might have been somewhat mistaken in my comments at last evening's meeting concerning the definition of an asset prompted me to use that title. However, I shall remain unrepentant, as I was (and still am) speaking from the perspective of an investor; and while I may have stated this in a rather simplistic manner (in order to get your attention) when I said that an asset is something that places money in your pocket while a liability is something that takes money out of your pocket!... This may appear to contradict the definition that some academics attribute to the word "asset" however, it does make abundantly good sense when you are thinking as an investor!

There is an interesting new book out in which the author states, "The 20th century was an off-the-charts calamitous era in stock markets... or perhaps our assumptions were wrong... The entire field of investment analysis is founded on a few shaky myths."

The book I speak of is, "The (Mis)Behavior of Markets," and the author's name is Benoit Mandelbrot.

Mandelbrot states that, "Basically, everything you've learned about investments is completely wrong, as it's been built on faulty assumptions." Mandelbrot says that the accepted wisdom substantially underestimates the potential for loss. In plain English, financial markets don't follow a "normal" pattern.

Here are a few examples that Mandelbrot gives:

* If the market followed a "normal" pattern based on statistics over the last century, there should have been 58 days when the Dow moved more than 3.4%. Instead, Mandelbrot found there were 1,001 such days!

* Similarly, the "normal" assumption of Wall Street suggests six days of index swings beyond 4.5%; in fact there were 366 such days!

* Index swings of more than 7% should come once every 300,000 years; in fact the 20th century saw 48 such days!

So Wall Street's basic assumption, that everything should fit as "normal," is wrong!
"Normal" is what the academics want. It's what all the work they've done is based on.

For example, the "normal" assumption by academics is that yesterday's price change does not influence today's... each price change is independent from the last.

Another theory based on "normal" is the efficient market theory... that markets won't boom or bust because markets are efficient... they are correctly priced at basically every moment.

This is all hogwash, says Mandelbrot. The accepted wisdom says that prices move randomly. Mandelbrot says price changes are not random... "Today, in fact, does influence tomorrow"... "If prices take a big leap up or down now, there is a measurably greater likelihood that they will move just as violently the next day... Whatever the explanation, we can confirm the phenomenon exists - and it contradicts the [normal] model."

What we need to know about how markets differ from popular perception:

1. MARKETS ARE RISKY. Much riskier than most imagine.

2. TROUBLE RUNS IN STREAKS. Contrary to the accepted wisdom that stocks move randomly, big moves are often followed by big moves.

3. MARKETS HAVE A PERSONALITY. Markets are driven by the actions of people, not by fundamentals, wars, etc..

4. MARKETS MISLEAD. Investors love to find patterns and statistical mirages where none exist.

... Whether or not you agree with the observations of this 80-year old author, his comments should serve to alert you to the importance of doing a better job of estimating the risk you take whenever you buy a stock or shuffle your portfolio.

And finally, never lose sight of the most important message contained in this book:
You can lose more money than Wall Street previously thought... or wanted to admit!

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MEETING REMINDER - PLUS!

We meet again this coming Thursday, February 17th, from 7:00 to 9:00 PM at DePaul University in Naperville, IL - located at 150 West Warrenville Road.

Our Topic: "The Language of Investing"

This meeting is open to anyone who is interested in learning and talking about investing. We do have an annual membership fee of $15.00, and non-members may attend for a $5.00 donation per meeting.

In March, we begin our Spring Speaker Series and there will be further details as we enter the next month.

If you have any comments or questions then please direct them via e-mail to:
rwm123@hotmail.com

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Yesterday I reported about insider buying/selling and how it can be used to accurately forecast what may be happening in the market six to nine months down the line. Now today I read some comments by Jeffrey A. Hirsch, who is the editor and publisher of Stock Trader's Almanac Investor. Mr. Hirsch had these comments, "The market's poor showing in January is a red flag. The annual 'Santa Claus rally' never materialized, and the S&P 500 lost 1.8%. Then during January's first five days of trading, the S&P fell again." Mr. Hirsch has been following the action of the S&P ever since 1938, and he has been accurate in forecasting its movement about 80% of the time. And now here is his forecast for 2005: "The S&P should fall from 1,180 today, to 1,095 by this summer."

