TABLE T ABLE OF MIST MI STAKES AKES Introduction: Succeeding in a tough economy SECTION I - MIST MISTAKES AKES Mistake 1: Getting Wiped Out by Stock Concentrat Concentration ion Mistake 2: Being Deceived by Market Indices Mistake 3: Relying on the Prove Proverbial rbial Breakeven Mistake 4: Failing to Demand Perormanc Perormance e Results Mistake 5: Being Vulnerable to the Media Mistake 6: Not Understanding Understanding Financial Jargon, Jargon, or “Where Is My Straight Talk?” Mistake 7: Not Diversiying and Not Knowing That a 50% Loss Requires a 100% Gain Mistake 8: Falling Victim to the ‘Ostrich ‘Ostrich Eect’ During Market Declines Mistake 9: Not Understanding Understanding the Dangers o Overdiver Overdiversication sication Mistake 10: Not Knowing That Cheap Stocks Are Cursed Mistake 11: Listening to Stock Market Gurus Mistake 12: Getting Discouraged
1 4 7 9 12 14 16 19 21 23 26 28
SECTION II - Tools You Need You Are Invited! Please R.S.V.P R.S.V.P.. Just Ask Our Clients The Stock Market Wizards www.equitytube.com Letter From The Chairman www.wallstreetrontier.com www.minerviniprivateaccess.com About Michael Weiss Privacy Policy Disclosure Contact Inormation
32 34 35 36 37 42 43 44 46 49 51
SUCCEEDING IN A TOUGH ECONOMY
Whenever I read or hear new advice, I digest it and then consider the source.
Most of the time, it is subjective or infected with special interest. It is not easy to be a successful investor. My journey in the stock market began more than twenty years ago and includes a story that exemplies exemplies the challenges for the individual investor. I was having dinner with a friend and he told me a story about Rich. Rich never expected a speeding ticket to cost him $38,485
Rich was in a hurry to buy some groceries before heading home to watch the Yankees game. He was traveling 45 mph in a 45 mph zone, but missed the sudden sign change to 30 mph. The policeman pulled him over and handed him an $85 ticket. It wasn’t a pleasant way to start his Sunday, but at least, Rich thought “that was that.” A few months later, Rich learned that his car insurance payments increased by $75 a month. Now his $85 speeding ticket mushroomed to $985. A hefty price to pay for going just 15 mph over the speed limit, but once again, Rich thought “that was that.” Six months later, Rich went to lock in a new home loan. A $750,000 house with a $500,000 mortgage seemed like a conservative ratio. But what Rich didn’t know shocked him. The mortgage company not only checked his nancials, they also checked his driving record. The speeding ticket cost him 0.25% on his interest rate (1/4 point). Over 30 years, 0.25% on a $500,000 mortgage equals $37,500. Adding the higher insurance premiums, the seemingly innocuous speeding ticket wound up costing Rich $38,485. Through repetition, I learned the nuances of investing, and in this book, my rst, I illustrates the compounding effect of innocent mistakes and how to avoid them. I will reveal to you those things that I know can make your investing life miser-
SUCCEEDING IN A TOUGH ECONOMY able, including: being deceived by market indices, not diversifying, falling victim to the ostrich effect during market declines, and listening to stock market gurus. Avoid them, be disciplined and dogmatic about yo ur investment strategy, and success will be yours. The book, in simple English, avoids nancial jargon and describes strategies that can be instantly implemented by most investors. This book is your denitive list of twelve investment mistakes. Minimizing your investing mistakes is similar to limiting your losses. It is imperative if you are to be successful.
Failure is never seen as failure in the investing world, only as a learning experience. The denitive list of twelve investment mistakes will shorten your learning curve and put you in a position to maximize your returns in the greatest investment vehicle in the world - the stock markets of the United States of America. As you read through this list of investment mistakes, keep two simple thoughts in the back of your mind. Please understand that while my list is detailed and denitive, it is by no means comprehensive. Investing requires education, experience and a tenacious will. There are simply too many mistakes that you can make as you enter this world. Second, on page 38, I extend to you a call to action. If you read nothing else, I suggest that you take the time to read and understand my call to action. It will help you in your endeavor. Good luck and best wishes! Michael L. Weiss Frontier Financial Advisors, Founder www.wallstreetfrontier.com www.equitytube.com
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1 N I O I T N C E O S I
T C E S
SECTION 1
The Mistak Mistakes es
MISTAKE #
1
Getting G etting Wiped Out by Stock Concentration The whole point of diversifying your portfolio is so that when some of your investments lose, others gain. This strategy minimizes your port folio’s volatility. If you are a C-level executive at a public company, do you have a concentrated stock position? If so, watch out, as a major stock market decline can wipe out a decade of hard work.
