The Rant: Alpha Teach Yourself Investing in 24 Hours: An Analysis (part 44)

Mission Statement

Sunday, December 24, 2017

Alpha Teach Yourself Investing in 24 Hours: An Analysis (part 44)

Picking a Mutual Fund (part A)

Charles Lamson

Performance Indicators

Past performance is no guarantee of future success. That is more than a warning from the regulators. It is an absolute truth. Yesterday's hero is today's failure. Basing a decision to buy a fund on past performance only is not much better than flipping a coin.

JUST A MINUTE

Past performance of a mutual fund is no guarantee of future success, but it will pick out the turkeys real quick.

Past performance can tell something about the management of the fund. Wild swings in performance, especially when there is no apparent reason, can signal problems you should avoid. Get to know the manager(s). Their biographies are in the prospectus. A new manager may mean a large turnover in assets, triggering capital gains distributions.

While past performance will not predict future winners, it is pretty good at picking continual losers. Avoid funds that have histories of poor performance.

Looking at a fund's performance is more useful if you can compare it to some objective standard. This is why measuring performance against some of the leading market indicators, like the S&P 500, is so popular.

This process has some advantages and some disadvantages. The advantages include easy access to the indicators whether it is the S&P 500 or the Russel 2000 or one of the other generally accepted market indicators.

That can also be a disadvantage if the fund is compared to an index that is not reflective of what the fund is about. For example, the S&P 500 is weighted toward large-cap stocks. Comparing it to a small-cap stock mutual fund will yield a distorted picture of the fund, which is what some fund managers want.

It is better to get familiar with the indexes that are reflective of your fund's place in the market.

TIME SAVER

There are a number of services on the Internet that will recommend which mutual fund to buy. Save yourself some time and make your own decision. How will that save time? By the time we finish this analysis of the book Alpha Teach Yourself Investing in 24 Hours written by Steve Little, you will have all the tools or know where to find them that you will need to make informed decisions. If you have confidence in your decisions, you will not be checking up on your investments every 20 minutes.

Services on the Internet offer ways to compare mutual funds.

Let us walk through the process step-by-step:

You have established, based on your goal of funding your retirement, that the best product at your age and level of risk tolerance is a medium-cap growth fund.
You go to Morningstar.com and use the fund selector to find medium-cap growth funds.
If you want, you can follow Morningstar.com rankings to narrow the choices.
Examine the funds for fees and expenses and any other characteristic you feel is important.
Order a prospectus of your choice. Some funds will let you download a prospectus, while others will mail you one. Confirm the information regarding fees, expenses, and so on.
Buy directly from the management company.

Clearly, you can do a whole lot more using the online resources that are available on the Internet than you could accomplish on your own. While it is more cumbersome and time-consuming, it is possible to make your selection using available printed material. You just will not be able to consider as many funds this way.

Your portfolio will obviously consist of more than one mutual fund. How many and what types are topics we will cover in a future post when we discuss asset allocation.

*SOURCE: ALPHA TEACH YOURSELF INVESTING IN 24 HOURS, 2000, KEN LITTLE, PGS. 258-260*

END

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The kingdom of God is among you

Luke 17:20-25 Asked by the Pharisees when the kingdom of God was to come, Jesus gave them this answer, ‘The coming of the kingdom of God does not admit of observation and there will be no one to say, “Look here! Look there!” For, you must know, the kingdom of God is among you.’ He said to the disciples, ‘A time will come when you will long to see one of the days of the Son of Man and will not see it. They will say to you, “Look there!” or, “Look here!” Make no move; do not set off in pursuit; for as the lightning flashing from one part of heaven lights up the other, so will be the Son of Man when his day comes. But first he must suffer grievously and be rejected by this generation.’

Live Adoration from Tyburn Convent

Adoration, also known as Eucharistic Adoration, is a Catholic prayer in front of the Blessed Sacrament. It is a sign of devotion and worship to Jesus Christ, who is believed to be present in the consecrated host. During adoration, Catholics pray to Jesus Christ before the Eucharist at their local parish. The Eucharist is typically kept in a tabernacle at the parish church, and may be presented in front of a closed tabernacle or in front of the exposed host in a monstrance. A monstrance is a vessel used in Roman Catholic, Anglican, High Church Lutheran, and Old Catholic churches. It is a stand made of precious metal that holds the Blessed Sacrament during adoration. The word "monstrance" comes from Latin and means "to show".

Love

1 Corinthians 13:4-7: Love is always patient and kind; it is never jealous; love is never boastful or conceited; it is never rude or selfish; it does not take offence, and is not resentful. Love takes no pleasure in other people’s sins but delights in the truth; it is always ready to excuse, to trust, to hope, and to endure whatever comes. 1 Corinthians 13:8-9,13: Love does not come to an end. But if there are gifts of prophecy, the time will come when they must fail; or the gift of languages, it will not continue for ever; and knowledge – for this, too, the time will come when it must fail. For our knowledge is imperfect and our prophesying is imperfect. In short, there are three things that last: faith, hope and love; and the greatest of these is love. Colossians 3:14-15: Over all these clothes, to keep them together and complete them, put on love. And may the peace of Christ reign in your hearts, because it is for this that you were called together as parts of one body. Always be thankful.