So now we have two forecasts to keep an eye on and it will be interesting to watch whether or not they get it right!

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Each indecision brings its own delays, and days are lost lamenting over lost days...Whatever you can do or think you can do, begin it. For boldness has magic, power, and genius in it.

-Johann Wolfgang von Goethe

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The Ultimate Leading Indicator

Insider buying is one of the very few signals that have worked in trying to find stocks that might outperform the stock market.

And it makes sense, too, because while there may be a thousand reasons why an insider might sell, there is only one reason that he'll buy his stock and that is because he thinks the share price will go up!

So we find it a matter of concern to read a report by Thomson Financial stating that for every $1 of corporate insider buys this past January, there were $55 of insider sells.

Thomson Financial states: "January's indicator is the most bearish monthly reading that we've seen over the past decade." Thomson considers it to be "very bearish" when there are $20 of insider sales for every dollar of insider buys. So the current reading is off the charts!

Research into the actions of insiders prove that insiders tend to be right, but early - as much as six to nine months early. So when we see such a massive amount of insider selling - $55 sold for every $1 bought, the highest reading in a decade - we are likely within six to nine months away from some sort of market correction!

There are two important points to be noted here. First, the big picture is that insiders are selling in droves and that is an ominous sign. Large amounts of insider selling preceded many market downturns like the mid-1970s, the 1987 crash, as well as the flurry of insider selling that took place in 2001.

The second point to bear in mind is that corporate insiders buy heavily when their stock appears irresistible. So there is a chance that some stock with heavy insider buying could buck the trend of the overall market and actually rise because something big might be coming. Whatever it is, it's worth further investigation.

However, you should not rely on insider activity alone as a buy or sell signal. But whenever you see heavy insider buying of an individual stock, or heavy insider selling across the board, you absolutely cannot ignore its message!

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AARP's Crummy Numbers!

If you belong to AARP, you have good reason to ask yourself this question... WHY? While it claims to stand up for retired persons, the facts suggest otherwise!

There was an AARP poll last month that claimed to find Americans generally hostile to Social Security reform. Misleading methodology, says pollster John McLaughlin. Here are a few excerpts from USA Next's summary of his findings:

* The survey includes no respondents under age 30, even though voters age 18 to 29 made up 17% of the 2004 electorate.

* Those age 60+ constitute 34% of the sample, yet they were 24% of the 2004 electorate.

* AARP's sample gives democrats a six-point advantage over republicans (37% to 31%). However, the two parties made up equal percentages of the 2004 electorate (37% to 37%).

* AARP asks respondents whether they favor or oppose allowing workers to invest some of their Social Security payroll taxes in the stock market - never mentioning other options such as bonds, that are seen as safe and win higher support. Even with the slanted wording, a majority of those under 50 favor the idea, and even with the skewed sample composition, the idea only loses by a slim 43% to 48%.

* AARP asks respondents whether they agree "Social Security should be protected as a guaranteed benefit, and should not be privatized." Yet no one has proposed privatizing the Social Security system and Social Security benefits are not now "guaranteed."

We hear that AARP is still blanketing Capitol Hill with this nonsense too. It certainly doesn't do much for AARP's credibility on this issue!

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Five Indicators That You Should Be Watching

#1. Institute For Supply Management Manufacturing Index

This indicator is released at 10:00 A.M. ET on the first of the month. It covers the prior month, and the stock sectors affected are manufacturing, and raw materials.

Even though manufacturing only makes up 10% of jobs in the U.S. and 17% of the economy, this index is still a highly sensitive leading indicator for predicting where the economy is heading. Manufacturing trends usually start before those in services, which makes up a much larger section of the economy, so this report is worth watching. The index is a survey of purchasing managers at manufacturing firms, which takes into account new orders, inventories, employment and commodities, among other things. The basic question being asked: "Are you producing more?" The report gives investors a snapshot of industrial output as well as possible rising durable goods orders, employment rate or commodities shortages.


#2. The Employment Report.

This indicator is released at 8:30 A.M. ET on the first Friday of the month. It covers the previous month, and affects all stock sectors across the board.

