How To Build Your Perfect Portfolio

If you've been wondering whether or not your investment portfolio is going to retain its value in these uncertain times, or whether your retirement savings are safe, there is an almosr fail-safe way to ensure that you don't get hurt - whatever the future may hold.

There is a concept that was devised in the 1970s, called a Permanent Portfolio. And it was so named because once you have set it up, you don't have to continually reevaluate it, alter it, or even think about it. And it doesn't matter whether the future brings prosperity, inflation, recession, or even a depression; you'll know you're safe - no matter what!

Over the decades, this portfolio has achieved an average annual gain of 9.3% and has had only four losing years. For individuals concerned above all else with capital preservation, this is truly the ultimate investment strategy.

Because there is no one who can reliably predict future stock valuations, the direction of the economy, or anything else that has to do with human action, the goal of the Permanent Portfolio is simple: to deal effectively with uncertainty, with a minimum of effort. Thus the bottom line is that you have to accept uncertainty and handle your investments as though you have no idea what's coming next - even when you think you do.

The general premise of this approach is that anything that happens - be it war, peace, civil unrest, instability, good times, bad times, etc. - will translate itself into one of four economic environments: prosperity, inflation, recession, or deflation. Fortunately, three of these four environments have an investment that does particularly well in it. Stocks and bonds both profit during prosperity; gold does well during inflation; bonds do well in deflation. And although nothing does well in a recession, cash helps to cushion the fall in other investments.

A portfolio consisting of equal parts of each of those four types of investments is not volatile and has a relatively consistent rate of return. Of course, this portfolio will never do as well as one that is over-weighted each year toward whatever investment is "hot," but unfortunately, that information is not available until after the fact. The Permanent Portfolio, in contrast, does not require precognition; just some simple mechanical adjustments whenever one of the portfolio segments gets too far out of the balance with the others.

It might seem that a Permanent Portfolio consisting of four contradictory investments would be neutralized: As one element rose, another would fall - and nothing would be gained. On a day-to-day basis, that can be true. But over broad periods of time, the winning investments add much more value to the portfolio than the losing investments take away.

During a bull market, for example, stocks, bonds, or gold might go up 100% or 200% - or more. But in a bear market, a losing investment generally drops between 15%-40%. Thus the winners usually more than cancel out the losses of the poorer investments during any particular economic environment.

If you want to build your own Permanent Portfolio, it's important not only to hold the proper mix of investments, but to keep those investments in the right form.

Cash means short-term debt instruments denominated in the U.S. dollar. The two safest and easiest ways to hold cash are with U.S. Treasury bills or a money market fund investing only in T-bills. And the reason you use Treasury securities is to eliminate the need to evaluate credit. Commercial paper or other debt instruments require continually monitoring the credit standing of the issuers. But the U.S. Treasury will always pay its bills by either taxing or printing money.

Gold consists of gold bullion or one-ounce gold coins that have no collector value. The link between dollar inflation and the price of gold doesn't necessarily exist between the dollar and numismatic coins or gold stocks.

Stocks consist of an index of corporate shares traded on the largest and most liquid securities exchange, the New York Stock Exchange. It's best to split the stock portion between two or three mutual funds or ETFs that clone the S&P 500. They stay fully invested at all times, so you aren't relying on someone's opinion as to when to be in stocks.

Bonds consist of long-term U.S. Treasury bonds, because you don't want to have to monitor the credit of the bond issuer. A second qualification is that you want the bond to have a large impact on the portfolio when interest rates change. So you should hold treasury bonds with the longest duration available - which is currently the recently resumed 30-year U.S. Treasury bond.

This simple approach has yielded amazing results since 1970, and should continue to do well in the uncertain future that lies ahead.

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One Secret of Successful Investors

If you wish to invest in individual stocks successfully, then you must have, and use, an exit strategy. And what's more, it must be one that forces you to methodically cut your losses and let your winners run on.