GETTING GET TING WIPED OUT BY STOCK CONCENTRATION I you work or a public company, you are granted stock options and warrants. Your company is on the move. Each year the compounding eect is working or you as you receive more and more. Your stock price continues to rise. Then what? This is your dilemma. Warren Buett and Bill Gates, two o the world’s most successul and richest men, each took a temporary 50% hit to their net worth within the last decade. You and I can’t aord to take a loss like that, even i it is temporary,, and especially i you are nearing retirement. temporary
GETTING GET TING WIPED OUT BY STOCK CONCENTRATION continued Many o the most well-known stocks will go through a period o massive consolidation o at least a 50% retraction. Companies like Microsot, GE, Merck, GM, Citibank, Home Depot, Research In Motion and Merrill Lynch have all experienced massive drawdowns. I you own or inherited a stock that has moved signicantly higher over the years and now represents a signicant part o your investment portolio, put a plan in place to systematically reduce your holdings. I you want to take your emotions out o the equation, institute a calendar plan that automatically sells a predetermined amount regardless o the market conditions. Lastly, do not let the act that you have to pay taxes undermine a well-thought-out, balanced investment approach. The consequences could ar outweigh Uncle Sam’s take.
The best course o action is to develop a systematic sale system. Decide on a number o shares to be sold every quarter and systematically sell them. I the stock is heading south, do not override your system. By continually selling and diversiying the proceeds, your portolio and your amily’s needs are protected.
MISTAKE #
Being Deceived by Market Indices The Dow Jones and the S&P 500 indices are myopic views of the overall stock market. The media focuses on these indices, and chances are the success of your portfolio is being judged by your comparison to them. Are you comparing apples to oranges? Furthermore, relying on these indices during a market correction can lead to a false sense of security, as they may not provide an accurate picture of the investment climate.
BEING DECEIVED BY MARKET INDICES
Stock Mix - The Dow Jones Industrial Average - October 11, 2008 Could there be a circumstance where the index advances while the broader number o stocks continue to decline? Absolutely! This disparity is a result o the way the indices are computed. In the Dow, which consists o only thirty stocks, see chart stocks with higher prices carry greater weight than lower-priced lower-pric ed stocks. So when a high-priced stock rises, it carries more weight in the index. These weights change daily as the prices o the shares rise or all. When the stocks rise, their rise adds more points to the Dow’s advance.
Consider the comparison o a stock whose Dow weight is less than 1% General Motors to one with a Dow weight greater than 8% IBM. There have been days when the Dow’s rise has been due entirely to the rise o a single stock.
BEING DECEIVED BY MARKET INDICES continued
The S&P 500 isn’t much better. You might think that because there are 500 stocks instead o thirt y, the index might be more comprehensive. comprehe nsive. Think again. Each individual stock is weighted by market value, which is the sum o the number o shares outstanding times the price o the stock. As o October 11, 2008, the top ten stocks represented more than 20% o the value o the S&P. Just as surprising is the act that the bottom ten companies represent just 0.1% o the overall index. Keep an eye on the individual stocks i you really want a comprehensive look at the overall stock market.
Company ExxonMobil General Electric Procter & Gamble Microsot Johnson & Johnson JPMorgan Chase AT&T IBM Chevron Wal Mart
% 4.12 2.87 2.3 2.15 1.98 1.95 1.68 1.51 1.51 1.45
Company Compa ny General Growth Teradyne Te radyne AutoNation Oce Depot MGIC Investment Meredith Ciena Titanium Metals Unisys Dillard’ss Dillard’
% 0.01 0.01 0.01 0.01 0.01 0.01 0.01 0.01 0.01 0.01
Total
21.52%
Total
0.10%
Since a small group o companies can move the Dow Jones and S&P 500 indices, do these indices truly refect the health o the overall stock market? While they might be useul, they are hardly comprehensive. Keep your eye on the individual stocks i you want to know what is really going on.
MISTAKE #
Relying on the Proverbial Breakeven In nancial circles, the term ‘breakeven’ is heard most often when people are in investments in which they are losing money. It is their hope to get back to breakeven - which equates to neither a gain nor a loss. The danger lies in the attachment to getting back to breakeven. breakev en. This is especially true during a major market decline, when the previous market leaders could be the
RELYING REL YING ON THE PROVERBIAL BREAKEVEN BREA KEVEN The ultimate authority on whether you made a good or bad investment is the price o the stock. The management team, company strategy, product mix, patents - they don’t matter. What does matter is the current price o the stock, which refects the current value o the company. This is a dicult concept to implement, because no one likes to admit they made a mistake. Most people think that i they have not sold the stock, they still have not lost. Look at every investment or what it is - a public company expected to grow its earnings and thereby reward its shareholders. I you are not being rewarded, chances are the company is not perorming. Falling Falling stock prices can be a sign o bad undamentals. Don’t let the price you paid or a stock infuence your investment decisions. Get in the habit o taking small losses and looking or new opportunities with better undamentals. I you must own the company, you can always buy it at a uture point in time. Protect your capital and you will be a winner. Your Your cost basis or the stock the price you bought it or should never infuence your investment investment decision. Look at each investment today, regardless o the price you paid, and ask yoursel, “Is this company still worth owning?”
