Selecting Rules for Investing and Trading

There are three important differences between investing and trading. Overlooking them can lead to confusion. A beginning trader, for example, may use the terms interchangeably and misapply their rules with mixed and unrepeatable results. Investing and trading becomes more effective when their differences are clearly recognized. An investor's goal is to take long term ownership of an instrument with a high level of confidence that it will continuously increase in value. A trader buys and sells to capitalize on short term relative changes in value with a somewhat lower level of confidence. Goals, time frame and levels of confidence can be used to outline two completely different sets of rules. This will not be an exhaustive discussion of those rules but is intended to highlight some important practical implications of their differences. Long term investing is discussed first followed by short term trading.

My mentor, Dr. Stephen Cooper, defines long term investing as buying and holding an instrument for 5 years or more. The reason for this seemingly narrow definition is that when one invests long term, the idea is to "buy and hold" or "buy and forget." In order to do this, it is necessary to take the emotions of greed and fear out of the equation. Mutual funds are favored because of they are professionally managed and they naturally diversify your investment over dozens or even hundreds of stocks. This does not mean just any mutual fund and it does not mean that one has to stay with the same mutual fund for the entire time. But it does implicate that one stays within the investment class.

First, the fund in question should have at least a 5 or 10 year track record of proven annual gains. You should feel confident that the investment is reasonably safe. You are not continuously watching the markets to take advantage of or to avoid short term ups and downs. You have a plan.

Second, performance of the instrument in question should be measured in terms of a well defined benchmark. One such benchmark is the S & P 500 Index that is an average of the performance of 500 of the largest and best performing stocks in the US markets. Looking back as far as the 1930's, over any 5 year period the S & P 500 Index has gained in price about 96% of the time. This is quite remarkable. If one widens the window to 10 years, he finds that over any 10 year period the Index has earned in price 100% of the time. The S & P500 Index has earned an average of 10.9% a year for the past 10 years. So the S & P500 Index is the benchmark.

If one just invests in the S & P500 index, he can expect to earn, on average, about 10.9% a year. There are many ways to enter this kind of investment. One way is to buy the trading symbol SPY, which is an Exchange Traded Fund that tracks the S & P500 and trades just like a stock. Or, one can buy a mutual fund that tracks the S & P500, such as the Vanguard S & P 500 Index Fund with a trading symbol VFINX. There are others, as well. has a mutual fund screener that lists scores of mutual funds having annualized returns in excess of 20% over the past 5 years. However, one should try to find a screener that gives performance for the past 10 years or more, if possible. To put this into perspective, 90% of the 10,000 or so mutual funds that exist do not perform as well as the S & P500 each year.

The fact that 10.9% is average market performance for the past 10 years is all the more remarkable when one considers that the average bank deposit yield is less than 2%, 10 year Treasury yields are about 4.2% and 30 year Treasury yields are only 4.8 %. Corporate bond yields approximate those of the S & P500. There is a reason for this disparity, though. Treasuries are considered the safest of all paper investments, being backed by the United States Government. FDIC regulated savings accounts are probably the next safest while stocks and corporate bonds are considered a bit more risky. Savings accounts are possibly the most liquid, followed by stocks and bonds.

To help you calibrate the safety and liquidity question, the long bond holders are comparing bond yields they now receive with next year's anticipated stock yields. Consider that next year's anticipated S & P500 yield is around 4.7% based on the reciprocal of its average price to earnings ratio (P / E) of 21.2. Yet the 10 year annualized return of the index has been 10.9%. Bond holders are prepared to accept half the historical yield of stocks for added safety and stability. In any given year, stocks may go either up or down. Bond yields are not expected to fluctuate broadly from one year to the next, although they have been know to do so. It is as if bond holders want to be free to invest short term, as well as, long term. Many bond holders are thereby traders and not investors and accept a lower yield for this flexibility. But if one has decided once and for all that an investment is for the long term, high yield stock mutual funds or the S & P500 Index, itself, seem the best way to go. Using the simple compound interest formula, $ 10,000 invested in the S & P500 index at 10.9% a year becomes $ 132,827.70 after25 years. At 21%, the amount after 25 years is more than $ 1 million. If in addition to averaging 21%, one adds just $ 100 a month, the total amount after 25 years exceeded $ 1.8 million. Dr. C. honestly believes that 90% of one's capital should be allocated over a certain such investments.

Now that you've allocated 90% of your funds to long term investing, that leaves you about 10% for trading. Short to intermediate term trading is an area that most of us are more familiar with, probably due to its popularity. Yet it is more specifically complex and only about 12% of traders are successful. The time frame for trading is less than 5 years and is more typically from a couple of minutes to a couple of years. The typical probability of being right on the direction of a trade approaches an average high of about 70% when an appropriate trading system is used to less than about 30% without a trading system.

Even at the low end of the spectrum, you can avoid getting wiped out by managing the size of your trades to less than about 4% of your trading portfolio and limiting each loss to no more than 25% of any given trade while giving your winners run until they decrease by no more than 25% from their peak. These percentages can be increased after there is evidence that the probability of choosing the correct direction of a trade has improved.