If you follow this rule, you will have the best chance of outperforming the markets. The exit strategy we favor is quite simple. It involves setting trailing stops for each of your individual stock positions. Then merely ride stocks as high as you can, but if you see them heading for a crash, use your exit strategy to protect your portfolio from serious damage. Here's how it works:

Let's say you decide to set a trailing stop of 20% off their highs for all of your stock positions. This means for example, if you buy a stock at $50 per share, and it starts to fall from that price, you would sell - if and when - that stock dropped down to $40 per share. No exceptions!

Conversely, if instead of falling, that same stock were to rise to $100 per share, and thus set a new high, you would then reset your trailing stop upward in order to reflect the new upward price movement. However, your 20% trailing stop would now be set at $80 per share, and if the stock were to decline in price from the $100 new high, you would then sell this stock - no matter what - if it fell in price down to the new $80 trailing stop.

Finally, there are two important rules to follow whenever you use trailing stops:

1. Use end-of-day prices, and sell out the very next day after the stock hits your trailing stop.

2. Don't place stop orders, because stocks very often close higher the very same day that your trailing stop was reached. Again, simply sell the day after you hit your trailing stop.

Note: One tool you can use to keep track of your trailing stops is Yahoo Finance's Alert Service. You'll receive an e-mail whenever your stock hits a price that you specify.

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Words of Wisdom

If one advances confidently in the direction of his dreams and endeavors to live the life he has imagined, he will meet with a success unexpected in common hours.

-Henry David Thoreau


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Americans Now Spend More Than They Earn

The Chicago Tribune recently reported that the personal savings rate of Americans dipped into negative territory during 2005, something that has not happened since the days of the Great Depression.

The Commerce Department reported this past January 30th that the savings rate fell to minus 0.5 percent, meaning that Americans not only spent all of their after-tax income last year but also had to dip into previous savings or increase borrowing.

The savings rate has been negative for the entire year only twice before, in 1932 and 1933, years in which the country was struggling to cope with the Depression, a time of massive business failures and job layoffs. Americans exhausted their savings to try to meet expenses in the nation's worst economic crisis.

One major reason that consumers felt confident in spending all of their disposable income and dipping into savings last year was that a booming housing market made them feel more wealthy, and that in turn supported greater spending.

But analysts cautioned that this behavior was risky - at a time when 78 million Americans are on the verge of retirement.

According to David Wyss, chief economist at Standard & Poor's in New York, "Americans seem to have the feeling that it is wimpish to save. And while the right idea is to put money away for old age, we (as a Nation) are just not doing that."

Ed Note: In light of reports such as the above, one has to wonder exactly where our economic "ship-of-state" is truly headed!

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Two Good Ways to Measure Value and Safety

Investors have used P/E ratios as a way to measure the value of stocks, but an interesting alternative is to think of "earnings yield" instead. What is earnings yield? It's the P/E ratio measured in the opposite way. For example: if a stock is trading at 12 times earnings, it has an earnings yield of 1/12, or 8.33%.

Looking closely at earnings yield is the first step toward measuring value, because it allows you to make a quick and simple comparison between stocks and bonds - which will help to keep you from ever paying too much for a stock.

Here's how to do it: Suppose you checked Moody's and found a ten-year corporate bond (rated Aaa) yielding 7%. That is what's good about bonds - you know how much you'll make. But with stocks, earnings will fluctuate, but you can nevertheless approximate the same kind of yield from equities.

So you can figure a company's earnings yield by merely inverting its P/E ratio. Thus, a P/E of 5 results in an Earnings Yield of 20.0%; a P/E of 8 results in an Earnings Yield of 12.5%, etc..

Therefore, relating what we have just stated to the S&P 500, we see via the latest edition of Barron's (February 20, 2006) that the S&P 500 currently has a P/E ratio of 18, giving us a yield of 1/18, or 5.56%. Therefore in today's market, since stocks are only earning 5.56%, with lots of risk, the advantage in this hypothetical situation is clearly in favor of the bond.

