Past Performance is Now a Guarantee of Future Performance

Fund Managers tell us past performance is no guarantee of future performance. But right now there are plenty of fund managers who believe now is a good time to get back into stocks. It suits them now though to tell us history shows that those who hesitate end up not taking part in any bull market rally.

So the mantra now is, Past performance IS a Guarantee of Future Performance. They need you buying stocks again.

After a government stimulus in the past there has been a corresponding stock market rally. What they fail to tell you is this time it is different. This time it is the financial markets themselves that have taken the hit.

Previously it was the Dotcoms, 9/11 or the Asian Crisis.

This time the very foundations of the world financial system as we know it crumbled and the world was close to complete financial collapse.

With this so-called bear market rally in anticipation of and then on the back of the Geithner $1 Trillion dollar solution with printed money, you may feel you are missing out on rising stock prices.

If you have spare cash then it might be good to trade this market using stop losses. Or if you have money for the “long term” buy some stocks and put them away for 5-10 years. (it may be too late too)

I may be cynical but isn’t March the end of the quarter and bonus time? All they need to do is beat the index for this quarter. It doesn’t matter that they lost 50% of the value of your equity funds over the last two years. Short term rewards for long term losses is still the order of the day.

If you can’t help yourself, feel you are missing out or feel the need to try and recover lost money by trading the markets yourself, then try to do it with some backing from research you do, or pay for others to do it for you.

Now who can you trust these days for stock recommendations?

It seems it is okay for researchers to talk up stocks like Allco, Babcock and Brown, ABC Learning as they took on massive debt, often provided for no collateral by our leading banks. But it is not okay to seriously downgrade stocks based on their huge debts because you might get your trading license revoked – no names here unfortunately.

Your nest egg funds under management mostly in those same banks, may well have purchased Allco, Babcock and Brown and ABC Learning on recommendation from the bank’s own research departments. Your funds would have purchased those stocks through the bank’s brokerage department. The result is the bank takes fees on managing your funds, buying and selling stocks in your fund and the cost of research to recommend buying those stocks as well. However you may have lost 90% of the value in those stocks using the “Buy and Hold” strategy now shown to be seriously flawed in mature bull markets.

Managed Funds should not belong to banks.

Sorry, I’m off topic again damn it!

Back to who do you trust if not yourself?

Knowing all about past performance blah, blah, blah, …., if you decide to use any third party stock picking service make sure you put stops on all your trades. Unless you want it to be a “buy and holds” investment (blue chip if there still is such a thing).

With markets down 50% buy and hold of “well selected stocks” (you see I can be just as vague as the wealth managers) may be a good thing at this time.

One place to check out for stock picking might be Trident. You can subscribe to the free version of Trident Confidential Newsletter which claims,

  • Consistent high returns
  • Capital Protection
  • Integrity

The site is absolutely packed with information. The trick is to know how to use it. Or if you like the site consider subscribing to the paid newsletter where they give you more specific advice in their Trident Portfolio. It is a world-wide service – not just for Australia.

As Lance Spicer explains ..

“My commitment to my own money – I personally invest my own money in the Trident Confidential Portfolio. There’s nothing like putting your own money on the line to make you try harder! Also, unlike most ”gurus”, I am actually an accountant who knows his way around a set of Financial Statements and Annual Reports. I should, for 20 years it was my job to prepare them for stock exchange listed companies.”

“I approach every stock investment like I am buying the whole company – lock, stock and barrel – so, I really examine what they have lurking in their balance sheets. Initially, I check their levels of debt, cash flow, cash, and return on equity and assets. If they don’t pass this initial examination – I toss them out. If they pass, they then go through the Trident Investment Selection Process. If they pass our proprietary process, you will read about them in Trident Confidential.”

Hulbert’s Financial Digest is the recognised place where Financial Newsletters are rated. Trident has a performance comparison claimed to have been taken off the Hulbert website which shows the Trident newsletter over 3-5 years had an average return of 96.33% pa, well ahead of any other newsletter in the US or Australia.

There is an awful lot of information on the site and even more if you decide to pay a subscription because you get several books as well on DVDs.

The site has a lot of hype and Lance pushes his newsletter hard. But it may be just the thing if you want to take control and do your own investing after trusting the wealth management industry who have lost 30% or more of your nest egg. To be kind it’s not that wealth managers are incompetent. It’s just that their short term goals are not aligned with your long term investment horizon. Until that is sorted out you cannot trust them.

Don’t forget those stop losses if you decide to trade in stocks.

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