Mutual funds are companies that pool money from many investors and invest the money in stocks, bonds, short-term money-market instruments, into other assets or securities, or a combination of each of these investments. They have a fund manager who is responsible for investing the pooled money into specific securities, and they provide the ability for investors to purchase stocks and bonds with much lower trading costs than if they tried to do it on their own.  When you are investing in mutual funds, you are buying shares and you become a shareholder.

Investing in this type of fund provides many advantages over stock investing. These advantages are explained below.

Diversification – This is the number one advantage and allows investors to purchase a large number of stocks.  Mutual fund investing provides you with portfolio diversification and it greatly reduces your risk.

Liquidity – The investor is able to receive money produced from this type of investment in a relatively short period of time. Income generated from stocks and bonds can be difficult to obtain and CD’s offer no liquidity at all. 

Cost – Small amounts of money can be invested at no trading cost.  Investors can also invest at regular intervals and receive the same manager, access and investment, as the wealthy stock brokers since mutual funds are non-discriminatory.

Professional Management – With this type of fund you hire a professional manager who researches and trades the market on a regular basis.  They are fairly inexpensive and they usually have a support staff devoted to them as well.

While there are many advantages, there are also disadvantages as well.  A few disadvantages are explained below.

In the Dark – Investors have a hard time finding out the exact make-up of a fund’s portfolio at any given time. They also cannot influence which securities the fund manager buys and sells or the timing of the trades.

Guaranteed Costs – While there are typically no trading costs, investors must still play sales charges, annual fees, and other expenses despite the performance of the fund. They may also have to pay taxes on any capital gains received even if the fund did not perform well.

Uncertainty in Price – Unlike investing in stocks where you can get real-time pricing information, mutual funds only calculate their NAV (net asset value per share) once a day and this typically takes place after the stock exchange closes. The fund unfortunately may not be calculated until many hours after you have placed your order.

Obviously there is much more information that you should know before you begin to invest in mutual funds. The advantages far out way the disadvantages and almost every successful investor will tell you that you need to invest in mutual funds in order to build a strong portfolio. You may also want to learn about topics such as asset allocation, hedge fund investing, and stock charting.  These are additional investing concepts that may be of interest to you as well.  Happy investing and good luck!

Candlestick signals help reveal a lack of change of investor sentiment as well as they do showing a change of investor sentiment. Trend analysis becomes much easier to implement utilizing the information each candlestick signal represents. Witnessing a morning star signal or a hammer signal in the oversold condition provides an excellent visual signal that a reversal may be occurring in a trend. Fortunately, recognizing the investor sentiment that created those signals provide additional knowledge for analyzing price movements.

Having the knowledge of what candlestick formations reveal produces a dramatic advantage for investors. Simple techniques, such as the conditions of the stochastics, and the type of formations being produced during a trend greatly improves the trend analysis process. Obviously a long body demonstrates strong buying or selling forces. Long bodied bullish candles have been witnessed in the Dow over the past four weeks. The trend strength has been provided by a number of strong bullish candles. But what to the remaining trading days reveal?

Dow

Strong bullish candles indicate a great desire for the Bulls to enter the market. As can be seen, the pullbacks after a strong day consist of indecisive trading formations, spinning tops, doji's, etc. What do those formations illustrate? The bears are not showing convincing strength on the pullbacks. Observing the obvious can make trend analysis a very simple procedure. When the bullish candles are 'convincing', and the pullbacks are indecisive, the trend obviously should be moving in the direction of the convincing signals. This is one of the nice things about candlestick analysis. It is based upon common sense principles.

Knowing the predominant trend of the market allows the candlestick investor to position their portfolio appropriately. The Bullish Engulfing signal, seen in the Dow approximate one month ago, establishes the potential market direction. Upon seeing a major reversal signal in the oversold conditions, the scanning process now becomes oriented to the longside. Simple scanning techniques should reveal which sectors are now be looked upon favorably in these market conditions. Will all stocks move positive in a bullish market? Not necessarily! Candlestick buy signals in specific sectors allows investors to participate in those stocks/sectors that appear to have the greatest bullish sentiment going into the current trend.

FSLR

As mentioned in our chat room and previous newsletters, the scan searches found the oil service stocks and solar energy stocks showing the strongest candlestick reversal signals. The majority of stocks should move up during a bullish trend. Having the ability to sort out which stocks are not participating in the new uptrend greatly enhances the potential returns for the portfolio.

Online training program - April 19 and 20th, this two-day online training program will clarify how to use candlestick analysis correctly. How do you consistently participate in stock price moves of 15%, 20%, 30%, and greater? The common sense analysis provided by the visual aspects of candlestick signals are very easy-to-learn. You can gain a lot of insights by participating in the weekly training sessions. However, the response from past participants describes the benefits of sitting through a two-day training program. Once you have received all the information in a nice chronological order, it becomes more clear why the signals work as they do. Afterwards, participating in the weekly trainings reinforces what you have learned. The more you are exposed to the candlestick signals, the more sense they will make. Do not miss this opportunity to learn candlestick analysis in an easy-to-understand format. Take advantage of the knowledge Steve Bigalow and Rick Saddler can provide for improving your investment skills. This is not rocket science! This is merely common sense investment practices put into a visual depiction. Click here for the online training session details.

Free Public Stock Chat Session on "How to use indecisive signals to evalaute a price trend" tonight at 8PM ET. Click here for instructions.

Good investing.

The Candlestick Forum Team