And now some thoughts on Safety. One good way to measure safety is by figuring out if the company you are looking at can afford to buy itself. Ask yourself this question: Are the balance sheet assets and the cash flow of the company strong enough to accept new debt equal to the current market cap?

Whenever a company has a strong enough balance sheet and a strong enough business to buy back all of its stock - at least on paper - you then have a large margin of safety, which essentially gives you the same risk as a bondholder, and that in turn makes your greater earnings yield that much more attractive. You're only taking the risks of debt holder, while you will receive the return of an owner.

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Your Credit Score and You

Good credit. With these two little words, you can save thousands of dollars in interest on mortgages and loans with a lower interest rate. But do you know what affects your credit score or how to know if you have good credit?

Good credit is determined by figuring your credit score. Your credit score (FICO) is a number between 300 and 850 that lenders use to help determine the interest rates for any money you borrow. The lower your credit score, the higher your interest rates. You may even be totally passed over for a loan due to your score. A score above 700 may allow you to receive the best rates.

Your credit score is based on your past credit record, which is recorded by companies such as Experian, TransUnion and Equifax. They calculate your credit score based on certain factors, including payment history, credit card balances and credit application inquiries.

Everyone is allowed to check his or her credit score by ordering a free annual copy from each credit bureau. You can view your own credit report by visiting www.annualcreditreport.com or call 1-877-322-8228. And when you receive your credit report, be sure to check it thoroughly for any inaccuracies. A recent survey revealed that 80% of all credit reports contain mistakes.

Under the Federal Fair Credit Reporting Act, credit-reporting agencies and companies that provide information about you are required to correct inaccurate information. Here are a few tips on how to correct any inaccuracies:

* Put it in writing. It's best to write a letter and send it via certified mail, especially is you are correcting a serious matter. The letter should include your name and address, and identify each item in the report that you are disputing.

* Send a letter to the lender or business that provided the inaccurate information to the credit bureaus and attach copies of any supporting documents.

* Keep good records of all communications with the agencies.

* If you're unable to resolve the dispute, you can ask that a statement be included in your file and on future credit reports.

* If a credit bureau refuses to remove inaccurate information from your file, the Fair Credit Reporting Act gives you the right to take legal action.

Good credit has its rewards. Having it allows you to save thousands in interest payments. Monitoring and protecting your credit score can also save you from many sleepless nights.

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Words of Wisdom

Never believe anything until it has been officially denied.

-Claud Cockburn


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Knowing the Difference Between Investing and Speculating

As an investor, when you find a good company selling at very undervalued prices, you can make large gains fairly quickly. But in most cases, gains from sensible investments don't happen that fast. It's thrilling when it comes, but even so, it's not quite the same rush as doubling your money in a week or two. Finding those short, fast gainers is the art of speculation.

Most investors don't understand the difference between the two; and many wrongly think speculation is a dirty word. Investing and speculation are both honorable pursuits, but they have different game rules and different perspectives.

It may come as a surprise, but Warren Buffett is a talented speculator. That's what he was doing a few yeras ago when he suddenly amassed a huge position in silver.

So what is the difference between investing and speculating? The obvious difference is in time. Speculations tend to be special opportunity plays that unfold much faster. But not always. Investments tend to pay off more slowly. But, again, not always.

The principal difference between investing and speculating is in the purpose for holding the stock, or bond, or whatever. The goal of investing is an income stream and growing net worth. Investors look at return on equity, the company's profits compared to what investors have put in -- the shareholder equity. That is a measure of how well the managers are building value.

The purpose of a speculation is simply to buy an asset and then sell it to someone else at a profit... and soon. The basis of speculation is the other guy's wants, not the value of the asset.

