MarketWatch featured a story called “Tide’s Out – Fund Investors have wisely stopped performance surfing.” It goes into detail about the “dangerous” habit of always trying to own funds that always top the short-term performance charts.

It’s media ignorance at its finest since the assumptions are flawed due to the fact that not every investor uses the brainless buy and hold philosophy. In my view, the most dangerous habit when investing is to be exposed to a fund/ETF that does ‘not’ perform. There is absolutely nothing wrong with being in top performers as long as you have an exit strategy in place via a trailing sell stop discipline.

After all, it’s only performance that propels your portfolio forward and not staying put in funds and ETFs that represent the bottom of the barrel, which includes about 80% of all offerings.

The story cites investors who loaded up on top tech funds only to get killed during the subsequent bear market. That has been my argument for some 20 years. Any investment you get into, whether it’s a high flier or an average performer, requires you to have a plan to get out. If you don’t, then this following formula will repeat itself over and over in your investment life when facing a bear market:

Buy and Hold = Investment Losses to the second power (humor attempt)

Doing the same thing over and over and expecting a different result each time is in some professions called insanity.

Many readers have expressed regret about not having ETF choices available in their 401k plans. A lot is being done to change that in the future although the mutual fund companies handling most of the custodial functions like the status quo.

SmartMoney’s article “Coming Soon: ETFs in your 401k” sheds some light on the dominant positions that the major players like Fidelity, Vanguard, T.Rowe Price and Principal have. It’s nothing but a cash cow for them with more than 2 trillion sitting in 401k type of accounts. This privilege allows them to keep collecting fees year after year without performance considerations.

In my advisor practice, I have seen my share of 401k plans from clients who left their jobs and were looking to roll over their assets into an IRA. Most of the 401k choices weren’t worth the paper they were written on or seemed to have been picked out by a low level clerk who played darts.

From my experience, about 2% of the 401k plans I have seen offered a reasonable amount of fund choices that were worthwhile and occasionally the custodian actually made an effort to offer new fund selections every few years.

Most of them, however, are the bottom of the barrel. I have a client who works for a Fortune 500 company, which shall remain nameless, and whose 401k I manage.

It’s the saddest and most incompetent of all plans I have ever seen. So, yes, new companies like BenefitStreet, Invest N Retire, Wisdom Tree and others trying to break the old established rules and offer a fresh approach along with new choices will only benefit the 401k participant who, in my view, is being taken advantage of by the old system.

For many years, when visiting Hamburg, Germany, I have stayed in a small hotel near my mother’s apartment.

The set up is unique and unlike anything you see nowadays when traveling in a world of mega hotels, poor service and employees who do not care nor do they speak your language. The Condi Hotel in Hamburg features a grand number of 35 rooms and has their own bakery and café.

Yes, you read that right; it’s a small place where you love to go because everybody knows your name. From the owner, to the waitresses in the breakfast room everyone is friendly, in good spirits and ready to help. The maids who clean up your room actually are natives and speak your language–a rarity in itself. A special request is handled quickly and efficiently by them without interaction with the front desk.

The breakfast buffet spread is something I look forward to all year. Freshly baked rolls and a variety of German meats and cheeses along with boiled eggs, juices and fruit make this a perfect way to start your day. Best of all, it’s included in the price of your stay.

Some things are still based on the honor system. Many business people frequent this hotel, usually only for a couple of nights. Despite the number of new guests passing through, you can enter the unattended lobby at any time of the night, where you may find some freshly baked cookies, a tray with clean beer and wine glasses and yes, open access to a refrigerator filled with adult beverages, mainly superb locally brewed beer and an assortment of small bottles of wine.

You take what you like up to your room and leave a note for the front desk advising them of your room number and what you took. They will then add it to your bill upon check out. It’s service at its best along with trust in the honesty and integrity of the patrons.

Too bad that in today’s society this is an exception and can’t be the rule for conducting business.

Mark Hulbert of MarketWatch featured a story called “Still Bullish,” in which he looks at the best long-term timing newsletters to see whether they had maintained their bullishness since early August or reduced their equity market exposure.

Interestingly, the bottom line was that nobody was bearish with the average equity allocation having reached 86%. He further mentions that the best market timers on average have more than double the equity exposure of the 10 worst market timers.

He makes a good point in that if you are betting on a bear market right now, you have to bet against the timers with the best long-term records and side with those whose records have been awful.

My view is that if you simply follow trends, as I harp on constantly, you don’t have to bet against anybody whether they have a winning record or not. Go with the uptrend for as long as it lasts, and get out when your trailing sell stops get triggered. It’s as simple as that, although many talking heads in then media like to make it far more complicated.

My latest No Load Fund/ETF Tracker has been posted at:

http://www.successful-investment.com/newsletter-archive.php

Profit taking pulled the markets down, but the bulls prevailed and the week ended up on a positive note.

Our Trend Tracking Index (TTI) for domestic funds/ETFs has moved to +6.42% above its long-term trend line (red) as the chart below shows:



The international index inched higher to +5.61% above its own trend line, keeping us safely on the buy side:



For more details, and the latest market commentary, as well as the updated No load Fund/ETF StatSheet, please see the above link.

MarketWatch had a piece called “Avoid Mediocre Funds In Hot Sectors.” Finally, it’s a story I can agree with because being in a great performing sector should be every investor’s goal. However, just because a sector is hot, does not mean that every fund/ETF in it is performing up to par.

The article states to sell a few funds that apparently are not great performers. In particular, they are recommending selling PRGFX (my M-Index rating is +10), VWUSX (+10) and DEFIX (no rating available).

Instead, you are supposed to be buying TMGFX (+15), JORNX (+18) and JAVLX (no rating available). While these funds maybe OK replacements based on my momentum numbers, there are some that are even superior performers.

If you utilize my weekly StatSheet on a regular basis, you would have known that, for example, funds like WLGYX (+20), BSMAX (+20) and TWHIX (+19) have stronger momentum numbers and have performed better.

While chasing performance is generally frowned upon by Wall Street’s talking heads, it’s a great way to grow your portfolio as long as it is used in conjunction with a clearly defined exit strategy to protect you from too much downside risk.

I am obliged to tell you that from the list of funds above, I and my clients have positions in WLGYX only.