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Posted by Martin June 08, 2011
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Is there an investment for volatile market?


Many times investors look for protection and search for “anchor” investments to protect or stabilize their portfolios. During the unstable and volatile market investing in precious metals or natural resources such as natural gas may provide such stability. However, for a new investor it may be difficult to invest properly and some guidance may be needed.

Gordon Brent Pierce is a leader in business development, strategy and investing who may provide required background and help in decision making, research on natural gas and silver outlook and potential investment opportunities.

GordonBrent Pierce presents that the U.S. has a great potential rapid increase of natural gas demand/supply, which may potentially lead to increase of jobs, preserve environment, and also create a great investment opportunity.

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Posted by Martin June 06, 2011
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How to invest or trade in a weak market?


Today the market ended down again. The S&P 500 lost 1% today and confirmed that we are still in correction. How a small investor shall trade or invest in this market? On the internet you may find a lot of information how to deal with this market. Some say sell or reduce your positions, others buy more, others stay aside and so on. Which way to go?

It depends on your investment in your portfolio and your strategy. All above mentioned strategies are basically correct but they do not apply for every strategy. It is hard to pick the right one, mainly when those advisers do not tell you which strategy they are referring to.

For myself it was confusing a lot to understand what approach to chose. I was afraid of buy & hold strategy when seeing stocks falling down and I was supposed to hold them. And in my first investment child-steps I saw a lot of loses. And timing the market, which I did wrong obviously, didn’t work for me as well.

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So how do you invest in a weak market? Or volatile market like the one we are going through these days? It depends on your strategy you select and stocks you wish to invest in. I will try to review those investments and what approach works for me:

Mutual Funds

If you invest in mutual funds like I do in my ROTH account it almost doesn’t matter what you do during bull or bear market. You can invest all time and select buy & hold strategy. I like falling market, because I can be buying cheaper. I use mutual funds to accumulate money into such level that I can buy stock in larger lots to eliminate cost on purchasing stocks or ETFs. But if you use funds as your major or only investment vehicle then continue buying.

When to sell mutual funds? There are a few reasons when you want to sell funds. Definitely I would wait for bull market unless there is some serious reason or upcoming disaster which forces you to sell. One reason would be that the fund no longer meets your investment criteria. For example I am investing into dividend paying mutual funds. If the fund stops paying dividends it will be a reason to sell. Another reason can be if the fund changes strategy, for example you used the fund as a tool to invest into small caps but later the fund changes its policy and allows investing into large caps. You would want to reduce position to meet you allocation (or even sell the fund and choose another one).

Stocks & ETFs

This is a whole different story. And the most confusing. Buy and hold? Or time the market? And what about leveraging? Will margin calls catch you with pants down? You need to know in what stocks you want to invest. Are the small caps, large caps? How volatile are they? Here is my approach:

Sometime ago I chose to invest majority of my money into dividend paying stocks. Some smaller portion of the account can be invested into small caps and volatile, speculative stocks, options and ETFs. I also chose to use leveraging by buying on margin. I have seen many opponents against leveraging your portfolio, but it works for me so far and later I will try to explain why.

Lets take a look at dividend paying stocks. When you ask yourself what companies pay the dividend, you will see big, international large caps. These companies are so big that they tend to react to market volatility with almost no impact (even though today we can see some large swings too, but these are our friends actually). A great example I would like to use is Johnson & Johnson company. Recently the stock went through many recalls. People on investment forums were predicting the end of the company. And the stock was falling. Partially because of the problems with production, partially because of the market sentiment. However, the company didn’t touch its dividend. A great signal, that all the problems didn’t affect company’s ability to make money. Small company wouldn’t afford anything like this. Thus there was no reason for such panic and thus Mr. Market was our friend and offered us a great price of the stock.

So when the market is weak and falling I wait, save money in my account to make them ready for action. I do not sell the company cuts its dividend. When the price drops down and the market recovers I act and buy. (I call this timing the market).