MISTAKE #
Failing to Demand Perormance Results Every savvy investor must demand intelligent, accurate, clear reporting. How else can you know whether you made money or not? Pretty simple concept, but you would be amazed at just how confusing some nannancial statements can be. In a bear market, the speed and transparency of your information must increase, which will allow you to make the appropriate adjustments.
FAILING TO DEMAND DE MAND PERFORMANCE RESUL RESULTS TS Have you ever wondered why your brokerage statements are so conusing? Have you ever wondered why those rms don’t provide you with precise perormance results or each o your accounts and then one easy-to-understand consolidated report? I was perplexed by these same questions. In 1994, I demanded change, so I started the rst consolidated nancial reporting company in America to provide investors with this critical inormation. Producing perormance and tax reports on more than $24 billion in assets or the high-net-worth market made the answers to the above questions extremely obvious.
If you have read this far, I must be engaging you, so in return for your undivided attention, I am prepared to offer you a unique proposition. If you aren’t crystal clear on what you own and don’t understand your portfolio allocation or how you are doing, fax us your statements (212-504-3073) and we will conduct a portfolio X-ray, free of charge and without any obligation. All your private information will be kept strictly condential (please see our privacy statement at the end of the document or go to: http://wallstreetfrontier.c http://wallstreetfrontier.com/privacy). om/privacy).
FAILING TO DEMAND DE MAND PERFORMANCE RESUL RESULTS TS continued Many o the big institutions hold back your inormation because they do not want you to see how poorly you may be doing! Demand your perormance results on a gross and net basis, and have those rms tell you exactly how much you have paid in ees to achieve those results. I you are not getting the results you deserve, move your money into index unds or consult a nancial asset management company that is not araid to be judged on net perormance.
Have you ever wondered why those same statements don’t clearly show you how much you have paid in commission and management ees on each o your accounts and a running annual total? Have you ever wondered why the mutual und companies do not provide individualized perormance reports instead o the und’s perormance report and why many o them do not ully disclose all the ees associated with running those unds?
MISTAKE #
Being Vulnerable to the Media The media thrives on excitement and tragedy. tragedy. This is especially true during a bear market. It stimulates you into making quick, uninformed decisions by creating a sense of fear and urgency. Use care care when relying solely on the media’s unsolicited, free advice.
BEING VULNERABLE TO THE MEDIA Have you ever seen the nancial television shows where a person purporting to be a successul money manager tells you how he made it? He went to a antastic school, school, then worked or the big investment banks and now he’s on your television. He reely doles out investment investment advice to you every night.
appeared, wouldn’t wouldn’t they be ocusing on running their own money? Thanks to the Internet, these talkative investment proessionals’ recommendations are now being measured. Beore you take a stock tip rom an actor, advisor, advisor, riend or amily member, attempt to quantiy the person’s past success and understand his or her investment process. process.
The media has only one goal - to sell advertising. advertising. The producers o these shows realize that their audiences are sophisticated and intelligent, so they build a brand around a sense o authority using experts who sound like they know what they are talking about. Their manner is authoritative, and they appear to be people you can trust. So much so, you sometimes sometimes ollow their tips tips with without perorming your normal due diligence. We must ask ourselves, what are those pundits really selling, entertainment or advice? advice? I these olks were as good good as they
Relying solely on the advice and tips oered to you by nancial experts on television is one o the biggest investment risks you can take. I encourage you to to watch the shows. Learn rom them. But don’t rely solely on their their advice.
