COMMON SENSE

The Buy and Hold Myth, part 5, looking at next week, the market will have  price reminisces of last years stock market.  Now, if you thought the market reached it’s low last year, you still suffered losses through the low in March 2009.  How would you like to learn how to avoid these unnecessary market drops, you will have to learn technical analysis to time the market during these short term cycles.  My blog post in Jan, 2006, I explain how the market media matrix manipulates into thinking there is always and eternal bull market.  I reviewed Jane Bryant Quinn article about the theory of “buy and hold” for long term investors.  I think you will find it interesting to know that if you missed the best 90 days of market gains, you would have a paltry$2.70 for every dollar invested.  If you followed the “buy and hold” theory, you would have $75 for every dollar invested.  Now that sounds like a good case for buy and hold, right?

However, if you would have missed the worst 90 days of the market, your gains would have been $1694!   I guess Wall Street’s “market media matrix” does want you to know about that!

• A.  buy, hold, hope for 42 years for 90 good days in the market, results $75.
• B.  time the market yourself and miss the best 90 performing days, results $2.70
• C.  use Doctrader’s  “red signal line” to avoid the worst performing 90 days of the market, results $1694.

Raise your hand if you can see which choice you want!

Introducing the “red signal line” to determine if the market are in a long term bull market or a long term bear market.

Technorati Tags: 9 myths, Analysis, baby boomers, bull market, financial, investing, Investment, market, market media matrix, Part 5, technical analysis

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Part 4 of the Buy and Hold Myth series shows the current secular bear market, beginning in 2000-2003.  The beginning of every Secular market, lasting 18 years, begins with the short term cyclical market (lasting 18-36 months) of the same type.

Currently, if you measure your current rate of return since the year 2000, you may you will be disappointed.  The next few days, you should receive your quarterly 401k statements. Do you dare to open them up and compare your results since the last quarterly statement? To read more about my Market Cycle theory check out my blog post last year, warning investors, at “What is the Weimar Republic?”

Technorati Tags: 401k, 9 myths, bear markets, buy and hold, funds, investing, Investment, market cycles, retirement, secular market, technical analysis, Weimar Republic

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Only spouses have been able to avoid a large tax bill when they inherit a 401K. The new tax law now allows non-spouses (children and other family members) opportunities to avoid taxes on inherited 401K money.

Typically the spouse is allowed to take the lump sum distribution from a 401K and roll it over to their own IRA where it can grow tax deferred. Tax deferral allows the money to grow fast. When the spouse turns 70 1/2 years old, he/she is required to take minimum distributions from the IRA. A lot of 401K plans don’t give non-spouse beneficiaries the same option. They are forced to take the money out of the 401k plan and pay taxes on the lump sum distribution all in one year.

Starting January 1, 2010, a new law that is part of the economic-recovery package Congress approved late last year, non-spouse beneficiaries will be able to rollover their lump sum distribution from a 401k that they inherited to their own Inherited IRA. An Inherited IRA will make the named non-spouse beneficiary take distributions stretched out over their lifetime. The tax bill will be a lot less than if they had to take the lump sum. It also helps the non-spouse beneficiary which is usually the children not blow through the money as fast as if they had all of it in one year.

A lot of problems can occur when the receiving custodian usually a bank or brokerage firm does not handle the paperwork for an Inherited IRA correctly. Obviously this is something they don’t do everyday and a lot of mistakes have been made where the money was rolled over into a personal IRA instead of an Inherited IRA. Make sure the firm you work with knows and understands how to do this or else it could cost you time and unexpected taxable income or penalties.

When inheriting the proceeds from a 401K, you can avoid a large tax bill. Follow the guidelines above to stretch the money over your lifetime in order to add to your financial plan and lower your tax liability.

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The Myths about Buying and Holding Stocks for the long term is just that, a Myth!  In Part 3 of the Video series I am show you where the Baby Boomers begin moving the market, first as dependents, then as consumers.  My blog post last year about the Great Depression or Recession I wrote, ”

Currently, the demographics are unclear relating to the baby boomers, yet by Nov. 4th, when the elections are closed will there be riots on main street or a selling riots on Wall Street?”

Looking at the stock market for the previous secular bear market, you can see for yourself, the market didn’t make new highs, but was stagnant.   The Demographics of the Baby Boomers, were still in the early stages of getting their first jobs, starting their families, and begin to invest through their company’s 401k plans. The baby boomers were early adapters of the new technologies to increase their productivity.

Coming out of the 1966-1984 secular bear market, they begin the Greatest Bull market that will never be repeated again.  Stay tuned for Part 4 of the “Buy and Hold Myth”.

Technorati Tags: 9 myths, baby boomers, investing, Investment, market, market cycles, part 3, stock, technical analysis

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