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Moneywise: Smart advice for the small investor

Should you be watching your investment portfolio? Reuters and several other business media reported last week that the S&P market index was less than a percentage point away from its all–time high. Even with that assessment, trading market volume is low, as it appears that investors are unwilling to place more cash into a market that may change at any time. Additionally, many indicators that investors and analysts use to monitor market activity are close (or at the peak) of measures.

How is the small investor supposed to react?

That depends. Is the latest US capital market activity normal for an investment cycle, that is climbing more or less upward, with a series of pullbacks? Do you have a significant exposure to risky investments compared to the rest of your savings? Are you solely invested in your pension accumulations? Have no capital market exposure, whatsoever? Feeling frustrated that you don't understand the game. Then feel free to start your investment knowledge base know by using the websites listed below.

Managing a group of securities, or a portfolio as is more commonly described, is not an easy task. Investment managers get paid millions to pull off outperformances that beat market averages, while small investors have felt that, at times as if managing is half guess-work and half good luck to bring their securities into positive territory. However, there are also investment tools, such as market signals that analysts and lay people alike monitor to anticipate the direction of US stock markets, and indeed any capital market.

Market signals (metrics) are considered a forecast of stock returns, and can provide an indication, not a probability, that value changes are ahead, thereby providing an investor some grounds for thought on decisions such as exiting or entering capital market trading activity.

Here are two major market signals that you can use to assess your own investment portfolio position, along with some finance and investments websites that I use frequently. See how many more indicators you can find as you start your investment knowledge tracking.

NYSE margin debt at NYSE Euronext. High margin debt indicates a major market peak and statistics through July 2013 shows a peak patterns that analysts think is similar to 2007. Margin debt in layman's terms is the amount of debt that investors have driven up by borrowing against their investment securities.


Insider Trading is an important indicator of changes in a company value, either positive or negative, because it is assumed that corporate insiders know more about a company's future earnings prospects. Increased levels of insider trading overall provide an indicator as to the perceived direction of a capital market.

www.finviz.com Financial Visualizations tracks latest insider trading by individual company, ticker, or profile with names of executives and their buy/sell positions.

CNBC under Investor Tools has a great site for tracking Insider Activity and Concentration by Industry. A low sell/buy ratio indicates bullish sentiment, and conversely, a high sell/buy ratio by corporate insiders indicates negative sentiment. As at August 2013, Cumulative activity on corporate insider selling stood at 20-1, that is insiders were selling twenty stocks for every stock they purchased, a very bearish sentiment. http://www.cnbc.com/id/15839243

Sources of finance and investment knowledge:

Investment Quality Trends, a paid subscriber investment newsletter since 1966, rated number one by the Hulbert Financial Digest for their risk-adjusted total return equity model portfolio that has averaged 13% since tracking in 1986.

Seeking Alpha. Read. Decide. Invest. According to the website, “This is a platform investment research, with broad coverage of stocks, asset classes, ETFs and investment strategy. In contrast to other equity research platforms, insight is provided by investors and industry experts rather than sell-side analysts. For individual investors, Seeking Alpha provides opinions and analysis (with more than 7,000 contributors), not just news. This website is free.

The Greedometer® from Triangle Wealth Management is an S&P 500 strategic risk gauge, representing strategic investment risk levels in the S&P500 stock market index. Its intent is to warn in advance of major / historically important stock market crashes. On August 13, 2013, it had registered two weeks of readings never seen before — high enough to break the gauge. TWM Basic investment newsletter is an inexpensive $100 per year.

Bloomberg and BloombergNewsweek. Investment news, opinions, and the entire gamut of securities reporting and analysis, along with keeping your pulse on global markets. One of my big favourites forever!

Yahoo. Finance. USA and UK/Ireland. Always been a favourite and continues. Great detail on individual stocks, bonds, mutual funds, ETFs, currencies and commodities, along with personal finance advice.

www.dshort.com “dshortupdates” from Advisor Perspectives, authored by Doug Short, PhD in English with a major interest in economics and financial planning since the bear market of 1973-74. The Professor Short does a nice job of updating (and explaining market and economic indicators) along with detailed charts. Takes a little clicking to find the section featuring just Professor Short. No, he is not a bear market investor — Short is his last name.

Investopedia, educating the world about finance. Investor knowledge personified. The Best! From the basics to quantitative analysis to forex leveraging, this site features the most brilliant authors, along with tutoring for US securities exams and the Chartered Financial Analyst level exams.

So often readers have said to me, “I don't understand what I have in my pension. I own some mutual funds that I bought at one of the banks, but don't really know what they are or what they do. What are they talking about when they say bonds are risky, or the S&P index is falling? I'd like to think about taking some baby steps in investing, but just don't know where to start. It is so overwhelming!”

Have the courage to be contrarian. Start very small; pick one or two stocks that you know — look around your home. Identify items you have bought. Who made them? Who sold them? Apple, Toyota, GE? There are three you can start with. Go to Yahoo.Finance, or the library, or any investing book and start reading everything you can find on those three stocks. Type the name into Google and see what your search generates. You will be surprised at the millions of bits of information out there.

Ignore the noise. Stick to your plan. Even if all you have for investments is your future pension, learn about the stocks, bonds and other securities held in your pension plan. Understand what inflation does to your home budget and why you may be a conservative investor. If you don't try, if you don't start, you will never know if your pension is performing for you, losing money, or just stagnating. Waiting until you decide to retire is too late. And if you decide to venture into investing personally, you've got some investment background that you can use when you work with a broker. Locally, Butterfield Bank offers a self-directed brokerage plan to purchase individual stocks.

The author does not endorse this information or these sites, nor does she refer, or have any connection to these websites. Any investment information provided herein is general in nature and cannot be considered personal individual investment or financial planning advice. Readers who are not self-directed investors should consult their financial representative.

Martha Harris Myron JP CPA PFS CFP is a Bermudian journalist and a cross border financial planning specialist. Offshore financial perspectives for international citizens living, working, crossing borders, and straddling ponds in the North Atlantic Quadrangle: United States, Canada, United Kingdom, Europe, and the island of Bermuda, the premier international finance centre.

President of Pondstraddler? Life™ Consultancy.

Publications, Presentations and Seminars. www.pondstraddler.com

Uncertainty: Who can tell which the direction the stock market will go in the future?

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Published August 17, 2013 at 9:00 am (Updated August 16, 2013 at 6:36 pm)

Moneywise: Smart advice for the small investor

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