Speculation is inherently more risky than investing, because you are trying to gauge how someone else will feel about your asset down the road. Very often, speculators don't even care about the existing value or condition of the speculative asset. That increases risk. But in the stock market, you can cut that risk down when you speculate by paying heed to the asset value and making your play at the right time.

There is one other great difference between investing and speculating. Value investing takes a lot of courage. You tend to be going against the crowd if you want to buy a company when it's cheap and sell it when it's popular and the price is up. But, scary as it may be, if you've done your assessment of the company's worth well at the outset, it is the safest form of investing. The price of a well-chosen value stock may bounce around for a while, but you have a very, very high probability of being right within a year's time.

Because investing is safer over the longer run, you can put serious money in your investment choices, be they retirement funds, your nest egg, or the children's college trust. Given time and caution in making sound choices, the risk that you will lose money is quite low.

In speculation, the risk of being wrong in the long run is usually somewhat higher, since you are looking for the immediate trend to pay off. The risk on each choice is higher than with investments, because you are not waiting around for the asset's worth to prevail. You won't be collecting dividends or growing shareholder equity, even though the asset may be capable of both. You are buying in order to sell, and thus, you count on other people's perceptions and moods. You are trying to guess what people will want and how they will react. Thus when you speculate, you need to be prepared to have some trades go wrong, and it is your strategy that keeps you healthy. You need to be sure not to put too much of your kitty on any one trade.

With investments, each trade's quality is most important. With speculation, the strategy is most important. Successful speculators are not all-the-eggs-in-one-basket types. They tend to allocate their money over a few plays so that if one doesn't work out, the extremely good return on another will more than make up for it.

For all but the most daredevil types, speculation is best done with a very small portion of their money. And attitude is extremely important. Certain traits drive successful speculators:

1. They are reasonably well situated with a comfortable investment account that is already on target to meet their retirement and investment goals.

2. They have some extra money they can put out at a higher risk for a much bigger return; some of the best call it their play money.

3. They are cool, if not calm, when a trade seems to be going the wrong way.

4. They are realists who recognize you can't get a stream of 100% or better returns without taking the occasional loss.

As you can see, none of these characteristics eliminates investors from being speculators. But not all investors have the right temperament. A certain degree of cold-bloodness is needed.

Even those of us who are primarily long-suffering, conservative, sensible investors do often get the urge to try a "big one" now and then.

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Why Mutual Fund Investing May Not Make Sense

Kenneth L. Fisher is a featured columnist at Forbes magazine. In a recent column, he explained why it is that he hates mutual funds, and he makes good sense!

The original purpose for mutual funds was to provide a professionally managed portfolio to serve those with too little to diversify on their own. A fund is a good tool for someone with only $50,000 to invest in the market. Anyone with greater assets to invest should be buying stocks directly.

What's wrong with mutual funds? Start with performance. Over the long term the average fund in pretty much every category has fallen short of the S&P 500 index or whatever other benchmark is relevant. Yes, there are some winners, duly publicized in fund surveys, but you don't know about these in advance. Published numbers, moreover, overstate average results experienced by investors, because loser funds disappear.

Next problem: costs. The average expense ratio for the U.S. equity funds tracked by FORBES is 1.23% a year. Foreign funds cost an average 1.46%. Then there are sales charges, (both upfront and imposed on redemption), plus all sorts of hidden costs. Funds can legally overpay brokers for commissions and then get kickbacks in the form of "soft dollar" services like free research (which the fund management company should be paying for out of its own pocket). The other trading cost is the spread between bid and ask prices. For a fund that trades heavily and owns stocks in smaller companies, portfolio transaction costs could easily add a few percentage points to your annual cost burden. Add it all up -- the sales loads, the published expense ratio and the invisible transaction costs -- and you could be spending 4% a year to have your assets in a mutual fund.

