A few days ago, MarketWatch featured another update of their so called ‘Lazy Portfolios.’

If you missed my previous blog on it (http://thewallstreetbully.blogspot.com/2007/01/beyond-ridiculous-portfolio-for-all.html), it’s a selection of various Vanguard low-cost, no load (good idea) index funds. In various configurations, it has outperformed the benchmark S&P; 500 index over 1, 3 and 5 years.

The repeated chest bumping every quarter is all about the fact that no timing and no trading is necessary. That’s good; I am all for limited trading and holding on to investments that are going up.

I am just wondering why a longer performance period was not included. For example, how about looking at a 7-year period, which would include the last bear market? Could it be that the downturn in the market from 2000 to 20003 took such a huge bite out of that portfolio that it’s better not to report?

That’s what the numbers say. As I reported before, the ‘Lazy Portfolio’ only lost 30% vs. the S&P;’s 33%. If I had owned the lazy portfolio, and not the S&P; 500, I would have felt so much better, how about you?

If you are planning to employ the services of a professional to help you manage your portfolio, you need to know that not all financial advice is regulated in the same manner.

For example, commissioned brokers operate on a different standard than do Registered Investment Advisors. Since I am a fee-only investment advisor, I definitely have a bias as to what I believe is most appropriate for the investing public.

So what is the difference in terms of regulations and how might it affect you?

Just yesterday I came across an article called “How All Financial Advice is Not Regulated the Same.” It’s a well written piece that will thoroughly enhance your understanding about this important topic and will help you better decide which type of financial service professional is right for you.

You can read the full article at:

http://business.mainetoday.com/financialsense/010910.html

Yesterday, one of my readers posed an interesting question:

“I own both IIC and EVM (Muni CEFs) in my taxable Scottade account. This week, I noticed a large price spike about mid week followed by a price drop today and yesterday. I believe it had to do with some news of dividend payout dates. Here is my question for you. Is it alright to sell these when a spike occurs and then buy them back in a day or two? I do want to continue to own these for the long haul but could have made a few bucks trading them this week!”

Turns out that the price spike happened because of market conditions and it raised the NAV by a little over 1%. If you could turn back the clock to that point in time, I still don’t think it’s a good idea to sell those positions for the following reasons:

1. The increase/spike is fairly small and considering the buy/sell spread and the trading fee, it’s simply not worth the effort.

2. Since this transaction would have happened in a taxable account, the capital gains would have caused a taxable event; not just for this small gain but all gains accumulated to this point.

Income investing requires a different mind set. If that’s your investment objective, you might want to read my article called “10 Rules For Successful Tax-Free Income Investing” at:

http://www.successful-investment.com/articles31.htm

Yesterday’s piece in MarketWatch titled “Quit hanging on to milquetoast funds” contained a lot of truth.

In an interview, Steve Goldberg of Tweddell Goldberg Investment Management said that “investors should look at their mutual funds as if they are buyers or sellers, rather than holding on to lukewarm performers hoping for improvement.”

He added that “most people hang on to a fund too long, hoping for a return to a break-even point or to a place where they can make an exit and say that they doubled their money, without regard to the length of time such growth involved.”

I my advisor practice, I have found that to be true as well. I still get calls from readers who are proudly reporting that they have now finally reached a break even point after hanging on to the same funds through the entire bear market of 2000-2003—and beyond.

Maybe it’s a good idea to heed Goldberg’s advice, who finished by saying that “if a fund is good enough to own, it’s good enough to buy more; and if it’s not, then why are you hanging on?”

I can only add that the reason most people hang on is that they don’t have a clearly defined exit strategy. If they had one, they would automatically get out of funds as performance (due to market conditions) deteriorates and triggers their sell stop points.

Are you still hanging on to a fund you bought some 7 years ago?

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

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

Sideways to upward bias pushed all major market indexes slightly higher.

Our Trend Tracking Index (TTI) for domestic funds moved higher as well and now sits +4.60% above its long-term trend line (red) as the chart below shows:

The international index rallied as well and has now moved to +9.37% above its own trend line, as you can see below:

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

A few days ago, I was discussing the bear market of 2000–2003 with a prospective client, when he pointed out that he actually held on to one fund profitably through the severe downturn.

Really! Even though we avoided most of the bear by being in cash on the sidelines, any fund which has the ability to hold up against the major trend is worth looking at.

Take a look at the chart of PRPFX: