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Aaron Katsman
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Aaron Katsman, President and CEO (aaron@lighthousecapital.co.il). Aaron develops investment portfolios for clients around the world. He is author of the book Retirement GPS: How to Navigate Your Way to A Secure Financial Future with Global Investing (McGraw-Hill). A well-respected wealth... More
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Aaron Katsman
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AaronKatsman.com
My book:
Retirement GPS: How to Navigate Your Way to A Secure Financial Future with Global Investing
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  • Investing Book Review: TradestreamYour Way to Profits

    I am not big on investing books, but a new book published by Wiley called ” Tradestream Your Way to Profits” – Building a Killer Portfolio in the Age of Social Media- caught my eye. Many clients have called me to discus if there are any ways to use social media tools to enhance their investing strategies?

    Zack Miller’s ( my colleague) book answers this question with a resounding ‘Yes’. Miller takes the reader on a journey of the last 30 years in investment philosophy and shows how social media bridges many of the gaps of the last 30 years to help make more informed investment decisions. 

    Let’s face it. Most if not all investment representatives and advisors do some kind of piggybacking of investment ideas. Whether it’s reading about an analyst recommendation on a certain stock, or hearing a hot pick on CNBC or even around the water cooler, very few investors actually come up with their own ideas. Rather, they hear or read something and they use that as a source of idea generation and proceed to do research on the stock and then decide whether to pull the trigger or not. In my favorite chapter, Miller talks about using certain social media sites to  piggy-back off the top hedge fund investors. He explains how you can use these tools to create portfolios similar to the Joel Greenblatt’s and and Bill Ackman’s of the world.

    If you are a do-it-yourself-investor, take a look at Tradestreaming, as it has the potential to help your investment decisions, and hopefully will make you a better investor.

    Aaron Katsman is a licensed financial professional both in the United States and Israel, and helps people who open investment accounts in the United States. Securities are offered through Portfolio Resources Group, Inc. a registered broker dealer, Member FINRA, SIPC, MSRB, NFA, SIFMA. For more information, call (02) 624-0995, visit www.aaronkatsman.com  or email aaron@lighthousecapital.co.il.



    Disclosure: no positions
    Aug 02 10:56 AM | Link | Comment!
  • Think Like a Contrarian

    Turn on the TV or radio and chances are that you will hear a story about the damage caused by the BP (BP) oil spill in the Gulf of Mexico. For savvy investors this type of a disaster and other like it may be an opportunity to profit.  While it may seem a bit crass to try and profit when birds and fish are dying, and previously pristine, white beaches are now covered in oil, smart investors lick their chops when such disasters strike. Why? Because in the case of BP, they focus not solely on the damage caused by BP, but rather on the damage caused to BP’s stock and bond price. I want to make it clear that I am not making any type of recommendation to run out and buy BP stocks or bonds, but it’s a great illustrative example of what is termed, ‘contrarian’ investing. 

    Investors who go against the general market trend are called “contrarians.” A contrarian is also defined as an individual who believes that certain crowd behavior among investors can lead to exploitable mispricings in the securities markets. For example, widespread pessimism about a stock can drive a price so low that it overstates the company’s risks and understates its prospects for returning to profitability. In the case of BP, a contrarian investor would make the case that the company is the 4th most profitable company in the world, and it’s already lost more than half of its value. In addition, a contrarian would assess that even the worst case scenario would mean that the company’s litigation exposure and clean up costs would come to maybe 2-3 years of its operating income. And no one expects the company to pay up immediately; rather, much of the litigation exposure will get tied up in the courts for years. It was 19 years after the Exxon Valdez oil spill until the Supreme Court made a final ruling as to Exxon’s legal liabilities. I want to emphasize that this is by no means a recommendation to buy the stock — it’s just a good example to explain the concept.

    Identifying and purchasing such distressed stocks and selling them after the company recovers can lead to above-average gains. Conversely, widespread optimism can result in unjustifiably high valuations that will eventually lead to drops, when those high expectations don’t pan out.

     Backward Thinking?

    Unfortunately, some investors have an inverted perception of risk. They tend to buy stocks when they have already appreciated significantly and sell them after they have already gotten crushed. However, this is the opposite of the golden rule of investing: Buy low and sell high.

    Baron Rothschild, member of the Rothschild banking family, is credited with saying that “The time to buy is when there’s blood in the streets, even if the blood is your own.” This motto has served shrewd investors for decades. The most famous of all investors, Warren Buffet said, “You pay a very high price in the stock market for a cheery consensus.” In other words, if everyone is in agreement about a particular investment, it may not be a good one.