Costs can be minimized in an index fund, but then there's a third problem: taxes. Funds cannot pass through losses to their shareholders. Say you have $1 million in the market and you earn 9% or $90,000. Maybe you have $130,000 in appreciation on winning positions and $40,000 in losses on the other stocks. If you own these stocks directly, you can switch out of just the losers and use the $40,000 loss against other capital gains. But if the stocks are tucked into a mutual fund, you're walled off from the $40,000 deduction.

There is an interesting book entitled, Stop Wasting Your Wealth in Mutual Funds by the author, Don F. Wilkinson, and published by Dearborn Trade Publishing. The first 35 pages of this book are worth the price of the book!

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The Plain Truth About Your IRA

Hundreds of millions of dollars in IRA money is fleeing Wall Street each month into the vaults of Self-Directed IRA custodians. This migration of dollars is, at best, an irritant to Wall Street. However, if this monthly outflow was to change from millions to billions of dollars, and that is very likely to happen - then there is hope that Wall Street may change its tune and begin to do "for" the investor, rather than doing "to" the investor, as has been the case for far too long!

Theoretically, Wall Street could offer self-directed IRAs, but it has no incentive at present to do so. If it did, then its clients would be able to buy such things as real estate, mortgages, notes, and tax liens - but if it did that then Wall Street would not make a dime!

Stock brokers, financial planners, banks and insurance companies offer us a limited menu of Wall Street financial products like stocks, bonds, mutual funds and annuities for your IRA. Selling these financial products is how they make money - and they are not likely to change what has worked successfully (for them) for decades.

Wall Street not only controls your IRA funds, it also routinely extracts money from them via transaction fees, management fees, documentation fees, and the like. But Self-Directed IRA custodians don't charge commissions. They just charge a fee for being the custodian of your IRA portfolio. That's how they generate income. And if your IRA funds are held by a Self-Directed IRA custodian, not only can you buy real estate, tax liens, and even lend money, but you can also purchase Wall Street financial products.

In other words, a Self-Directed IRA empowers you to decide what to buy, when to buy, how long to hold, when to sell, and how to sell. But of course, having the privilege of being able to make your own decisions also carries with it some responsibility. With a Self-Directed IRA, you have the responsibility to make sound financial decisions for your Self-Directed IRA dollars.

I believe that Self-Directed IRA's are a prudent choice for serious investors. Just remember that along with the power and control it gives you, you also have the responsibility to do your homework before paying out your hard-earned IRA money for any investment.

We have located three (3) firms who act as custodians for self-directed IRAs, and you can find them in our "Links" section as follows:

Link: "IRA-PLUS" - to find the firm, "Entrust Group."

Link: "IRAs-Your Way" - to find the firm, "Pensco Trust Company."

Link: "Self-Directed IRAs" - to find the firm "Equity Trust Company."

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Speaking of Dividends

The current (February 6, 2006) edition of Barron's talks about the Investment Quality Trends newsletter, which celebrates 40 years of publishing this April 1st.

While I.Q. Trends may not be as well known as its peers, Mark Hulbert who follows the investment-newsletter industry, has named I.Q. Trends as the No. 1 performing newsletter on a risk-adjusted basis out of some 165 he surveys.

I.Q. Trends zeroes in on a group of 350 blue-chip stocks it selects on the basis of six quality criteria. After a stock makes the grade for blue-chip quality, it is sorted by its current value. Based on fundamental data (chiefly dividend yield), each stock is deemed either undervalued, overvalued or in a rising or declining trend.

Then there's the Lucky 13, which is a portfolio of 13 stocks I.Q. Trends buys on Dec. 30 each year and holds until the following Dec. 29. The Lucky 13 has returned on average about 18.11% annually (capital gains plus dividends) since its January, 2000 inception - a stretch that included three of the toughest years over the past 40. In 2005, its total return was 8%, versus 2.1% for the Dow Jones Industrials.

Investment Quality Trends is published twice monthly, and is available to subscribers in hard copy or E-mail. And you can find them in our "Links" section under I.Q. Trends.

