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November 2005 performance review

Stocks rocketed, but bonds were merely ho-hum in November. The Conservative portfolio rose 0.82% for the month. The S&P500 rose 3.78% while the Lehman Brothers Aggregate Bond Index rose just 0.44%. Smaller-cap stocks were hot, and tech hotter still – areas safe portfolios are light on.

Ask MAX: Gold or Silver

12/08/05 - Ask MAX

Wendell from Florida Asks:

I hear a lot about buying gold, but what about silver? Is it a better buy and will it appreciate more quickly?

Gold gets most of the precious metals investing attention because gold bugs and other crazed anti-central bank fanatics think that gold is money, not a mere commodity like silver or platinum. Get these quacks going on about the good ole’ days and they will wax poetic about how unstable the world has become since we got off the gold standard — ignoring the 13-fold increase in stock prices and explosive growth in the economy that has happened since Nixon put the gold standard to rest for life (we hope). Meanwhile, gold and silver are still cheaper than they were over twenty years ago.

The Fund Christmas Present You Don’t Want

Sure April 15th gets most of the glory, but in the world of mutual funds, tax time is really in December. Why? Because that’s when stock funds typically distribute taxable gains to fund shareholders. 

October 2005 performance review

The Conservative portfolio fell 1.25% in October as both bonds and stocks were weak. The S&P500 dropped 1.67% while the Lehman Brothers Long Term Treasury Index fell 1.88%. Smaller-cap stocks fared worse, with the Russell 2000 index of smaller stocks down 3.1%.

Ask MAX: Should I sell based on Cramer's warning?

11/03/05 -

Yehuda from Brooklyn asks:

I'm 25 and live in Brooklyn. Jim Cramer said the market is going to crash with the economic news of the last three weeks. Should I sell all my stock funds and buy bonds?"

Take your hands off your keyboard and step away from your E*TRADE account. Jim Cramer is probably wrong, and is definitely not the guy to go to for sound investing advice.

We love watching Cramer's new show as much as the next guy. We love his sixteen-cups-of-coffee delivery, his aggressive-as-a-rabid-Pit Bull stock picks, even the dopey sound effects. 'Mad Money' is unquestionably the liveliest show on the toned-down, post-Enron, post-Nasdaq 5000 CNBC.

But while Cramer is a bright guy with a lot of real world investment experience, his show is first and foremost entertainment. We wouldn't base our investment decisions on Cramer's television rants any more than we would on the advice Uncle Earle gives us at Thanksgiving dinner. Okay, Cramer is probably a safer bet than Uncle Earle, but you should be wary of all famous (and oft-wrong) market prognosticators.

Helicopter Ben

Ben Bernanke is not an old Bush chum or just semi-qualified for the job. The stock market did not react badly to the news. Bernanke seems more than deserving of the top job in the entire world of economics. But as I dug a little deeper, I uncovered some details that are a little scary.

September 2005 performance review

The Conservative portfolio was essentially flat in September, up just 0.08%. Bonds and stocks flipped once again – bonds fell while stocks went up.

Ask MAX: Should I Invest in a Loaded 401(k)?

Yousef from Idaho asks:

I recently started my first job that has offered a 401(k) plan, and I was very excited to begin investing. The problem is, the funds in the plan are load funds, and after being a fan of your site I know that load funds should be avoided at all costs. Should I invest in my company's loaded 401(k) plan?"

We've reviewed hundreds of 401(k) plans for our Private Management clients and for investors who have used our MAXadvisor 401(k) Planner service. While many of those plans offer funds that normally charge a sales load to investors outside of tax-deferred accounts, the vast majority of those plans waive the regular load charge to people who invest through a 401(k) plan. We've often seen Templeton funds offered without a load charge through company-sponsored retirement plans that would cost investors 5.75% if they bought it at Etrade outside of their 401(k).

There are, however, some very lousy 401(k) plans out there that do, inexplicably, force participants to pay load charges. The dubious rationale behind paying load charges is that some investors need help choosing the funds that are best for them from the ten-thousand plus funds available. How this rationale holds up in a 401(k) plan in which investors have limited choices is beyond us.

When Disaster Strikes

When the stock market closed on Friday August 26th, Hurricane Katrina was barely a blip on investors’ radar. The hurricane was a relatively ordinary Category 1 when it rolled through Florida with minimal damage. Monday told a different story, as it became clear that raincoat clad news reporters actually didn’t oversell this one. Not by a long shot.

Ask MAX: A Good Place for Some Short-Time Money?

09/22/05 - Ask MAX

Chris from Tempe asks:

I'm 32 and have been saving pretty heavily for three years. I was planning on buying a house, but there is also a possibility that I will use the money to start a business. I should have enough money accumulated to make the down payment in roughly one year, but I want to have access to the money in the interim in case I go the business route. I realize that stock funds are too volatile for short-term savings so I am wondering; what is a better place than my bank's low-interest savings and checking accounts to keep my money safe for such a short period of time?

You're right on about stock funds being too risky for a short-term investment. There really is no stock or bond fund that is immune from at least some degree of volatility. Even the MAXadvisor Newsletter's Safety Portfolio can get hit with short-term losses, which is exactly what investors like you don't want when they absolutely, positively don't want to suffer any loss of capital.

As you mentioned, your bank's savings accounts are certainly safe (in fact, they are largely insured by the government), but the amount of interest they generally pay is so low (especially for smaller balances) that you could do almost as well burying your loot in the backyard. Fortunately there are several attractive options for a guy in your position. Here's our short list