This report is one of the most timely economic indicators since it's released within days of the previous month's close. It is valued for its ability to help investors predict possible upcoming trends. For example, a rising unemployment rate will weaken consumer buying power. As a result, the loss in power and confidence will stop consumer spending. This can affect virtually every sector of the stock market and, ultimately, gross domestic product. The report is the result of two separate surveys - one of 60,000 households; the other of close to 400,000 individual worksites - measuring labor and the unemployment rate, as well as other employment-related data, such as hourly earnings, average workweek, and nonfarm payrolls.

#3. Retail Sales Index

This indicator is released at 8:30 A.M. ET around the 13th of the month. It covers the previous month, and the stock sectors affected are retail, employment, and manufacturing.

With retail sales making up over one-third of GDP, this index is a great way to measure the economy's health. The consumer is the most important part of the economy, and retail sales is a comprehensive survey of what the consumer was up to each month. This "advance" report represents the total goods sold from a number of various-sized retailers, from public companies like the Gap to mom-and-pop hardware stores. The reports are revised three months back at each release and revisions are often large. In an attempt to be more accurate, the report is broken down to exclude auto sales because they have a frequent tendency to fluctuate from month to month.

#4. Consumer Price Index

This index is released at 8:30 A.M. ET generally on the 15th of the month. It covers the previous month, and the stock sectors affected are retail, manufacturing, and raw materials.

The most trusted indicator for measuring inflation, the Comsumer Price Index tallies the cost of a fixed basket of goods and services from month to month, including everything from Kellogg's cereal and General Electric light bulbs to transportation costs, such as Delta Air Lines flight. In order to get a more accurate CPI, financial markets often stick to the "core rate," which excludes ever-changing food and energy prices. If inflation is the rate at which the price of goods and services is rising, then a high CPI means that inflation is going up.

#5. Housing Starts And Building Permits

This indicator is released at 8:30 A.M. ET around the 16th of the month. It covers the prior month, and the stock sectors affected are raw materials, employment, and construction.

Housing starts can give an investor a good idea of coming supply and raw materials orders, a possible rise in the employment rate as well as new home sales, which is an indicator in its own right. New home sales make up a big part of GDP, so to see a rise would indicate a healthy economy. It's one of the leading indicators, meaning that its changes come before larger trends in the economy, as opposed to coincident or lagging indicators, which would change with or behind the economy. The report also shows whether or not small builders and entrepreneurs have confidence that the homes they're building will be bought in the future.

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Learning To Think Like Warren Buffett

That's the title of an interesting article found on page 29 of the February 14, 2005 edition of Business Week magazine. This article goes on to state that one way Warren Buffett became the world's most successful investor was by understanding how putting off tax payments can build wealth.

With his January 28th support for Procter & Gamble's two-step tax free deal for acquiring Gillette Co., Buffett seized upon an opportunity to exit a position without triggering a giant tax bill. Berkshire's gain on the 96 million Gillette shares that it has held since 1989 amounts to $4.3 billion. And now because it is reinvesting all of that gain into shares of the new company, the government will have to wait to collect its share of the profits.

But tax concerns are not the only thing that drives Buffett's decisions. He has proven that by selling winning positions for cash, such as his holdings in Disney and Freddie Mac. And taxes should be a greater concern to Buffett than to many others because Berkshire's 35% corporate rate is more than twice that of the 15% individuals pay on capital gains.

Therein lies a lesson for investors who may be trying to piggyback on Buffett's picks. Many assume that if he owns a stock, it's worth buying. But because Berkshire's tax rate is so high, Buffett bears less risk in holding overpriced stocks. After tax, he would give up only 65% of profits foregone by not selling at a high, while an individual would forfeit 85%. By the same token, on those occasions when he does sell and offer Uncle Sam his 35% cut, he's sending a loud signal that the outlook is bleak. But since Buffett never reveals what he's selling until he's done, it's hard to play copycat. Investors are better off trying to learn how Buffett thinks!

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Investor Wisdom

The number one rule is to know the difference between an asset and a liability. The rich focus on their asset columns while everyone else focuses on their income statements. The more money that goes into my asset column, the more my asset column grows. The more my assets grow, the more my cash flow grows. And as long as I keep my expenses less than the cash flow from these assets, I will grow richer, with more and more income from sources other than my physical labor.