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7 Steps For Finding Winners

1. Look for companies with a pattern of earnings growth over at least five years and a habit of reinvesting at least 35% of earnings in the expansion of the business. The reinvestment rate can be determined by comparing earnings per share with the dividend payout. The portion that isn't paid out to shareholders gets reinvested in the business.

2. Look for companies with P/E ratios ranging from around 10 to about 14 when the market is down. When the market is high, look for P/Es lower than the market and lower than other companies in the same industry.

3. Look for a pattern of rising dividends supported by rising earnings, and a dividend yield in the neighborhood of 3% or 4% to generate income to reinvest in the company.

4. Look for stocks selling at a price no higher than 1.3 times book value per share.

5. Look for a return on equity that is consistently high compared with other companies in the same industry or that shows a strong pattern of growth. A steady return on equity of more than 15% is a sign of a company that knows how to manage itself well.

6. Stick with companies whose debts amount to no more than 35% of shareholders' equity.

7. For the most part, stick with stocks with betas of around 1.0. Whenever you assume the risk that goes with an oversized beta, it should be in the expectation of an oversized reward.

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Building Wealth With Stocks

The stock market is really the place to look if it's wealth that you want. If you are an intelligent investor with average resources, average willingness to take risks, and limited time to spend on active management of your portfolio, then it is safe to say that no other investment available delivers as well as stocks over the long run.

There are several categories of stocks to fit investors' goals. Sometimes the reasons for buying a particular kind of stock are obvious from the definition of the category.

Growth stocks have good prospects for growing faster than the economy or the stock market in general. Investors buy them because of their good record of earnings growth, and the expectation that they will continue to generate capital gains over the long haul.

Blue-chip stocks are a more loosely defined universe, including solid performers that could also be classified as growth stocks. Investors with an eye on the long-term and little tolerance for risk buy these stocks for their high quality. They tend to generate decent dividend income, some growth, and above all, safety and reliability.

Income stocks pay relatively high dividends and tend to raise them regularly. Electric utilities and banks often fall into this category, which is favored by retirees and others in need of a relatively high level of income from their stocks.

Cyclical stocks are called that because their fortunes tend to rise and fall with those of the economy at large - prospering when the business cycle is on the upswing, and suffering during recessions. Auto manufacturers are a prime example. Other industries whose profits are sensitive to the business cycle include airlines, steel, chemicals, and businesses dependent on home building.

Defensive stocks are theoretically insulated from the business cycle because people go right on buying their products and services in good times as well as bad. Utility companies fit here, as do companies that sell food, beverages and drugs. To maximize profits, you need to buy these stocks on the verge of an economic downturn, which requires an ability to predict that is rare even among the so-called experts.

Speculative stocks don't pass the usual tests of quality, but for some reason, they seem to attract investors anyway. They may be unproven young companies. They may be erratic or down-on-their-heels older companies exhibiting some sort of spark, such as the promise of an imminent technological breakthrough or perhaps a brilliant new chief executive. Most speculative stocks don't do well, so it takes big gains in a few in order to offset your losses in the many.

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3 Things You May Not Know About The Stock Market

The number one thing most investors don't understand about the stock market is that the value of common stocks is heavily dependent on the level of short-term interest rates. Whenever investors can earn a very high rate of return on short-term, low-risk investments, they will not place their money at risk in the stock market and thus the overall price level for stocks will fall.

The second thing many investors don't understand about stocks is that the nominal price of a stock has absolutely nothing to do with its intrinsic value. Which is to say that if you understand this fact, then you would know why it is that a stock which trades at $10 per share can actually be more expensive than a stock that trades at $100. In order to get a rough idea of whether a stock is cheap or expensive, you must look to its income statement and also to its balance sheet relative to the total value of its shares outstanding.