    It’s Time in the Market, Not Timing the Market

    For most investors, contrarian investing may be helpful to help enhance returns but is generally no substitute for a proper strategic asset allocation.  Study after study has shown that investors do best if they are invested in the market and not sitting on the sidelines waiting to hit a home run. For example, if $10,000 were put in an investment that performed similarly to the S&P 500 Index from December 1990 to December 2005 and left untouched, this sum would have grown to $51,354 by the end of this time. However, if the investor missed even the 10 best days of the stock market during that 15-year period, his investment would have grown to only $31,994. And missing the stock market’s best 50 days during that time would have led to a loss – the original $10,000 investment would have been worth only $9,030 by the end.

    While buying and selling constantly and trying to time the market are not always advisable, it is worthwhile remembering that there are always opportunities in the market, especially after it has dropped. Analyze investments objectively without getting caught up in the hysteria and speculation that scares panicked investors and you could potentially profit when common sense returns.

    Aaron Katsman is a licensed financial professional both in the United States and Israel, and helps people who open investment accounts in the United States. Securities are offered through Portfolio Resources Group, Inc. a registered broker dealer, Member FINRA, SIPC, MSRB, NFA, SIFMA. For more information, call (02) 624-0995, visit www.aaronkatsman.com  or email aaron@lighthousecapital.co.il.



    Disclosure: No positions
    Jun 24 7:32 AM | Link | Comment!
  • First Time Investors: The Chance of a Lifetime

    The recent plunge of global stock markets has sent many investors scurrying for the exits. While more experienced investors should know better and avoid panicking, for young, first-time investors, this could be the chance of a lifetime. The old saying ‘it’s better to be lucky than good’ summarizes the reason that for new investors now is a great time to invest. If you can buy good stocks of quality, profitable companies for a substantial discount, you potentially could be well rewarded down the road. The fact that a young person has managed to save enough to open an investment account or a newly married couple has wedding money at their disposal to invest happens to be lucky, and their good fortune should be taken advantage of.  

    But why should novice investors take the risk now, when the markets are falling, to start investing? Some investors will say that they will wait to invest until it’s clear that the market is heading up. The problem is that there is no way to know if the market is moving up until after the fact. While none of us can predict the future we can use the past as a guide to try and figure out how past crises worked themselves out, although we should also be aware that past performance is no guarantee of future success.

     Buy Low/Sell High

    According to an old investment adage, one should buy when prices are low and sell when they are high. Although there is no sure way to declare that the market has finished falling, it is certain that the market would be cheaper after a 13% decline than it was 13% ago. In other words, the market is “on sale.” None of us likes to pay retail prices for anything and with the recent market pullback it could feel as if the investor is getting a great deal and buying wholesale! Now could be the time to implement a classic investment strategy known as ”buying the dips.” An example of this would be to wait for a pullback of at least 10 percent in prices, and then the investor will make his purchase. Relying on long-term statistical analysis, the investor would say that if over time, markets tend to move higher, any opportunity to buy stocks after a severe pullback could result in nice profits.  This approach is much different than trying to time when the market will bottom out and start moving higher. 

    One of the biggest risks of trying to “time” the market is the potential of “missing” the market. This is when an investor, thinking the market will go down, sells his investments and sits in cash waiting to re-enter the market when it’s clear the market will go up. But while the money is on the sidelines, the market shoots up. The investor has, therefore, incorrectly timed the market and “missed” the best performing months. Numerous studies have shown how much an investor can lose by being out of the market. For example, if a person put $10,000 into an investment that performed similarly to the S&P 500 Index in December 1990 and didn’t touch it until December 2005, the $10,000 would have grown to $51,354. But if the investor missed even the 10 best days of the stock market during that 15-year period, his investment would have only grown to $31,994. And if he missed the stock market’s best 50 days, the original $10,000 investment would have been worth $9,030 by the end. Oftentimes the market recovery is so swift that by the time such investors have made up their minds to invest, it’s too late. The market will have already recovered most of its losses. 

    Getting Started

    Last week I wrote about how newly married couples should start investing immediately. Many young couples, mistakenly, put all of their wedding money into the bank, where it makes virtually no interest. Think about the future. How will they be able to afford paying for their children’s weddings in 20 years’ time if their savings do not grow? To get started, a young couple will find it very useful to consult with a financial adviser, who will help them to define their financial goals and needs. Then, an investment plan can be drawn up to achieve these goals and meet these needs.

    Let the recent market drop work in your favor and start investing now.  Buy wholesale.

      

    Aaron Katsman is a licensed financial professional both in the United States and Israel, and helps people who open investment accounts in the United States. Securities are offered through Portfolio Resources Group, Inc. a registered broker dealer, Member FINRA, SIPC, MSRB, NFA, SIFMA. For more information, call (02) 624-0995, visit www.aaronkatsman.com  or email aaron@lighthousecapital.co.il.



    Disclosure: no positions
    Jun 10 6:12 AM | Link | Comment!
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