Creating Your Own Mutual Fund

Now that you have mastered the art of investing I think I should go over what I do each month. Hopefully, this will help you to get a far better understanding and help you in creating and running your own mutual fund. As we go through this month I will be giving you some other pointers which should help you to make decisions.

Before we proceed I would like to talk about various sources. Especially for a complete novice and even with a system such as the one in this work the world of investing can be overwhelming. Just think about it, the Dow Jones Industrial Average includes 30 companies, tops in their respective industry, it tracks to monitor the New York Stock Exchange which numbers in the thousands of companies. Just imagine living in a town with thousands of available singles. You ask out what are considered by your community to be the top 30 hotties. Would you base your entire future dating and love life on the results of just those 30 dates when there are thousands of available singles? Of course you wouldn’t. Unless you are creating a mutual of just those stocks which are included in the Dow Jones Industrial Average it wouldn’t be of much value to you. At best it would be a barometer. Even still, if you were to create a mutual fund out of these 30 companies that is still a lot of research to do for one person not to mention the thousands of other companies to check out. This doesn’t include foreign exchanges such as the Nikkei in Japan, the DAX in Germany, the Brazilian Bovespa, or the Hang Seng in Hong Kong along with markets all over the world extends into the hundreds of thousands of potential investments. Remember, just because gold closed at this price in Frankfurt doesn’t mean that is the price here. Even within the United States the New York Stock Exchange is not the only one. There is also NASDAQ which includes stocks which are called over the counter stock and are not found on the New York Exchange. You also have Currency Exchanges, Commodity Exchanges, Bond markets, and of course Mutual Funds. Even the one Application I am using to do my trades contains over a hundred investment opportunities. This is a hell of a lot of information to dig through even with just looking at well established companies or investments. So where do you start?

Most investment applications dwindle this number down for you by having a limit to the stocks they offer to assist you in buying. Some also include very nice overviews of the company or investment. They include the most recent prices and in many cases up to a five year review of the investment’s performance which can help you decide. Some of my friends use several investment applications just to have access to certain investments. Even with the entire market at your fingertips this is a hell of a lot of information to digest. Which brings me to a very good source to help you with deciding on how to set up your mutual fund and which companies to include and this would be friends.

Having several close friends who are also investing can be a gold mine of possibilities. I do get some of my leads on where to invest on my own but quite often I hear about a potential investment from friends who also invest. They are not all necessarily investing as I do, meaning creating and running my own mutual fund. Some are day investors which I highly DO NOT recommend doing. Others buy stocks in traditional ways through a broker while others picked investments for their Individual Retirement Account or Money Market Account. No matter how they are investing or for what reason they share information about companies they are tracking. I get a tip I think is worth checking into further and then pursue it. From what I see, I then decide to buy or not. I also share my information on hunches and tell them of my successes as well. Working and sharing with several individuals can be very rewarding. Some people even form investment clubs.

Investment clubs started popping up in the late 1980’s and early 1990’s. These are where a group of people pull their resources together for business and investing ventures. One of the most famous consisted of several retired women and they even wrote a book about their club and shared some of their insights, “The Beardstown Ladies’ Stitch-In-Time Guide to Growing Your Nest Egg Step-By-Step: Step-By-Step Planning for a Comfortable Financial Future.” There are as with anything both pros and cons. Biggest pro of an investment club is that you have several minds keeping tabs on the market. Each person can pick a specific industry or type of investment to watch. You also are able to bounce around and grow ideas as you learn from one another. At the same time you will have to explain why you think a specific investment would be a great idea to pursue which will help you develop your research and persuading skills. At the same time you have to defend and persuade your ideas. Biggest drawback is you are stuck with the decisions of the group which can be good and bad. Good in stopping you from jumping on every fleeting opportunity and bad in restricting you from taking an opportunity you were not able to convince the group to take. There are also numerous regulations you must follow in forming an investment club. Me, I prefer doing it on my own and working with my fellow investing friends independently. We talk about our successes and get advice about our mistakes while keeping tabs on the market and sharing ideas.

Some people ask me if I spend a lot of my free time researching and following investments. Truth is, I spend very little time on my mutual fund. Unless I hear something major on the news which could impact the market such as a presidential faux pas or a war broke out I just check my investments two or three times a week to see if anything major is happening. At the most, that is if I had seen something that attracted my attention, I may check them each week day spending at the most less than five minutes to see if any opportunities have presented themselves. This is an opportunity such as if one investment is nearing its 52 Week High while another is approaching its Low. And the reality is a lot of times I don’t necessarily wait for an investment to hit its high to transfer it into an investment which has hit its low. If I see a stock is at its low and another using the range method where I subtract the 52 Week Low of an investment from its 52 Week High resulting in the Price Range, then subtract the 52 Week Low from the Current Price of the Investment then divide this answer by the Price Range resulting in a 70% or higher I will take advantage of the low and transfer the funds.