Even if you are not much into dividend paying stocks and you are just large caps guy, you won’t make it wrong if you take similar approach.

What about small caps? Here, I do the right opposite. When the market shows correction and those small caps or speculative stocks turn down and meet my criteria for selling I sell. An example in my portfolio could be Actuant Corp. Recently, when the market turned down I had two reasons to sell: I wanted to release money for my future investment and second the stock met my sell criteria. It is not a stock which fits my dividend investment criteria and I consider it as speculative, so I sold. When the market gets into rally I will buy speculative stocks which meet my screening criteria (as well as if my allocation and portfolio building strategy allows). I still may buy ATU back when this sell off ends, which no one knows when that happens.

How this works with leveraging?

I selected to use leveraging of my investments. I believe that if managed carefully and not recklessly you may achieve a lot better results when you expose yourself to more stocks than when you invest 100% only. Buying on margin allows me to invest 200%. I found a lot of people being against this strategy as dangerous. But how dangerous it is compared to your mortgage? When buying a house, you come up with 20% down payment and borrow the rest for 30 years. I think there is nothing wrong with stocks when you put down 50% and borrow another 50% from the broker and pay the loan for next 30 years or so.

Of course, you should select equities which are not such volatile such as dividend paying stocks or index funds or ETFs. Over time the market will help you to pay the margin off and as you age, you start de-leveraging your account. But what to do if the market falls down? A common sense would advice to buy more shares, right? If you are fully invested, you should be reducing your positions or as in my case wait and stop adding to your positions. Since I started leveraging recently, rebalancing by selling makes no sense for me otherwise it will be very costly for me. So I took “do-nothing” approach. i am just waiting, sitting aside, and saving money by contributing (paying down my margin loan) into my account. That makes my buying power growing and I do not get caught by a margin call from my broker.

And of course, do not try to leverage your account with small caps! That can kill you.

Oh such volatility

Times changed. Today, investors have access to information from around the world within one mouse click and a few seconds. Markets are volatile like never before. For a long time I had a great issue with this volatility. How to deal with it? How to trade it? i couldn’t find an answer which would work for me. This volatility is the reason why so many investors claim that timing the market doesn’t work. Of course you cannot catch the bottom or top of the trend. No one can do that. But you can do swing trading changing your side based on the trend and be long when the stock grows or be short when it falls. But how to do it and what indicators to select?

Well, if investing into dividend paying behemoths it almost doesn’t matter. You just wait for next dip or fall and add to your positions. But if buying other than dividend stocks the approach should be a bit different.

You can select whatever indicator or oscillator you want (I like StochasticRSI), but to avoid getting in-and-out it is important to use at least two-time-frame perspective and use weekly time frame rather than daily. I used to look on daily charts, but the volatility was so heartbreaking that I had to look at different point of view and adjust my strategy to weekly charts and ignore daily up-downs. Look at an example GT Solar International. A daily chart shows volatile stock. Well if you are a day trader or you have time and account large enough for more frequent trading this chart is your friend. I cannot afford it. I need to hold the stock in longer period of time – at least a couple of months. This chart would kick me out of the stock very often and fees would wipe out my portfolio quickly.

Solar International Daily Chart

But take a look at the same chart in weekly period. See the difference? It is a smooth uptrend. Nothing huge, but uptrend which can provide a peace of mind and forget all the daily craziness on the Wall Street floor. So if you use automated trading to eliminate emotions just adjust your oscillator to weekly trend and continue trading as usually.

Solar International Daily Chart

This morning I have read an article at Yahoo! that the bull rally is dead. I cannot say whether it really is or not, but what I can say is that I welcome it. I can buy cheaper stocks I am interested in. So if it is dead, it won’t be dead forever. It has never been dead for ever. So lets wait, save money and be ready for new bull waiting round the corner.




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Posted by Martin June 01, 2011
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Market in correction


OK, we are back where we were a few days ago… What did we expect from crazy Mr. Market? Nothing much as I wrote yesterday.