MISTAKE #
Not Understanding Financial Jargon, or “Where Is My Straight Talk?” Knowing some of the basics of nancial terminology is essential when you’re on the road to becoming a success ful investor. investor. I said basics. If you don’ don’tt understand what is being said, then ask for clarication or nd a nancial asset manager who speaks your language. Watch out for the nancial rhetoric during stock mar-
NOT UNDERSTANDING UNDERSTANDING FINANCIAL FINANCI AL JARGON, OR “WHERE IS MY STRAIGHT TALK?” Alpha? Beta? Sharpe ratio? ratio? What are are these nancial pundits talking about? A recent survey conducted by AARP reported that 53% o Americans said they had made a wrong decision on an investment because they were conused or simply didn’t understand the nature nature o the investment. investment. A shocking 73% stated that nancial advisors use more jargon than car mechanics. Throughout the years, we have learned to slow down the auto mechanic. New types o service centers centers have been created to deliver an easy-to-understand message so you can make an inormed decision. decision. It is time or the nancial service industry to do the same. Forc Force e the analysts to use the same rating system, so there is no chance o misinterpreting their advice. Accountability starts with clear communicacommunication. The act is that you cannot make an intelligent, well-inormed decision i you don’t understand what’s being said. Whether you do it yoursel or you hire a nancial advisor, you owe it to yoursel and your portolio to learn the language.
Accountability starts with clear communication. Practice it and demand that it be reciprocated. reciprocated. I you don’t understand what your nancial advisor is saying to you, then ask him to explain. It’s that simple.
MISTAKE #
Not Diversiying and Not Knowing That a 50% Loss Requires a 100% Gain Owning 1,000 stocks will not protect you in a bear market and may result in the destruction of your capital. A long-only, buy and hold investment strategy is not a diversied investment strat egy. All investors need to diversify their portfolios and, perhaps more important, diversify their strategies.
NOT DIVERSIFYING (AND ( AND NOT KNOWING THAT A 50% LOSS REQUIRES A 100% GAIN) Ask yoursel this question: How many successul proessional money managers run a por tolio with ten or ewer stocks? I can’t think o any. Why should you try to be the rst? Working with stockbrokers who must call you beore every purchase can create the same trap. How many concurrent stocks can you be sold? Be updated on? Make timely decisions on? Compound that with the act that you are not your broker’s only client and I think you get the point.
Percent Stock Drops 5% 10% 20% 30% 40% 50% 60% 70% 80% 90%
The global investing landscape has changed orever. orever. China, India and other oreign countries are growing in infuence and power.. The result is increased volatility or the oreseeable power uture.
What is the risk o being solely committed to a long-only, buy and hold investment strategy during a major market decline?
Percent Gain Needed to Break Even 5.26% 11.10% 25.00% 42.86% 66.67% 100.00% 150.00% 233.33% 400.00% 900.00%
I your portolio drops 10%, you can make it back with an 11% gain. I it drops 20%, you can make it back with a 25% gain. But i it drops 50%, you must make a 100% gain just to break even! Look to the let, the numbers do not lie.
A risk-controlled, ast-adapting investment strategy strategy should be a part o everyone’s portolio. The question is, what does that strategy look like and are you capable o deploying it yoursel?
Many investors’ stock stock portolios consist o ten stocks or ewer stocks. I you don’t have the capacity to research and own at least twenty t wenty separate companies, you should obtain the advice o a nancial asset management rm.
NOT DIVERSIFYING (AND ( AND NOT KNOWING THAT THAT A 50% LOSS REQUIRES A 100% GAIN)
continued
First o, all investors should consider a strategy that has the capability to hedge their investment. The purpose is to reduce your portolio’s portolio’s exposure to a stock market decline. This is a risk reduction strategy that will also reduce your potential prots. When it is deployed with the correct precision, it will help reduce a portolio’s volatility. While hedging is eective, it does not guarantee portolio saety in a declining market. The only way to accomplish this is by selling stocks and moving to cash. A properly managed portolio will move you to 100% cash and eliminate all uture stock market risk. These strategies are being used successully every day. Be aware, and question individuals and nancial rms that are dogmatic about one investment approach. Successul long-term investing demands a combination o all investment approaches.
Remember: Losing 50% o your portolio value orces you to make a 100% gain just to get back to breakeven. That is why this is an area where every investor might be better o consulting with a sophisticated nancial asset management rm. The cost o being wrong is too great.
MISTAKE #
Falling Victim to the ‘Ostrich Eect’ During Market Declines “If you can’t see trouble coming, then trouble can’t see you.” We all know this isn’t true, but investors are notorious for ignoring their portfolios when bad news is imminent. Not opening your statements (the equivalent of sticking your head in the sand) is falling victim to the ostrich effect.
FALLING VICTIM TO THE OSTRICH EFFECT DURING MARKET MARKE T DECLINES There will always be times when the stock market looks like it will never recover rom an extended correction. Investors are earul and concerned, which is exactly where the nancial reporters want you. Bad news delivered in a compelling way increases viewership and increases prot potential, at your expense. The nancial media brainwash us, making a case that this current cycle is like no other. Market corrections are a act o lie. There There is nothing that can be done to prevent or stop these corrections. They come and go. Don’t ignore your problems; they don’t simply go away. As hard as it may be, you must open your statements, log in to your accounts and evaluate your position. Again, doing nothing is a certain recipe or disaster. Routines are a necessary part o investing, and discipline is required. Make it a habit to routinely monitor your investments during good times and bad, and i you are too upset to take on the task, call an objective proessional or advice.