It is not peace I have come to bring, but a sword

Jesus instructed the Twelve as follows: ‘Do not suppose that I have come to bring peace to the earth: it is not peace I have come to bring, but a sword. For I have come to set a man against his father, a daughter against her mother, a daughter-in-law against her mother-in-law. A man’s enemies will be those of his own household. ‘Anyone who prefers father or mother to me is not worthy of me. Anyone who prefers son or daughter to me is not worthy of me. Anyone who does not take his cross and follow in my footsteps is not worthy of me. Anyone who finds his life will lose it; anyone who loses his life for my sake will find it. ‘Anyone who welcomes you welcomes me; and those who welcome me welcome the one who sent me. ‘Anyone who welcomes a prophet will have a prophet’s reward; and anyone who welcomes a holy man will have a holy man’s reward. ‘If anyone gives so much as a cup of cold water to one of these little ones because he is a disciple, then I tell you solemnly, he will most certainly not lose his reward.’ When Jesus had finished instructing his twelve disciples he moved on from there to teach and preach in their towns.

The beheading of John the Baptist

Matthew 14:1-12 Herod the tetrarch heard about the reputation of Jesus, and said to his court, ‘This is John the Baptist himself; he has risen from the dead, and that is why miraculous powers are at work in him.’ Now it was Herod who had arrested John, chained him up and put him in prison because of Herodias, his brother Philip’s wife. For John had told him, ‘It is against the Law for you to have her.’ He had wanted to kill him but was afraid of the people, who regarded John as a prophet. Then, during the celebrations for Herod’s birthday, the daughter of Herodias danced before the company, and so delighted Herod that he promised on oath to give her anything she asked. Prompted by her mother she said, ‘Give me John the Baptist’s head, here, on a dish.’ The king was distressed but, thinking of the oaths he had sworn and of his guests, he ordered it to be given her, and sent and had John beheaded in the prison. The head was brought in on a dish and given to the girl, who took it to her mother. John’s disciples came and took the body and buried it; then they went off to tell Jesus.

Psalms 9:16

The LORD is known by the judgment which he executeth: the wicked is snared in the work of his own hands. Higgaion. Selah - Question: What does Higgaion and Selah mean? Answer: Both Higgaion and Selah are used numerous times in the Old Testament. They occur together in Psalm 9:16. The meanings of these words are uncertain. We observe Higgaion in such passages as Psalm 9:16; 19:14; 42:3; Lamentations 3:63. In Arabic, the root gives a deep vibrating sound, like the murmering sound of a harp (Psa. 92:3). The International Standard Bible Encyclopedia states that it may be derived from the Greek versions of Psalm 9:16 and takes it to mean an instrumental interlude. It may also mean a soliloquy or meditation such as concerning the judgment of God (Psa. 9:16), the words and work of God (Psa. 19:14), and the loving kindness and faithfulness of God (Psa. 92:2-3). In the Septuagint, Selah is translated as daplasma (meaning a division). It occurs in Habakkuk 3:3, 9, 13 and 71 times in the Psalms. It is used in 39 of our 150 psalms. Of those 39 psalms, 31 they are ones handed over to "the chief Musician." So, pause and meditation may be the predominate idea. In addition, it may mean to lift up (Hebrew, salal) or, in some definitions, a repetition, end of a strophe, or a recurring symphony. In his sermon named "HIGGAION!" about Psalm 9:16, Archibald G. Brown, on August 17, 1873, at the East London Tabernacle said this: "When the psalmist wrote this verse, and reached the words 'The wicked shall be snared in the work of his own hands', he seemed to be overpowered at the terror of the thought, and so put a full stop and wrote in the word 'Higgaion!' As much as to say, 'O my soul, meditate on the tremendous truth my hand has penned, and let all who read the same meditate.' And then after 'Higgaion' he puts 'Selah'. He would have there to be a solemn pause. Oh, I would that there could be just one moment's solemn pause in our meeting tonight. Would that there could be a Selah, a Higgaion! Friends, shall there be? I put it to you. 'The Lord is known by the judgment which he executes; and the wicked shall be snared in the work of his own hands!" Now let us just for a moment meditate on that. Let there be a solemn Higgaion, and let every heart ask itself the question, 'How do I stand in reference to this tremendous truth?' *Answer by Dr. Joseph R. Nally, Jr. (https://thirdmill.org/answers/answer.asp/file/47892)*

The Rant

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Sunday, December 24, 2017

Alpha Teach Yourself Investing in 24 Hours: An Analysis (part 44)

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