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Posted by Martin May 31, 2011
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Market in Rally Attempt today


So the crazy market rallied today. How serious this attempt is?

Considering that economic data released today morning were weak and the only fuel for the growth was (as Yahoo.com reported it):

  • Stocks Jump on Hopes for New Greek Aid Package, Still Down for Month
  • Greece moves on austerity, opposition wants more

and similar…

So is this the only reason for today’s crazy run? If so I do not expect this rally to last for long. I think this Friday more economic data should come out, so the market may provide mediocre results until then.

For me there is no change in the strategy. I am still sitting tight and waiting. Right now I wish to buy a SPY LEAPS options but to do so I need to save some money. I still hold all my dividend paying stocks, but got rid of all investments which do not fit my “dividend paying stocks” strategy.


I need to save a few hundred dollars more to be able to buy my first options contract. I want to save more money than needed. It is because I am using leveraging of my portfolio buying stocks on margin to be 200% invested. When doing this I want to have some money left after my purchase as a safety cushion so I do not get caught in margin calls when the market falls.

So we will see what happens in coming days. If you are a small investor and saving money to invest, this is still a good time to sit back, save and wait for the right time. It is coming.




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Posted by Martin May 26, 2011
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ATU sold


I decided to sell Actuant (ATU) shares. Not that I wouldn’t believe in this stock anymore as I wrote in my previous posts, but I have a different interest right now and I need to release money. I still believe this stock is good and it will grow more. Maybe right now it is a great time to buy more shares rather than selling, but as I mentioned I want to buy some options right now and to do that I would need more cash. Thus I decided to sell this stock.







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Posted by Martin May 23, 2011
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Buy Shares of Industrials Like Caterpillar


Investors should buy shares of industrial companies, which have improving operating performance, “reasonable” valuations and “strong” cash flows, according to Oppenheimer & Co.

Brian Belski, Oppenheimer’s New York-based chief investment strategist, recommended 22 industrial companies, including Caterpillar Inc. (CAT), Union Pacific Corp. (UNP) and FedEx Corp. (FDX) He considered companies in the Standard & Poor’s 1500 Index that have a forward price-to-earnings ratio lower than 15, and S&P stock rating of B+ or better, estimated 2011 and 2012 earnings- per-share growth greater than 10 percent, and increasing forward free-cash-flow yield.

“Investors are becoming increasingly nervous regarding the sustainability of global and domestic economic growth,” Belski said in a note today. “We recommend that investors focus on higher-quality areas with consistent to improving operating performance, reasonable valuations and strong cash-flow generation. In our view, industrials provide investors with all these attributes.”

A gauge of industrial shares in the S&P 500 has risen 7.2 percent this year, compared with a 6 percent gain in the broader benchmark index. The industrial companies have a price-to- earnings ratio of 17, while the S&P 500 is trading at a multiple of 15.1.


The following list contains the 22 industrial companies Belski
recommends. Ticker symbols are in parentheses:

Actuant Corp. (ATU US)
Applied Industrial Technologies Inc. (AIT US)
Brady Corp. (BRC US)
Carlisle Cos. (CSL US)
Caterpillar Inc. (CAT US)
CSX Corp. (CSX US)
Cummins Inc. (CMI US)
Curtiss-Wright Corp. (CW US)
Dover Corp. (DOV US)
Emerson Electric Co. (EMR US)
Eaton Corp. (ETN US)
FedEx Corp. (FDX US)
Honeywell International Inc. (HON US)
Hubbell Inc. (HUB.B US)
Illinois Tool Works Inc. (ITW US)
Lennox International Inc. (LII US)
Norfolk Southern Corp. (NSC US)
Parker Hannifin Corp. (PH US)
Regal-Beloit Corp. (RBC US)
Rockwell Collins Inc. (COL US)
Snap-On Inc. (SNA US)
Union Pacific Corp. (UNP US)

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Posted by Martin May 23, 2011
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US stocks plunge on European debt worries


With little economic news coming out of the United States, Wall Street is panicking about Europe. The Dow Jones industrial average fell 173 points, or 1.4 percent, to 12,338 in midday trading. Stocks also fell broadly in Europe and Asia.