-Robert T. Kiyosaki

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Achieving Financial Independence

If you ever listen to Bob Brinker's "Moneytalk" program on Saturdays and Sundays, then you may have heard him talking about "The Land of Critical Mass." What he is referring to whenever he uses that expression is the subject of today's blog!

Financial independence doesn't come overnight. You can achieve it only by developing sound wealth-building principles and then following those principles faithfully over a period of years. Get-rich-quick schemes and investments generally don't ever result in financial independence.

Wealthy individuals develop a goal-oriented, long-term viewpoint that other people lack. They realize that investment success comes from setting definite goals and meeting them. They write out specific goals for achieving financial independence, and they are willing to ignore the thirst for instant gratification in order to achieve their goals. This means saving money in order to invest in things that will appreciate, instead of buying depreciating consumer goods that might make you appear rich today. As J. Paul Getty once said, "Make your money first, then think about spending it."

If you want to become really wealthy and independent, you will have to own your own business. Only a business can produce the leverage and appreciation that is essential to amassing great wealth. In addition, working for someone else is not going to make your financial future secure, no matter how big your employer is. Even government jobs aren't as secure as they once were.

What investing can do is to preserve the purchasing power of your wealth. This relatively modest goal (beating inflation and taxes) is surprisingly hard to achieve. But, you can achieve it, and perhaps more, by following a few principles.

You have to be your own investment advisor.Too many investors are looking for an advisor or a system that will provide accurate, automatic buy and sell signals. No such person or system exists. Everyone in the investment advisory business has lost themselves, and others, lots of money at some point. Price movements depend upon individual and government actions which are two factors that are extremely difficult to predict.

Ultimately, personal judgment dictates investment moves, and it might just as well be your own personal judgment. And even if you find an advisor who generally beats the averages, you should not follow the recommendations blindly. Only you can determine your liquidity needs, goals, and the amount of risk you can tolerate. So, only you can decide which investments are best for you. You'll be the one living with the losses!

As your own investment advisor, you must develop a strategy and follow it consistently. To a limited extent, it really doesn't matter which strategy you select, because a number of strategies have proven records of long-term success. Investment newsletters, books and seminars provide information you can use in developing and implementing your own strategy. But, it's up to you to interpret the facts and theories presented by those sources.

In developing your strategy, remember that there is no ideal investment or system. There is no single route to profits, and no route remains profitable for very long. The last several years prove this. From the Spring of 2000 through 2002, no matter what investment you were in, chances are you lost money. You made money only if you bailed out of the market early enough and stayed in money market funds. But, 2003 was just the opposite as the current cyclical bull market took off. So the point here is, you should concentrate on investments and a strategy you understand and with which you are comfortable.

You should avoid short-term trading strategies. Short-term movements in the markets tend to be random events. They're largely overreactions to current news or rumors, and they can't be anticipated. No one, except perhaps a floor trader, can profit from short-term trading. So never make any investment unless you expect to hold it at least long enough to qualify for long-term capital gains treatment.

Another trap investors fall into is trying to predict the future. Predictions are dangerous to your wealth because nobody can predict the future accurately. So don't buy an investment until the market actually moves strongly in the direction you anticipated, and don't sell until any downward move you expected actually begins. You'll miss the top and the bottom, but you won't be caught in a market that is moving in the wrong direction.

There's a favorite tool of professional investors that combines the two mistakes I just mentioned. It emphasizes short-term trading based on predictions. That tool is known as technical analysis.

Technical analysis begins with a common-sense proposition: A trend in motion stays in motion until it actually ends. You can't go wrong investing according to that rule. However, many technicians build on this, and believe that they can predict the future by reading past price movements. This is nonsense. Nobody can do it consistently. So if that's your idea of technical analysis, then do yourself a favor and avoid technical analysis!

Another great failing of many investors is a lack of humility. There isn't any investor alive who wouldn't be substantially wealthier if he or she had only swallowed hard and cut losses early. You're going to make some bad investments. Even the best mutual fund managers make mistakes about a third of the time. Accept this fact, and learn to admit your mistakes.

