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How to be a good investor?

Try to find investors who are smarter than you. Warren Buffett is a legend and there are many other good investors, mutual fund and hedge fund managers. But the trouble is that majority of money managers are bad apples and not that they intend to be that way. They try hard to deliver better returns but are unsuccessful in doing so. Eventually they lend up resorting to unethical and questionable ways such as trying to get an inside information, data manipulation, window dressing etc. to make their returns look better.

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Sell in May and Go away - is being proved wrong this Summer.

There has been statistical evidence that buying Stocks in September and selling in May before the summer arrives is a good strategy. Researchers have shown that such a strategy returns appx. 7 % return every year. However, this year(2013) after a brief hiatus earlier, S&P-500 is making new highs as I am typing. ( See my earlier prediction on this blog). It is a pleasant surprise for those portfolios which are weighted heavily in equities or stock funds.

Fee structure of financial service agents.

It seems that Warren Buffett charges no fee if the returns are below 6%. If returns are above that, he charges 25% of the gain above 6%. Thus if an investment returns 10%, investor pays 4%*0.25= 1% to Mr. Buffett. Very fair I think when you compare that historical returns of equity markets have been in 9-11% range.

Data Galore and Big Picture (Values of various US asset classes and financial instruments)

US GDP : $15 trillion
US Bond Market total value : $37 Trillion
US Stock market total value: $15 Trillion
Value of all US residential homes: $23.5 Trillion
Notional value of derivatives outstanding worldwide: $600 Trillion -
Described my Warren Buffet as WMD: Weapons of mass destruction. What many people
don't know that munich re and some of the insurance subsidiaries of Buffett's companies make loads of money using derivatives.

Like they say: More money is robbed searching for the yield than using a gun point.

WSJ reported today:
Investors are once again clamoring for a risky investment blamed for helping unleash the financial crisis: the synthetic CDO.

In a sign of how hard Wall Street is trying to satisfy voracious demand for higher returns amid rock-bottom interest rates, J.P. Morgan Chase Co. and Morgan Stanley bankers in London are moving to assemble so-called synthetic collateralized debt obligations.

Controversial article from WSJ about "Is equity market nearing its top"

My prediction is that we are not near the top yet on equities in US. Fed's QE medicine is working and unemployment is coming down. However, the Bond yields will rise slowly with the expectation that inflation may pickup. Equities may correct by 5-10% to take a breather and then will go up higher further down the road to maintain historical equity risk premium. Early signs of bubble are beginning to slow up in some sectors but I don't see the Crash coming yet. However, time has come to get cautious and start taking profits on your speculative positions since the great run up of 2010 after the financial crisis.