So the Wall Street is panicking. Great, let them panic even more. This will push prices down and I will be able to buy cheaper. Save money and be ready to invest. Now let the Mr. Market screaming, panicking and falling as low as he can. When he finally realizes what a chicken he was it will be the right time to purchase.




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Posted by Martin May 17, 2011
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Can you help improve this blog?


I wish to provide my visitors a look at my process of investing, how I started and how I did it. I wish that the new investors can see how I developed my strategy and thinking about investing and trading. I am determined to succeed. I also remember myself looking for information and education how to be successful in investing and trading. It wasn’t easy. And I wish this blog would be able to provide some insight and make it easier for new investors to follow my steps and identify their own strategy.

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I think I was successful so far, although I lost a great amount of money at the very beginning. However, it helped me to realize how I want to be investing and into what stocks or investment vehicles (options for example). And shaped my strategy. Many experienced investors already knows, but newbies (like myself) need some practical help. I know myself desperately looking for step-by-step help. Despite the losses I was able to fully recover my ROTH IRA account (within a year) and make it profitable. I could save and increase the value of the account to $10,000. Now I am focusing on my “Trading” account. Which still need a lot of work to recover my previous huge losses. But I am progressing satisfactory, increasing the value and boosting savings as well as investing to get the most from stocks. I am also looking for additional income and trying to maximize portfolio income which can be reinvested.

But I would like to ask you for your help, my readers. What do you want this web should provide you with so you can find what you are looking for?

I decided to change this blog’s image (theme) and it would be a great opportunity to incorporate your comments. You can comment underneath this post or send me an email.

Your input would be greatly appreciated. Thank you!




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Posted by Martin May 16, 2011
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What to do when market is falling?


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There are many ways what you can do when market is falling. You could probably find advice on selling your positions and go sideways, buying more stocks, do nothing etc. Well it is all about strategy.

I remember myself when I was trying to figure out which way to go. Originally I used a strategy of selling stocks which hit my stop loss. Unfortunately during markets like today I was stopped out quite quickly. I ended up collecting losses. One after second.

I was thinking what I can do to prevent it. What strategy would be the best? Which would work for me?

Well, it is all about strategy.

With a small account like mine I couldn’t afford swing trading or timing the market. Although I still believe in this strategy as good one and I still believe that it is possible to time the market. But timing the market will increase trading frequency and also you may pick up more wrong stocks or wrong timing. With a small account you cannot afford it. That was my lesson.

So I must hold stocks longer. I must pick and buy stocks, which won’t be that volatile and which will hold value better than small caps. Besides some other reasons, this one was the one why I chose dividend paying stocks.

But what to do when the stock market is falling and almost all your holdings go south? First don’t be panicking. Mr. Market is once again having bad mood and overreacting. Based on the strategy he is actually creating a great opportunity for buying.

For me it is an opportunity. As I mentioned in my previous post I try to teach myself to stay calm, when the market is growing and get ready when it is falling. Watch your investments and save money. You may reinvest dividends or invest new savings into slowly growing stocks during long term strong bull trend, but during volatile market like today I am just saving and sitting tight. Now when the market is in correction I am preparing to act. I was waiting for Kinder Morgan stock as I said in my previous post, but I have bought CTL instead. CTL showed better results to me, better dividend yield, growth and other numbers I look at. Now, after I purchased CTL I am again waiting for KMP.

When I first mentioned KMP it was trading at $75.84. Today, a few days later KMP closed at $72.09. Given the size of the company, industry it operates, services it provides and dividends it pays this stock doesn’t look as a bad investment to me. Buying it cheaper is a great opportunity.

When the market or the stock shows strength again I will buy and add this stock to my portfolio. If the market continues growing, I will be saving money again for another buy opportunity.

How do you invest or what you typically do when the market is growing or falling?




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Posted by Martin May 16, 2011
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