For example I have stock in company A with a 52 Week Low of $25 and its current price is $27. And I have company B which has a 52 Week Low of $20 and a 52 Week High $60. B’s Current Price is $50. I subtract B’s 52 Week Low from it 52 Week High giving us a Price Range, 60-20=40 or $40. I take the Current Price of B and subtract B’s 52 Week Low from it giving us an answer of 50-20=30 or $30. I then take the 30 and divide it by B’s Price Range, 30/40=.75 or 75%.

Or:

A = Current Price

B = 52 Week High

C = 52 Week Low

D = Price Range

B-C=D

A-C

D = > .7 or 70%

Thing is I could see if B’s price will go higher but there is no guarantee that it will. If it does reach its High there is no guarantee that A will still be at or near its low. Granted I do have an income investment where I can move money from investments which have hit their High but why do that when you have an investment which is at or near its low? If an investment is over .7 or 70% and I have one which is near or at its 52 Week Low I just move the money from the higher price to the lower price. If it the investment which is up goes higher or the one which is down goes lower, oh well, I just carry on and move forward. Remember, until I totally cash out the lost is only on paper. Chances are if the one near or at its low moves even lower I will use the power of Average Cost Investing and buy more shares when it is time for me to invest and reduce the average cost per share increasing my potential for earnings moving my average cost even closer to the investment’s actual low.

Recently, I have bought shares from a company which because of a downturn in the image of its products its stock has been dropping. I heard about this stock through a friend who had noticed the crater in its performance. I did some research and saw the company was still highly profitable earning almost 26 billion in net profits last year and I saw they were being highly aggressive in changing the image of their products. First time I bought some shares the price was at about $40.00 a share. Since it has been consistently low and going lower I have been putting my monthly investment in its shares. Last month my average cost per share was about $22.00 a share. This includes the shares I had bought at $40. The price has since rebounded to over $24 a share giving me about a 9% gain if I was to sell at this moment. I started this investment in March of this year and it is now the end of October. This is higher than what most banks can offer you with their investments and this was on a stock which has dropped in value significantly. It has dropped in value by 57% but through the Average Cost Investing Strategy I have the potential to earn over 9%.

Update on this investment: it has gone up over 35% in November. This will be a good Christmas.

Truth is that very rarely do I hit the absolutes Highs and Lows in investing. There have been times I looked at a stock which was doing nothing and got rid of it for another which was performing. For example: I had stock in Facebook for over a year and it sat at about $75 and I decided to move the money to one which moved more along its Price Range. Shortly after that Facebook started climbing and is now sitting at about $100 more than what it was when I sold. Oh Well, I just moved on because the reality of it is I am still making money and I have had some amazing payouts in the past and will have other opportunities which won’t get away in the future. I may have missed that opportunity to make $100 a share with Facebook but I have made that up and then some on other investments.

Busiest time for me during the whole month period is when it comes time for my monthly purchase. I look over my investments. If any seem to be going up or down I read up on what they are doing and then I make my choice and then move on. That is pretty much it.

I spend about 10 to 15 minutes a week tops just checking my investments for any opportunities. I spend perhaps an hour reading over things when it comes time to making my scheduled monthly purchase I might spend an hour researching depending what is going on. I spend about ten to fifteen minutes talking about investments to friends. I listen to the news while working on other things. In total, I think I might spend an hour or two a month on my mutual while spending the rest of my time on other projects and especially my family.

This is an important point. Don’t become consumed by your investments. You risk becoming emotionally attached and create a high possibility of panicking and PANIC KILLS! As warned before, you should be using funds you don’t need in the near future and working with investments which are well established and with many assets. Several companies I invest in have been around for at least 100 years and have billions in assets. As I had mentioned earlier, one just posted $26 billion in net profits. Main idea is to reduce the chances of panicking and it is important to not get so wrapped up in it and allow plenty of time to decompress.

I have seen people who seemed to be mired in the markets the vast majority of the day. For the most part a lot of them don’t do as well as I have done and I only spend a couple of hours a month.

So to recap:

• I spend a few minutes a week quickly checking my investments for possible opportunities.

• I listen to the news to see if anything is going on which may impact my investments.

• If I see something which is an opportunity I take it.

• Regardless of my decision if I should have waited a little longer or shouldn’t have moved the money, the decision had been made and I move on.

• If I miss an opportunity or make a mistake, miscalculation, OH WELL, I just move on realizing that I will have many more opportunities.

• I share ideas with my investing friends and these friends are an incredibly important investment asset.

• I make my monthly purchase.

• I enjoy life the rest of the month.

Sure, you may miss an opportunity of a big payoff investment because you aren’t immersed in the markets twenty-four seven, but there will be many to take advantage of just checking a couple of hours a month. And remember your biggest opportunity in life is spending your time doing things you enjoy with those your love.