We strive to supply our readers with the best stock picks and investment advice at companyinvest.com.  Using the trading strategies we apply here, you can make 20-30% returns every year, even in a down year for the S&P 500 or Dow Jones Industrial average.

One measure of computing investment doubling time is the “Rule of 72.”

The ‘Rule of 72‘ is a simplified way to determine how long an investment will take to double, given a fixed annual rate of interest. By dividing 72 by the annual rate of return, investors can get a rough estimate of how many years it will take for the initial investment to duplicate itself.

For example, the rule of 72 states that $1 invested at 10% would take 7.2 years ((72/10) = 7.2) to turn into $2.

The Rule of 72 is not a perfect indicator, but is remarkably accurate and simple. The chart below outlines the Rule of 72 doubling times (in years) for low to high end annual returns.

The low end of the range is a typical return you would get out of a bank savings account or Certificate of Deposit (CD). If you want to create the kind of wealth needed for a comfortable retirement, you simply can’t afford to park your money in an investment vehicle that doubles only every 24 to 36 years!

However, if you follow a disciplined trading strategy, always using stops, along with the techniques taught on this site, you can double your money every 2 to 4 years!  With the power of compounding, you can amass a very sizeable retirement nest-egg over time!

WHAT IS A MUTUAL FUND?

A mutual fund is an open-ended fund operated by an investment company, which raises money from shareholders and invests in a group of assets, in accordance with a stated set of objectives. Mutual funds raise money by selling shares of the fund to the public, much like any other type of company can sell stock in itself to the public. Mutual funds then take the money they receive from the sale of their shares (along with any money made from previous investments) and use it to purchase various investment vehicles, such as stocks, bonds and money market instruments. In return for the money they give to the fund when purchasing shares, shareholders receive an equity position in the fund and, in effect, in each of its underlying securities. Benefits of mutual funds include diversification and professional money management.

Our Take: Recent studies have concluded that the over 85% of mutual funds CANNOT beat the annual return of the S&P 500.  So much for professional money management.  In addition, mutual funds are expensive, with front end commissions and several “hidden fees,” that the average Joe has no clue about.  And your performance is dependent on the fund manager buying and selling the right securities at just the right time.  And fund managers do not get bonuses due to good performance; they get bonuses only based on the amount of dollars coming into the fund.  So all their efforts go into getting as many people to buy into their funds as possible.  Also, very few of the strategies on this site can be applied to mutual funds.

WHAT IS AN EXCHANGE TRADED FUND (ETF)?

An ETF is a fund that tracks an index, but can be traded like a stock. ETFs always bundle together the securities that are in an index. Investors can do just about anything with an ETF that they can do with a normal stock, such as short selling. Because ETFs are traded on stock exchanges, they can be bought and sold at any time during the day (unlike most mutual funds).

Their price will fluctuate from moment to moment, just like any other stock’s price, and an investor will need a broker in order to purchase them, which means that he/she will have to pay a commission. On the plus side, ETFs are more tax-efficient than normal mutual funds, and since they track indexes they have very low operating and transaction costs associated with them. There are no sales loads or investment minimums required to purchase an ETF.

Our Take:  We love ETFs.  ETFs charge a fraction of the fees of mutual funds and can be traded just like a stock.  And online broker’s offer very reasonable commissions ranging from $4 to $10 per trade.  Additionally, ALL of the trading strategies you read about on CompanyInvest.com can be used on ETFs.

MORE REASONS TO BUY ETFs

There are two main reasons we love ETFs at CompanyInvest.com:

#1: ETFs have much lower fees than mutual funds.  Over time this can be very significant.  Consider the following example:

Investor A has a portfolio of four of the leading mutual funds with an average expense ratio of 2.16% (Typical of a mutual fund portfolio).  He initially invests $1 million.  His  portfolio yields a 10% annual return.  After 30 years, his portfolio grows to $9.6 million.  Not bad right?

Investor B has a portfolio of four of the leading ETFs with an average expense ratio of 0.19% (Typical of an ETF portfolio).  He also initially invests $1 million.  Let’s assume his portfolio also yields 10% a year.  After 30 years, investor B’s portfolio grows to $16.5 million!

So over a 30 year period, with identical annual rates of return, Investor B has accumulated nearly $7 million more dollars than Investor A.  And that is ALL due to higher fund expenses and other fees over time.

#2 ETFs can be traded just like a stock. This means you can buy and sell them whenever you want, and you can also short them (and make money even when the market is trending down).

ALL of the strategies we suggest on Companyinvest.com can be used with ETFs; but very few with mutual funds.  Once you learn to trade and incorporate trading strategies such as the ones taught on this site, you can beat the S&P 500 100% of the time; not 15% like the mutual funds.