When the nancial news is bad and your stock accounts are down, do not stick your head in the sand like an ostrich. This is very dangerous. Instead, recognize that the market is correcting, turn o the TV and examine your risk. This is when an experienced, educated nancial advisor is truly worth his or her weight in gold.
MISTAKE #
Not Understanding the Dangers o Overdiversication Diversication is the hall mark of the responsible investor. Is it possible to own too many different investments? If that occurs, your investment returns may be diluted while your portfolio achieves little additional protection during a stock market meltdown.
NOT UNDERSTANDING UNDERSTANDING THE DANGERS OF OVERDIVERSIFICATION OVERDIVERS IFICATION As we discussed earlier, diversication is the mark o a responsible responsi ble investor. What is the eect o too much diversication? Let’ Let’ss take two popular examples:
objective is to perorm identical to the market, then why not own a portolio o index unds, which have a much lower ee structure and have avorable tax treatmen treatment? t?
Mutual Funds: Many o the best-known mutual unds own hundreds o stocks e.g., Fidelity ContraFund ContraFund owned 361 stocks and American Fund Capital Income owned 1,812 stocks as o October 27, 2008. On average average,, most mutual und owners own our mutual unds. Four mutual unds multiplied by 200 stocks each means that investors own, on average, 800 stocks.
Warren Buett got it correct when he said that “wide diversication is required only when investors do not understand what they are doing.” I your objective objecti ve is to outperorm the indices, you might be better o working with a nancial asset manager who can provide you access to a proessional money manager.
Wrap Accounts: he same holds true or wrap account investors. A wrap account is a money management program in which investors choose multiple managers under one ee arrangement.. Any time investors choose multiple money arrangement managers, they must watch out or overdiversication. overdiversication. The S&P 500 represents a broad index o 500 stocks. I you were to own all 500 o those stocks, could you outperorm that index? I you owned 800 stocks, what would your chances be? Given that the only reason to own a mutual und is to outperorm the indices, by overdiversiying you make it nearly impossible to accomplish your goals. I your
It’s important to remember that no matter how diversied your portolio is, your risk can only be minimized. You You can reduce your risk associated with individual stocks, but no amount o diversication can prevent losses rom a stock market correction. The only way to eliminate all market risk is to move to a cash position.
MISTAKE #
1
Not N ot Knowing That Cheap Stocks Are Cursed Low-priced stocks usually indicate depressed fundamentals. Price is a excellent indicator of buyer interest levels, which are normally driven by a company’s ability to grow its earnings. Low price may be indicative of things to come, and during a major market decline, low-priced stocks may be the rst to decline and the last to recover.
NOT KNOWING THAT THAT CHEAP STOCKS S TOCKS ARE CURSED New investors are oten obsessed with the idea that the best opportunities or a huge payday are low-priced stocks. The idea o owning tens o thousands o shares can make you eel like you are in position or a big win. The problem with this strategy is that there is a reason why the stock price is depressed - the undamentals may be depressing. In addition to poor undamentals, there is another s et o dynamics that negatively aect low-priced stocks and make recovery tougher. The rst is the lack o liquidity, or the daily number o shares bought and sold. Hedge unds, mutual unds, pensions and other large institutional accounts generally won’t invest in companies unless they know that they can easily move in and out o the investment investment.. I it is too dicult to accumulate the amount o stock they need to make a meaningul investment without driving the price up, they will pass.
