You may have seen that Charles Schwab has reduced its commissions to $0. But when you dig a little deeper you realize there’s a catch. As it turns out it’s free but Schwab gets to use your cash, lend it out, and pocket-the interest you could have made. “Schwab doesn’t use money-market funds or short-term Treasury funds, which could earn nearly 2% at recent rates,” explains Jason Zweig at the WSJ. “Instead, it shunts the cash into Charles Schwab Bank, which currently pays 0.55% on the money—and then turns around and lends it out at roughly 2%.” Clearly you can see Schwab isn’t working … [Read more...]

As an individual investor, you may be confused by the hype and pressure aimed at you by the media and securities salesmen. The constant drumbeat of news, both good and bad, can create an emotional response from even the most stoic of investors. Couple that with many investors’ lack of experience, and trouble can erupt from portfolios during tough market times. In July 1993 I wrote: You’re on the 15th Tee. At the Four Seasons golf course in Nevis, West Indies, high in the lush green hills of this remote Caribbean island, you are overlooking the yawning expanse of a many hundred foot deep … [Read more...]

In the Spring of 1996, I explained how important just ten days of a 31-year period were to building 37% of their wealth. I wrote that March: Market Timing Strategy—Bankrupt Before I tell you what other funds I have bought this month and which funds I have on my short list for the next few months, I want to startle you, shock you, and convince you beyond any doubt that market timing is a bankrupt strategy whose time has never come. Here’s the only example you’ll ever need to never market time again. T. Rowe Price put these numbers out a year or so ago. The original research was done by … [Read more...]

Odd things are happening in the economy right now. The most obvious is the recent destruction of oil facilities in Saudi Arabia. But there are also subtler, less obvious warning signs, including the first injections of liquidity into markets by the Fed in 10 years on Tuesday and Wednesday. Couple that with the Fed’s lowering of the Fed Funds rate despite economic growth and low unemployment, and things appear uneasy. These are the times at which it would be easy to make an investment mistake. I wrote in July 1995: “My name’s Marlow. General Sternwood wanted to see me.” Devotees of the … [Read more...]

There are many investment maxims worth repeating, but one especially important today is don’t be shaken out of the market on bad news. Those are the ten words of advice I gave to investors back in June of 1991 in the midst of a recession, and I haven’t found a reason yet to doubt their value. I told readers then: The best time to make money in the business cycle is when recession is in place. Interest rates always decline during a recession, just as they have in the present one. And the stock market always explodes with its biggest cyclical gains during the heart of recession. When was … [Read more...]