Bottom Line: Participate in mutual funds if your company offers a matching contribution to your 401k program.  But consider opening a ROTH IRA (all the major online brokers such as Scottrade, Etrade, Tradeking, and Sharebuilder) offer them.  You will get much more bang for your buck and if you use the strategies discussed on our site, your annual return can be more like 20% per year, instead of the 10% used in the example above.

WHAT IS THE VIX?

 We strive to introduce new trading strategies at companyinvest.com.  Today we talk about a contrarian indicator, the VIX index.

 The VIX is the symbol for the Chicago Board Options Exchange’s volatility index. It measures implied volatility (not historical or statistical volatility) of a wide range of S&P 500 options. It is often called the “investor fear gauge” because it reflects investor’s best prediction of near-term market volatility, or risk. In general, VIX starts to rise during times of financial stress and lessens as investors become complacent. It is the market’s best prediction of near-term market volatility.  The good news is we can use the VIX to forecast the future direction of the market.

 HOW CAN YOU VIEW THE VIX?

 You can access the VIX index using your stock software or any major online trading platform software such as www.stockcharts.com or Yahoo Finance.  Enter the symbol “$VIX”. 

 USING THE VIX TO TRADE

 There is an old clichéd saying about the VIX index that goes:

 ”When the VIX is high, you buy… When it’s low, you GO!”

Looking at today’s chart of the VIX, “A” is the 3-day relative strength index (RSI).  Look at the past 3 times the levels were this oversold (green circles).  They all led to rallies in the VIX, while at the same time corrections in the S&P 500.  Here’s how they played out:

• June 21-Jun 30 VIX rally =     10.67% Correction in S&P 500
• July 12-July 18 VIX rally =     3.93% Correction in S&P 500
• October 19-20 VIX rally =       2.6% Correction in S& P 500
• November 5 to ? =                  3 to 10% S&P Correction on the HORIZON!

 ”B” is the price chart.  Right now the VIX is approaching a several month low, so if the saying rings true, you should sell some of your long positions or consider going short for the impending correction.  Also, today’s candlestick is a doji, indicating a probable change in trend.

 ”C” is the MACD histogram, a wonderful forecaster of trend change.  It looks like a bullish divergence is forming, meaning the VIX price made a LOWER low, while at the same time the MACD is forming a HIGHER low.

 Bottom Line: Position yourself for a 3 to 10% market correction.

 RECENT COMPANY INVEST PICKS

 We found some hot stocks recently!

 US Steel (X).  We said to buy shares at the $40 level on October 28, and since then the stock has rallied over 21%!  Many investors don’t get that kind of return in a whole year.  What to do:  Take 3/4 to all of your position off and put the profits in your pocket.

 Double Bull Gold (DGP).  We said to buy shares at the $39 level.  The trade is currently up 6.5% and still rising.  What to do:  HOLD or put a 5% trailing stop in.

With the dollar rallying most of the past week, materials and commodity stocks have consequently sold off hard and US Steel is no exception.  Since October 11 (in just two weeks), the stock has pulled back 13.51%.

Trading is all about finding the right time to buy.  Many investors strictly look at company fundamentals (earnings, cash on hand, debt, price to earnings ratios, etc) to place trades.  Problem is fundamentals will tell you WHY to buy a stock, but not WHEN to buy.  That is where technical analysis comes in.  Using chart patterns and momentum indicators, we can tell when the highest probability of a good trade will occur.  And at Company Invest, we think right now is a great time for a US Steel trade.

COMPANY INVEST TECHNICAL ANALYSIS

“A” is the 3-day relative strength index, a favorite swing trading indicator at companyinvest.com.  As you can clearly see, this indictor is WAY oversold (brown area). Look at what happened the last 5 times the RSI was this oversold (green circles).  Now look at the corresponding green arrows on the price chart that indicate trade entry points.  Each entry point resulted in a minimum of a 10% gain!  And here we are again…

“B” is the daily stock pricing chart (going back to mid May).  “Support” is very important in technical analysis.  Support happens when the big investors (pension funds, hedge funds, 401k fund manager) come in and buy.  We’ve illustrated two key levels of support on this chart (S1 and S2).  US Steel has been trading right at the S1 support level for the past three trading sessions without falling below it.  In this case it means buying the stock at $40 and change is a great entry.  Notice how the $40 level was also key support back on June 7.  And should the S1 support break, the next support level (S2) is the $37 area.

Also, the red selling volume bars have been getting shorter over the last 3 trading sessions while the stock has been basing.