Stocks move higher because there are more buyers than sellers. One reason which might appear too obvious to carry much weight why a stock price is cheap is that there is a lack o buyers interested in these companies’ undamentals. Most people want to buy low and sell high. Have you ever thought about buying high and selling higher? For a detailed explanation o how this works, please go to: http://www.equitytube.com/sepa
NOT KNOWING THAT THAT CHEAP STOCKS S TOCKS ARE CURSED
continued
If you are comparing apples to apples then your total net return on an investment has nothing to do with how many shares you own EXAMPLE 1 Trading Cost equal $0.03/share Investment A Investment Inv estment B Symbol ABC Price per share $1.25 Amount invested $25,000.00 Shares 20,000 Percentage Perce ntage gain 15% Gross Prot $3,750.00 Cost to sell ($.03/share) $(600.00) Net Prot $3,150.00 Assuming the same percentage gain, you make more money owning higher priced stocks ------> EXAMPLE 2 Trading Cost equal $0.06/share Investment A Investment B Symbol ABC Price per share $1.25 Amount invested $25,000.00 Shares 20,000 Percentage Perce ntage gain 15% Gross Prot $3,750.00 Cost to sell ($.06/share) $(1,200.00) Net Prot $2,550.00 Assuming the same percentage gain, you make more money owning higher priced stocks ------>
XYZ $197.00 $25,000.00 127 15% $ 3,750.00 $(3.81) $3,746.19
15.91%
XYZ $197.00 $25,000.00 127 15% $ 3,750.00 $(7.62) $3,742.38
31.86%
MISTAKE #
1
LISTENING TO STOCK MARKET GURUS The stock market has dropped 32% from its October 2007 high. Blindly following the stock market gurus, who sometimes resemble carnival hawkers, is a sure way to lose money.. Their claims may be money unsubstantiated and possibly exaggerated. Sound nancial advice from proven, established investment rms should provide more consistent results than any claims made by these Johnny-come-lately types.
LISTENING TO STOCK MARKET GURUS At any time o the day or night, you can turn on your television and see what I am speaking about. These gurus claim they made an outrageous return and, or a small ee, so can you. The inomercials show a lot o colorul graphs interspersed with powerul advertisements assuring you o success i you buy this trading sotware. sotware. I have even seen some some that claim their sotware is ully automated.
I implore you to thoroughly investigate any claim beore you arbitrarily relinquish your money.
Claims o stellar past per ormance may be truthul; ater all, everyone gets lucky sometimes. But past perormance is not a guarantee o uture results, especially when a stock market guru’s success is not readily measurable by an objective third party. Furthermore, Furthermore, anyone can take multiple huge risks and have one pay o, which o course might be the only one you are made aware o. Please, don’t don’t all or this trap. There There is a better way. To be successul, you must accept one simple act: there is no easy way to make money money in the stock market. Soliciting and obtaining advice is important. I actually encourage you to do so. I make my living giving nancial nancial advice and have done so or more more than twenty years. My rule o thumb is simple: i I can’t understand the investment, I don’t make it.
I would warn against these inomercials and suggest that i you are just looking look ing to give your money away, then donate it to a local charity. Your Your money would benet more people more directly and you could actually take a legitimate tax deduction. deduction. In other words, i you subscribe subscribe to these ‘late-night heroes,’ you are likely throwing away your money.
MISTAKE
1
#
Getting Discouraged Investing is like anything else. The more you do it, the easier it gets. This shouldn’t be misconstrued to mean that the more you do it, the easier it becomes to make money. What it does mean is that the more familiar you are with the process of investing, the easier it becomes to make rational and prudent decisions. Once you success fully navigate your rst bear market, future bear markets will appear as normal stock market cycles.
GETTING DISCOURAGED Few people ever become impassioned by investing. The concept o investing can be overwhelming. Not only should you have a good understanding o basic investment concepts, you also need expertise internal or external in portolio risk management. And as the saying goes: “this is where the rubber meets the road.” Even i investing isn’t your cup o tea, you must nd the right partner to work with. Some investors have a larger appetite or risk than others; some investors are more cautious and tend to look at a longer investment time horizon. One thing is or certain, you must deploy a riskcontrolled investment strategy. I’m sure that many o you reading this are amiliar with the concept o ‘paying your dues.’ Investing is no dierent. There is a substantial time investment that you will have to commit to. Otherwise, you risk losing your hardearned money. Buy the books, talk to the proessionals, but beore you try your hand at managing your money, I recommend recomm end that you allow a nancial advisor to help you develop a strategy.
There is too much at stake to alsely believe that you can develop, implement and eectively manage an investment plan i you have never done it beore. There There is a lot to be said or relying on the experience o others. Once you have a strategy in place, monitoring and managing that strategy can be a ull-time job.
THANK YOU
Visit www.equitytube.com or more inormation
Thank you or coming along on this important journey. jour ney. I hope that we have stoked your re and your investment coals are glowing. There is a signicant learning curve, so dig in and expect your rst investment to be the most important investment investment you will ever make. Invest your time! The United States stock markets are among the greatest places in the world to grow capital and achieve your nancial goals, so don’t get discouraged. I will leave you with a secret that has proven true every time I have shared it. The secret to wealth is learning to hold on to what you have earned and then grow it.