Most investors show a greater total return when they follow a concentration strategy. But conventional investment analysis says your money should be diversified and fully invested. This is a sound strategy if you are buying individual stocks, because each stock has many variables you can't know about. The market could go up while your undiversified portfolio is declining. You need a diversified stock portfolio.

But for other investments, diversification is better known as the surrender strategy. A diversified investor is one who lacks confidence to make the necessary buy and sell decisions. It's one who hopes that, over time, the total portfolio will at least break even. A better strategy is to leave your wealth in the money market until an investment starts to move up. Then, put a substantial part of your wealth into that investment until the trend reverses. This simple strategy is actually safer and more profitable than the diversification strategy.

Finally, if you want to truly remain independent, don't retire. Retirement is an arbitrary policy that takes away your greatest asset -- your earning potential. In today's volatile economy, you cannot risk losing your earning power!

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The Credo Of A Superior Investor

1. I will understand my own circumstances and formulate an investment plan based on my needs, not in anticipation of market trends!

2. I will remind myself that investing is not a form of entertainment. If I have an urge to gamble, I will go to Las Vegas and leave my investment portfolio alone!

3. I will stick to my plan regardless of market conditions!

4. I will not attempt to pick winning stocks!

5. I will ensure that my holdings are adequately diversified within each asset class I own!

6. I will place primary emphasis on minimizing my investment-related costs!

7. I will stay abreast of changes in investment-related tax laws!

8. I will not purchase any financial instrument I do not fully understand!

9. I will ignore money managers or others selling products rather than advice!

10. I will ignore market prognosticators!

11. I will take full advantage of my qualified retirement plans by making the maximum allowable contributions I can live with!

12. I will hold my least tax-efficient assets in my tax-deferred accounts!

13. I will rebalance my portfolio infrequently, but at regular intervals regardless of the current state of the markets!

14. I will not allow the price I have paid for a security to influence my future investment decisions -- except for tax considerations regarding capital gains and losses!

15. At year end I will harvest tax losses simply and without ever deviating from my portfolio's target allocations by selling and buying index-type funds within the same asset class!

16. I will appreciate the simplicity of this approach, and instead of worrying about factors that are not within my control, I will instead establish my plan and then turn my attention toward enjoying life!

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FEBRUARY MEETING: Thursday, February 17, 2005

The next meeting of the AAII - West Suburban Sub-Group will take place on Thursday, February 17, 2005 at DePaul University - located at 150 West Warrenville Road in Naperville, Illinois.

Meeting runs from 7:00 to 9:00 PM. And the room number will be displayed on the easel located near the reception desk in the main lobby.

Our topic will be, "How Well Do You Speak The 'Language' of Investing?" ... It's amazing how many of us recognize certain of the more than 4,000 investment terms from either seeing or hearing them used but yet, we may not actually fully understand their definitions. So we hope that you may come away from this meeting with a better grasp of investing lingo!

As always, our meetings are open to anyone who has an interest in learning and talking about investing. Each meeting is free to fully paid up Group members (the annual membership fee is still $15.00 per year) while guests are welcome for a $5.00 donation per each meeting.

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You may be interested in the new ValueSheet spreadsheet that was created by member Bryant Sheehy and available as a download from AAII. This Excel spreadsheet can analyze up to 10 years of financial data for publicly traded companies and provide fundamental analysis for making buy, hold, and sell decisions. Specifically, ValueSheet evaluates a company based on growth, profitability, financial strength, asset efficiency, management effectiveness and valuation. Historical trends are analyzed on a quarterly and annual basis and allow for projection of future stock performance.

There are two versions of ValueSheet: one is semi on-line and the other is fully on-line. The semi on-line version downloads five years of fundamental data from Reuters, Yahoo!, and Zacks.com and has the ability to print the information. Because this version is not completely on-line, some data must be manually entered. The fully on-line version automatically downloads the required data.

The semi on-line version normally costs $39.95 - but it is offered for free in the AAII download library.

The file size is 2.56M
System Requirements: Windows 98, ME, 2000, or XP.
Special Requirements: MS Excel 7.0/95 or later for semi on-line version; the on-line version (priced at $59.95) requires MS Excel 2000 or later.

To download ValueSheet (semi on-line version) go to:
http://www.aaii.com/dloads/download.asp?DOWNLOAD_ID=571

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