“C” is the MACD histogram which gives nice advance signals for stock directional change.  Although you can see selling momentum has been occurring (stair step down blue bars), it looks as if a bullish divergence is occurring between the MACD histogram and the price chart (green line in “C” Vs. red line in “B”).  Simply put, it looks as if a higher low is setting up on the histogram, while at the same time a lower low has occurred on the price chart.

“D” is the slow stochastic momentum indicator.  At 8.88, it’s also deeply oversold.  Look for the signal line (black) to cross up through the MACD line (red) in the next day or two.  Multi day rallies in the stock occurred the last 4 times this signal was triggered (green circles).

Company Invest Bottom Line:   Grab US Steel (X) here and point your stop loss order in just below support at around $39.95.  A $44 price target could be hit in just a few trading days.

Seasoned investors know all about “shorting” the market, but many newer investors do not.  When you “short” a stock, you borrow shares from your broker, immediately sell them (with the hope they will go DOWN in price).  Then if they do go down, you buy them back a lesser price, return the shares to your broker and you keep the difference.

(e.g., You short 100 shares of Alcoa (AA) at $13.00 per share.  In a week, the price of AA drops to $10/share.  You’ve just made a profit of $3/share or a quick $300 profit.)

If this sounds complicated, don’t worry. There are dozens of “short” ETFs (Exchange Traded Funds) around that you can trade.  An ETF is similar to a mutual fund, but can be traded like a stock (you can buy and sell shares intraday).

Today’s Company Invest pick is MWN.  MWN is a triple-leveraged ETF that is short the “midcap stocks.”  It seeks a return that is 300% of the inverse (or opposite) of the price performance of the Russell MidCap index.  Simple put, when the broader market goes down (S&P, Russell), this fund will go up fast.

You can see from the chart that MWN has taken a beating lately since the market has been rallying.  That is a good thing.  You want to buy stocks or ETFs AFTER they selloff, or when no one wants them.  It’s like buying wholesale instead of retail.

COMPANY INVEST TECHNICAL ANALYSIS

“A” shows the 3-day RSI in an oversold state.  This is a buy signal for a short term trade.

“B” shows the stock price sloping down, while the stochastic lines “D” are looking like they will slope up at the same time.  That is a positive divergence and another buy signal.

“C” Is the MACD histogram.  This is a nice predictor of trend change. As you can see, the blue bars have been getting smaller and are headed for the zero line. The last two times this happened (see other green arrows), the stock rallied by several dollars both times. Look for the bar to break above zero soon.

Finally, “D” is the slow stochastic, a measure of momentum. The best signals occur when the lines enter oversold territory (<20), go back above, then go back down below 20 again.  As you can see, this has happened.

Company Invest Bottom Line: At $13 a share, MWN is hard to pass up.  Grab 100 shares and put a $1 stop in.  That way, the most you could lose is $100, while you could easily make $500-$1,000 on the upside.  A great risk/reward play.

The Dow just gained 9% in September.  It was the best September since 1939!  The DOW is now closing in on 11,000.  Get out the party hats right?  As Prince sang, “Let’s Party Like it’s 1999.”

 We’ll it’s eerily like 1999.  For one, in April of 1999 the DOW broke 11,000 for the first time.  As of yesterday, 10/5/10, the DOW was again less than 50 points from breaking through 11,000.  11 years and NO gain in the DOW.  Wow! And here we are again.  1999 also marked the dot.com bubble inflating in full force.  Investors couldn’t swoop up stocks fast enough, and many of them (especially tech companies) got massively overvalued.  Then, in 2001, that bubble popped and it all came crashing down.

 Then there was the housing bubble and the commodities bubble, and now we’re in the middle of the Government induced, zero interest rate bubble.  This one took us from the March 2009 lows (a 68% rally!!!!)  And it our view, we’ll be giving this entire rally back over the next 3-5 years too.  Consider mutual fund cash levels.  Although we like to think the market is controlled by retail investors, it’s really the institutional investors (pension funds, mutual fund managers) that are in charge.  The chart below depicts mutual fund cash levels (the amount of cash fund managers have available to put to work).

 As of mid September, 2010, mutual fund cash levels were recorded at an ALL-TIME low of 3.4%.

Major rallies occurred in 1974, 1982, and 1990 when the cash levels were greater than 11%.