U O Y K N A H T
2 N O I T C E S SECTION 2 Too T ools ls You Need
. P . V . S . R E S A E L P
Your Are Invited! PLEASE R.S.V.P R.S.V.P.. You have just nished reading Mike’s denitive list o twelve investment mistakes and, i you are like most readers, you are likely wondering what you should do next. Mike is accustomed to giving advice and, as you will see here, there is a simple, logical process to getting started with no obligation. There are two options: the rst is or qualied investors and the second is or investors who want to learn more. Please choose one.
OPTION 1: YES, please contact me. Frontier Financial Advisors Website oers nancial asset management services based on Mark Minervini’s SEPA® methodology or qualied investors with portolios in excess o $1,000,000. To schedule a ree/no obligation consultation, and to learn more about our risk-controlled investment program.
OPTION 2: TURN TO NEXT PAGE
Contact Us: Frontier Financial Advisors Michael Weiss, Founder 44 Wall Street, 10th Floor New York, York, NY 10005 Phone: 646-419-4444 E-mail: ino@rontiera.com www.wallstreetrontier.com www.equitytube.com www.minerviniprivateaccess.com
Your Are Invited! PLEASE R.S.V.P R.S.V.P.. OPTION 2: You must establish a baseline. Due to the lack o clarYou ity on your statements and number o statements this can be a daunting task. We oer a ree comprehensive portolio X-ray that will establish your baseline in one easy to understand report. Step One: Fax your statements to 212-504-3073. Our team will complete the analysis o all your stock and mutual und positions. Your Your inormation is sae. Please read our privacy policy. Step Two: Your portolio will go through an internal review.. Ater the process is complete, a phone apreview pointment will be scheduled to discuss our ndings. Be advised that this review is noncommittal and ree o charge. Step Three: A ollow up call will be scheduled to disucss any additional questions. At this point, i you like what you hear a nal due diligence call will be scheduled. I want to emphasize that we do not rely on sales pressure tactics. Our goal is to educate you and let you decide i a risk-controlled investment strategy is an appropriate investment investment choice or you. Ultimately our objective is to identiy those individuals who want to
do business with us. I’m sure that you can understand and appreciate that. I you are ready to move orward, the due diligence call will be scheduled. Step Four: The due diligence call will last one hour and will be conducted in person or via a live video appointment. This time is necessary or us to clearly lay out a plan or you, and it allows both o us to establish and build rapport. This rapport is necessary because we view all our client relationships in the long term. We don’t want to waste your time or ours. Please eel ree to call at anytime 646-419-4444
JUST ASK OUR CLIENTS
K S A T S U J
There is one simple measure that denes our success: the quality o the conversations we are having with our clients. clients. While they were impressed with our impressive net returns or 2007, many were struck by how eectively we were able to preserve capital through this terrible bear market. Our vision is to deliver an actively managed, risk-controlled investment strategy that capitalizes on trading eciencies and ocused research to deliver superior returns. We are comortable saying, “Mission accomplished!” In 2007 and 2008, we were able to leverage two key components o Mark Minervini’s M inervini’s SEPA® SEPA® methodology: First, protect capital by going to cash and using short positions when appropriate. appropriate. Second, identiy new market leaders coming out o a correction. The execution o the SEPA® methodology is complex, but the concept is simple: don’t take big losses but do own the best growth companies the market has to to oer. oer. The commitment to avoid big losses is what drives us to cash, as we have done ve separate times over the last ourteen
months. It’s a simple concept: when stocks break down, we sell sell them quickly. Not only does this steadast rule protect us in down markets, but it also helps us lock in our hard-earned prots. What does it look like rom our vantage point sitting in 100% cash waiting out a correction? Clarity. While most others are are conducting damage control, we are ocusing on identiying the new market l eaders that will drive us out o the correction. Mr. Minervini’s SEPA® methodology provides us with the condence to weather the inevitable storms. Our clients have ound ound this program to be a perect addition to the long-only, buy and hold products delivered by the traditional investment houses. Our ocus remains on providing you with uniquerisk-controlledinvestmentopportunities that complement a traditional portolio. Please don’t hesitate to call our team o proessionals at 646-419-4444, as we look orward to providing you with the outstanding service your hard-earned money deserves.
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only three down months the worst, a minuscule 2% loss.
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Mark Minervini, who has averaged a 220% annual return during the past ve years while keeping his maximum quarterly loss to a raction o 1%.
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Schwager gets the answers rom phenomenally successul traders, including: Michael Lauer, an outspoken und manager manager,, who explains why he believes many o the country’s leading mutual unds are ollowing a fawed strategy and whose own und provided investors with a ty-old return in seven years. Steve Cohen, a modern-day trading legend who manages billions and who has averaged trading returns o 90% during the past seven years, with
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D A E R T S U M A
WWW.EQUITYTUBE.COM Visit EquityTube.com EquityTube.com to access our exclusive videos. Within these videos, you will learn: • Up-to-date analysis of major market events and what they mean to you. • The up and coming market opportunities that need your attention right now. • How to eectively manage your risk prole
to take advantage o the biggest opportunities while keeping your money sae. • Upcoming market trends with the potential or huge rewards. • And much more!