Intermediate term trading is based more on fundamental analysis which attempts to assign a value to a company's stock based on its history of earnings, assets, cash flow, sales and any number of objective measures in relation to its current stock price. It may also include projections of future earnings based on news of business agreements and changing market conditions. Some refer to this as value investing. In any case, the objective is to buy a company's stock at bargain prices and wait for the market to realize its value and bid up the price before selling. When the stock is fairly priced, the instrument is sold without one sees continuing growth in the value of the stock, in which case he moves it into the investment category.

Since trading depends on the changing perceived value of a stock, your trading time frame should be chosen based on how well you are able to detach yourself from the emotions of greed and fear. The better one can remove emotions from trading, the shorter time frame he can successfully trade. On the other hand, when you feel surges of emotion before, during or immediately after a trade, it's time to step back and considering choosing your trades more carefully and trading less frequently. One's ability to remove emotions from trading takes a great deal of practice.

This is not just a moral statement. An infinite universe of what's called technical analysis is based on the aggregate ethical behavior of traders and forms the basis of short term trading. Technical analysis is a study of price and volume patterns of a stock over time. Pure technicians, as they are called, claim that all pertinent news and valuations are imbedded into a stock's technical behavior. A long list of technical indicators has evolved to describe the emotional behavior of the stock market. Most technical indicators are based on moving rates over a predefined time period. Indicator time periods should be adjusted to fit the trading time frame. The subject is far too large to do it justice in less than several volumes of print. The lower level of confidence involved in trading is the reason for the large number of indicators used.

While long term investors may use only a single long term moving average with confidence to track steadily increasing value, traders use multiple indicators to deal with shorter time frames of oscillating value and higher risk. To improve your results and make them more repeatable, consider your expectations of changing value, your time frame and your level of confidence in predicting the outcome. Then you will know which set of rules to apply.

6 Safe-Guarding Tips for Traveling With Jewelry

Traveling somewhere warm for some fun in the sun this winter? Or maybe the snow-packed slopes are calling your name. Whatever your destination, the jewelry you bring along may be the most valuable items you pack, so take a little extra care in your travel planning.

1. First, decide what jewelry you actually will wear at your destination. That special four-carat ring you wear for special events? Probably not. The fun cultured pearl strand that goes with just about every outfit … definitely.

2. Make a list of the jewelry you are taking. Bring one copy with you, storing it separately from your jewelry bag, and leave one copy at home. Some insurance companies even suggest taking pictures of your jewelry or recording your special items on your video camera.

3. If you're flying, pack jewelry in your carry-on bag, never in checked baggage where it will be a shiny temptation for security screeners. Or, wear the jewelry on your travel day, as long as it's not bulky metals that could set off security screening equipment. For extra security, slip a pendant inside a shirt or sweater that you're wearing or spin a ring around so only the plain band shows.

4. If you are traveling by train or auto, put jewelry in a bag that you personally carry into restaurants and to your resort room or condo. And keep it with you at all times. Do not leave the jewelry in an unattended car or suitcase. Also, do not let the hotel staff handle the bag … and potentially help themselves to your bling.

5. At your condo or resort, store jewelry in the in-room safe when you're not wearing it.

6. Make sure your jewelry is properly insured and that your insurance policy provides coverage wherever your travels take you.

A lost diamond or gemstone can really put a damper on your much anticipated vacation getaway. Have the peace of mind that as you head to your winter escape, your precious items are safe and sound. Happy travels!

The Best Tips for Cooking and Buying Shrimp

Shrimp can make for a great meal, appetizer, or even a good side dish. Many enjoy consuming shrimp regularly and they are actually very good for you as well. There are many ways to prepare shrimp, but the one thing you want to make sure you never do is overcook the shrimp. You can grill them, sauté them, and prepare them in many other ways, but never over cook shrimp.

You now have the most important tip you can get when it comes to cooking shrimp. There are many other things you need to know about cooking and buying shrimp, however. Below you are going to find a few tips to help you purchase the right shrimp for you and you are also going to find them tips on how to cook them properly as well.

Tips for Buying Shrimp

1. The Tail Test

If you are purchasing shrimp that has been cooked and cooked on board before delivered to the stores, then you can do a tail test to see how fresh it is. You will want to straighten the shrimp out under the light and see how large the gap is between the shell and the meat. The larger this gap is the worse the shrimp actually are because of either being cooked too long or held under refrigeration too long.

2. Avoid the Slime

Anytime shrimp feel slimy or sticky you want to avoid buying them. This is what happens when shrimp starts to go back and you can put your finders on the shell and move them forward and backward. Once you have done this if you have a gritty feeling between your fingers or you feel the slime or stickiness you want to put the shampoo down and walk away from it.

3. Fresh Factor

If you are trying to buy precooked shrimp you want to see a shell with a shiny clear glossy shell. This should have long feelings still intact and it should be resting on an ice bed within some type of refrigeration unit. With raw shrimp you are looking for the same type of shell with legs still intact as well. These should be displayed much in the same way. You do not want to buy shrimp with legs that are turning black at all.

