While we’re obviously pleased to own some big gainers especially in this hot-then-not market, we always get a little worried when funds in our portfolios start to attract attention – and money. Our idea of asset allocation is to allocate into out-of-favor assets and wait until they are in favor. This applies to stocks, bonds, and cash in general, and specific sectors or fund categories. ...read the rest of this article»

So much for efficient markets, the theory that stocks are always efficiently priced. Such theory doesn’t have much to say for how bank stocks trade these days – up or down over 10% almost every day as speculators simultaneously fear the next IndyMac Bancorp (the aggressive California bank originally named “Countrywide Mortgage Investments” – a name that says it all) but want to get in cheap for the eventual comeback. ...read the rest of this article»

In our commentary last month we noted how, over the last year, fund investors have been getting out of stock funds after the market slipped, then buying in after the market rose – the classic buy high/sell low cycle. A successful fund portfolio does not this behavior make, and doing the opposite is pretty much what the Powerfund Portfolios are all about. We are going to use June’s sharp pullback in stocks to increase our stock allocations and risk levels across the board. ...read the rest of this article»

Fund investors have a bad habit of buying high and selling low. They do so with specific funds, categories of funds, and the stock market in general. This behavior is one of the top reasons why, as studies have shown, fund investors underperform the stock market. This behavior is also the basis of most of our contrarian fund-investing decisions – we try to invest the way the typical fund investor does not.  ...read the rest of this article»

Until recently, investors’ defined commodities as anything from "generic goods used to make more valuable items" to "a high-performing asset class that diversifies a portfolio and offers protection against a falling dollar, inflation, world calamity, and just about anything else." Can you blame them? Since 2000, commodity indexes have outpaced nearly every other asset class. While the S&P 500 continues trying to claw its way back to where it was nearly a decade ago, commodities, especially oil – the Grand Poobah of commodities – just keeps climbing.  ...read the rest of this article»

The relatively low volatility stock market of the last few years seems a thing of the past. Today we see wild moves almost daily as the market swings from euphoria to panic. ...read the rest of this article»

Over the last year, the strategy that has hurt investors (mostly large institutional ones) the most has been, for lack of a better term, the "yield reach." We'll define this strategy as buying a riskier income-oriented investment in order to attain a higher yield. ...read the rest of this article»

We don’t know why the Dow soared to record highs in October amidst the deflation of one of the world’s largest asset bubbles in history. Nor can we explain why retailer’s stocks reached similar summits in 2007, especially given that a fair amount of consumer spending stemmed from ill-advised home equity extractions and the type of pseudo-confidence that occurs when you watch the value of your home, most likely your principal asset, double in just a few short years. ...read the rest of this article»

The Chinese New Year doesn't arrive until February 18th, and considering that the Chinese stock market doubled in 2007, while our own volatile yet underwhelming market has taken more than ten years to accomplish the same feat, perhaps we should focus more on other countries' goings-on. ...read the rest of this article»

Each December we review our own portfolio holdings for estimated year-end capital gains distributions (right around when most fund companies start publishing estimates). This information can be useful because investors may want to avoid buying a fund until after a big distribution, or in some rarer cases consider selling a fund before a big distribution. ...read the rest of this article»