The third thing most investors don't understand is that the popular indexes are actually a very poor measure of the overall health of the market. The S&P 500 and the NASDAQ are both "market cap weighted," which means that the prices of larger stocks like GE, Intel, and Microsoft tend to move the indexes far more than do dozens of other companies combined. The Dow Jones Industrial Average is distorted even more strangely because it is price-weighted, which means that stocks with high nominal prices will influence that index proportionally more than other stocks.

If you really want to know whether the general trend is higher or lower overall, you have to look at either the advance/decline line or an index that weighs each stock equally, like the Value-Line Index. (NOTE: You can find the Value-Line Index on Yahoo under the ticker: ^VLIC.)

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In The Current Business Week Magazine

The February 13, 2006 issue of Business Week has some interesting comments by retiring finance column editor Robert Barker. When asked what were his best sources of investment ideas, Barker responded that it wasn't any of the scores of "pros" whose addresses he had readily available. But rather it was "public documents few people bother to study"... such as public companies' news reports and financial statements (8-Ks, 10-Qs, 10-Ks), quarterly updates of investment firms' holdings (13Fs), and details of corporate insiders' securities trades (Form 4s).

All are usually available at a company's Web site and, if not, at the Securities & Exchange Commission's site, through its EDGAR service. Barker adds, "Especially fruitful for me have been the 13Fs, which I have searched regularly for new or expanded positions held by investment managers I admire."

Thus what Barker is telling his readers is the fact that there really are no secret sources of investment information. If there is any secret, it's only to check diligently, and coolly assess, public information!
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Also in this same edition of Business Week is some interesting information about "The Debit Shuffle."

When you swipe your debit card at the supermarket, the cash instantly comes out of your checking account, right? Well, that's what some banks would have us believe. But three Superior Court lawsuits pending in California against Bank of America, Wells Fargo, and Citibank charge that it isn't so. Many banks hold all transactions until the end of the day, then process them in order of highest to lowest charges. When that happens, you might incur more fees than you would have if funds were debited in the order that the charges were made.

Say you had four small debits, then the final one of the day was a biggie that exceeded your balance. If the bank pays the big one first, instead of getting hit with just one penalty for insufficient funds, you might have to pay four or five fees of about $35 each. Banks have long reordered transactions to pay the highest check first because it often was the most important expense.

To avoid such charges, ask how your bank accounts for your debit card purchases. But better yet, always maintain the discipline needed to never allow your financial transactions to ever result in a condition of having insufficient funds in the first place.
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NEXT MEETING: Thursday - February 16, 2006

This month we'll continue our discussion about creating a "ghost" portfolio as a means of testing what we have been learning about the various investment avenues that one might pursue in creating his/her ideal portfolio.

Our topic this time will be "The A.A.I.I. Approach to Bond Investing." And the main points we intend to cover are:

1. Why invest in bonds.
2 The kinds of risk that an investor encounters with bonds.
3. The essential features of a bond.
4. The market for debt securities.
5. Specialty bond issues.
6. Bond ratings and how they work.
7. The behavior of market interest rates.
8. The pricing of bonds.
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We meet at DePaul University in Naperville, IL - located at 150 West Warrenville Road. The meeting begins at 7:00 PM and ends at 9:00 PM. The room number for this meeting will be posted on the easel standing near the reception desk in the main lobby.

These meetings are open to anyone who shares our interest in learning more about investments and investing. However, we do charge a modest $15.00 annual membership fee to cover twelve (12) monthly meetings. Non-members may attend any meeting for a $5.00 donation.
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The Price of Gold

The Price of Gold is often a contrary indicator. It tends to move in the opposite trend from that of the stock market. This occurs because gold is a traditional hedge against inflation. When the threat of inflation is present, many investors move to "hard assets" as protection against a decline in the value of the dollar and dollar-based assets like stocks and bonds.

Many other factors can influence gold prices. These include commercial demand for gold, as well as political instability in other parts of the world. By itself, gold is not a particularly reliable market indicator. Nevertheless, serious investors should always factor the "message from the gold market" into their overall market trend analysis.

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