1. The market sold off in   1973, 1976, 2000 and 2007 when cash levels were below 4.5%.
2. A low of 3.9% in occurred 05/1972. The market top was 12/1972 followed by a 46% decline.
3. The next historical low was 4.0% on March 2000 as the S&P reached its peak. Prices held up to make a lower high in September 2000 and then sold off for a year to a 43% decline.
4.  The next historic low of 3.5% was set in June and July 2007. The price top occurred several months later in October 2007 and prices sold off for 1.4 years to a 56% decline.
5. The July 2010 level was 3.4% compared to 3.8% in June and 4.2% in July 2009. Cash levels are at a new historical low. The top could be in or prices could hold up for several more months but in either case the market is facing a long decline similar to 2000-2002 and 2007-2009 (40-60%).
6. Cash levels will have to move much higher before the secular bear market ends.

 But never, fear, stay tuned to companyInvest.com as we will guide you through these murky waters.  There will be many opportunities ahead, and stocks do not go straight down.  There will be many nice rally opportunities, and we’ll even show you how to make money when the market goes down.

Alcoa Aluminum Daily Chart

Alcoa Aluminum has enjoyed a nice run from $9.92 per share on 8/31 to $12.22 at today’s closing. Lucky investors who got in at that time would have enjoyed a nice 23% gain in just over a month’s time!

Today’s Analysis:

Look at the green letter “A” in the chart above. If you notice, the stock price has went almost straight up from Sept 7 until today. Seems great right? However, Notice the red “A” at the bottom of the chart. That is a Stochastic indicator which measures momentum.  Notice how it is sloping down at the same time the price is going up.  That is a negative divergence and is a “sell” signal.

The letter “B” is today’s Japanese candlestick symbol, which is a “Hanging Man.” This candlestick appears during an uptrend and is a reversal signal.  Another “sell.”

Letter “C” are the volume bars, which are simply the number of shares traded in a day. Each bar represents a day. Notice how the buying volume has been diminishing while the stock price continues to rise. Another negative divergence. “Sell” again.

Letter “D” is the MACD histogram. MACD is a powerful technical indicator. The histogram bars are a nice predictor of market direction. They have flattened out. Watch tomorrow’s bar. If tomorrow’s bar, is shorter than today’s that is yet another “Sell” signal.

Finally the red line above the stock price (see red arrow) is the 200 day price moving average.  That line marks heavy resistance.  Should this rally continue, it will more than likely stall there.   The blue line near the bottom is the 50 day moving average. It can be considered “support.” So any selloff will likely be contained there.  In the middle is a trading range.

Bottom Line: After a 23% gain in a month, take profits and get out! Or if you’re feeling adventurous, short AA or buy puts.

“Opportunity Investment’ is a new style of investment where the investors look for the investment opportunities around the world. It is very different style of investment compared to traditional investment options such as bonds, shares, stock market etc.  You need to make decisions daily basis to get the best profit margins. The profit margins can be as high as 1000% in just one year.

The key object in “opportunity investment” is to find investment sources with high profit potentials. These investment sources need to be unexplored to keep the profit highest.

As the internet makes the information reachable so fast, the investment opportunities are everywhere and with structured and well planned investment plans, you can make millions in a short time of period.

The last economic crisis of the global stock market cost the investors a lot of money. Majority of investors lost money, retirement funds melted away and unemployment rate went sky high due to lay off in the manufacturing plants.

Because of the fluctuations in the stock market, investors seek for alternative ways to protect their investments. This driving force increased the global real estate market rapidly. If you haven’t consider investing to real estates globally, here are tips to increase your profits from real estate investments.

1) Think of Real Estate Globally. Do a research on what country can have a potential for economical growth. While developed countries such as USA, UK, Europe and Australia real estate markets are slowing down, developing countries like Bulgaria, Croatia and Turkey have a booming real estate market right now. You may need to do more research on possesing property and tax regulations in the given country before buying a property to compare the potential cost of ownership.

2) Assess your plan to make sure that it is profitable.  Think about the potential future political and economical changes before buying a real estate. With a proper plan, you can predict the market fluctuations and protect your investment.

3) Plan for the worst. When you make a plan, it is important to think about the worst as well. With this way, you can plan anything that can be possible.

4)  Consult an expert before the final investment. A real estate agent can save you thousands of dollars when you buy the property. With this way, you may save a lot of money and learn the market quickly.

5) Buy what you can afford. Most people like to buy what they want. An investment that fits to budget always prevents a possible future bankruptcy if something goes wrong. Ideally, a conservative budget is preferred when buying a property. With this way, you can have extra money for the unpredicted expenses for the property.

Finally, make a budget by adding all possible costs to own the property such as legal fee,s, real estate agency fees, taxes, etc. You also need to think about the potential renovation costs if you need to. Overall, real estate is a great way for investments and you can achieve your goals by using our recommendations to prevent surprises.