Tips for Cooking Shrimp

1. Do Not Over Cook Shrimp

This has already been mentioned, but it is worth mention about ten more times. It is the most important tip when it comes to cooking shrimp because when you over cook shrimps they will taste like bland rubber; It is actually better to undercook them a little bit and some eat them raw or nearly raw as sushi as well.

2. Thaw the Shrimp Properly

If you need to thaw your shrimp you really want to do this under refrigeration overnight, but if this is not an option you want to run cold water over the sharp to thaw them. Never set them out on your counter or table to be thawed. This is not good for the shrimp and can cause bacteria to grow within the meat. Also, once the shrimp are thawed you will never want to refreeze them. This makes them tough and can cause freezer burn as well.

3. Cook sooner rather than later

When you purchase fresh shrimp you should really cook them the same day you purchase them. This is one of the most perishable foods you can buy and if you wait too long they will go bad. Ask the store you purchase the shrimp from either they were previously frozen or not. If they have been previously frozen, you will not want to deny them. When you do not plan to cook shrimp the same day, just purchase them already frozen.

4. Always Clean Properly

Before you cook the shrimp you are going to want to clean and devein them completely. This will get rid of the parts of the shrimp that can cause a foul flavor and should not be consumed. You want to do this before you prepare your shrimp in any way you prefer. Deveining your shrimp is very important because this will get rid of the, for lack of a better word, poop trail.

5. Broiling

When you broil shrimp you will want to season or marinate them before you do so. Then, depending on the size of the shrimp, you are going to want to broil them for about four to five minutes. This will help to ensure that you do not overcook the shrimp and end up with rubbery shrimp. These shrimp can be cooked to be put on a salad or served in a different type of dish.

6. Pan Frying

For best results with pan frying use olive oil and season the shrimp ahead of time. If you like spicy foods you can use a Cajun seasoning to add nice flavor to the shrimp. To avoid overcooking the shrimp you are going to want to pull them out after about 3 to 4 minutes of cooking. You can bread the shrimp first if you want or you can just cook them without bread if you prefer.

7. Grilling Shrimp

Always use uncooked shrimp for grilling because frozen shrimp will tend to dry out on the grill. You will want to use the largest shrimp you can find because this will help to retain more of the smoky flavor from the grill itself. It is also recommended to use a charcoal grill and skewer the shrimp with vegetables. You can season them before you actually cook them as well, and then serve them over rice.

Have fun with the recipes you are using and do not feel like you have to follow them 100%. You want to put your own flavor into the recipe and tweak them to fit what you are after. Just make sure you purchase good shrimp and do not ever over cook them or you will be very disappointed with the way your dish turns out.

Plan A Holiday Party In 10 Steps

Holiday parties can be major events, requiring plenty of planning during this busy time of year. Be sure you plan far enough ahead so that everyone can work your party into their holiday schedule. Here is a helpful guide for planning your party.

Step One

Set the date. Try to plan your party several weeks before Christmas before travel plans and other holiday activities fill everyone’s calendars. Perhaps ask some friends when a good date for them would be to ensure that your favorite people can attend.

Step Two

Come up with party ideas and decide which ideas you would like to follow. Decide whether you want a large gathering with catered food, a small get together with friends, or maybe a mix of both. You can easily find holiday party ideas online or in holiday magazines to get ideas. You could try a dressy cocktail party, a black and white themed party, a caroling party, a soup party, or a tree trimming party. Determine your budget before you make any final decisions.

Step Three

Write a guest list. Invite some close friends for a sit-down dinner, or as many people as your house will hold for a jovial get-together with small snack, mini-meals, and drinks. Remember that not everyone you

invite will be able to come. Those who can attend may come and leave at different times, leaving your house more room for guests.

Step Four

Decide on a menu. If you are hiring a Utah holiday caterer, consult with the caterer as soon as possible and plan the menu. Be sure to include healthy foods too. If you are serving alcohol, have non-alcoholic drinks also available for those that don’t drink. Be sure you have a good estimate of the guest list and you stay within your budget. Consider using the caterer for other items as well, such as the decorations, linens, and flatware.

Step Five

Send out the invitations. Invitations should go out as early in December as possible so that your guests can RSVP. Be sure to include the meal time or arrival time, possible activities, if they can bring food, and appropriate dress.

Step Six

Decorate. Depending on the party, you can use traditional decorations with centerpieces, or use themed party decorations. If you need help with the decorations, plan a mini party with the girlfriends to make some decorations, or a shopping trip to your local store, or perhaps even borrow some decorations from close friends. It’s always a good idea to have a holiday tree, snowflakes, and candles. (Be sure to thoroughly clean your house before you fully decorate.)

Step Seven

Buy all the party items. Buy the food, beverages, paper goods, and decorations you will need for the party.

Step Eight

If necessary make the food and chill the beverages, or set up a time with the caterer, set the tables or make the arrangements on the serving table.

Step Nine

Just before the guests arrive, turn on the holiday tunes and set out the food and drinks. Leave the entryway open for the guests to come in! Perhaps have hot cider or hot chocolate ready to warm your guests from the cold outside.

Step Ten

Mingle and have fun!