LETTER LET TER FROM THE CHAIRMAN
Dear Investor,
The Problem Creates a Business Opportunity
Welcome to Frontier Financial Advisors, a registered register ed investment advisor specializing in nancial asset management. The Investment Advisory platorm has many advantages over the traditional brokerage platorm, and I look orward to sharing these benets with you over the next several weeks.
Early in my career career,, the nancial asset ass et management industry rustrated rustrated me no end. My clients complimented me on my attention to detail, as well as my ability to identiy their needs and ultimately deliver quality service. However, I received minimal praise or the investment products, because they were unsuccessul in delivering consistent investment returns. My investment choices were limited to o-the-shel rm products such as wrap accounts, mutual unds, index unds and stock recommendations recomme ndations generated by in-house brokerage analysts. Selling investment products tailored to the mass market led to inconsistent perormance o client accounts then, and this still remains an all-too-common dilemma among most investors today.
A number o years ago, I set out on a mission to build a nancial asset management rm designed specically to solve what I believe is a problem most high-net-worth investors continually experience. This vision was drawn rom both my twenty years in the nancial service business and proprietary knowledge gained through my experience in the consolidated nancial reporting industry see GreenTrak GreenTrak below.
R E T T E L
LETTER LET TER FROM THE CHAIRMAN
Knowledge I conducted an exhaustive research project, and the results o this venture supported my hypothesis that most high-net-worth investors were experiencing similar rustration in the asset management management business. My ndings led me to co-ound GreenTrak, GreenTrak, a consolidated nancial reporting rm created to provide investors with perormance inormation about their investments. GreenTrak GreenTrak aggregated investors’ numerous brokerage statements into one sixteenpage report that disclosed the results. GreenTrak grew to more than 100 employees and tracked in excess o $25 billion rom highnet-worth investors and investment proessionals. We tracked hedge hedge und managers, managers, institutional managers, index unds, mutual unds, wrap-account managers, brokers and individual stock traders. We tracked it all, and based based on this proprietary evaluation, we discovere discovered: d:
• More than 85% of our clients were underperorming the market over any given cycle. • Most clients were unhappy with the results they were achieving. • Most clients were generally dissatised with the services rendere rendered. d. • The investors with the best results were using highly exclusive - and sometimes inaccessible - money managers who specialized in the nancial asset management business.
Attacking the Problem by Creating the Solution GreenTrak was sold in 2000, and I set out to leverage my experience and unique industry perspective to build a nancial asset management rm that would address and conquer these problems. problems. The rm, based on the simple premise o true investor satisaction, would:
LETTER LET TER FROM THE CHAIRMAN
• Establish and maintain relationships with revered money managers whose investment decisions would consistently refect their expertise, and then introduce them to a select group o high-net-worth clients. • Build an investment platform that would oer an exclusive community o high-net-worth investors the chance to invest alongside these managers without being obliged to meet their restrictive high-minimum investment requirements.
Moreover, our nancial asset management rm would strive to provide great service and operate with absolute integrity, courtesy and proessionalism. As an entrepreneur since the age o thirteen, I knew it could be done, and Frontier Financial Financial Advisors is the product o over $1.5 million invested and many years o development. Today we operate on a solid oundation, with our lead money manager regarded as one o America’s top stock traders.
Mark Minervini is One o America’s Top Stock Traders Mark Minervini, by using his proprietary SEPA® methodology,, delivers a risk-controlled investmethodology ment strategy that has proven to be invaluable, as we did an incredible job protecting our clients’ capital in a very dicult stock market environment. I am proud to declare that we are quickly becoming a leader in the nancial asset management industry. As an investment advisory rm, we are compensated based on management management ees. ees. The management ee is derived rom a percentage o your assets under management. We are duciaries and must always prioritize your interest above the rm’s. rm’s. Furthermore, prior to initiating a relationship, we will send you our Form ADV, which is our legal brochure that provides ull disclosure. Lastly, beore any advice is given, given,
LETTER LET TER FROM THE CHAIRMAN
we sign an advisory agreeme agreement, nt, a contract that clearly outlines our terms o service. These policies are typical o Investment Advisory rm’s and exist in stark contrast to those o the brokerage industry. Our goal is to change your investment experience by providing you with an opportunity to successully grow your capital using Mark Minervini’s M inervini’s risk-controlled risk-controlled investment strategy. Our methodology is straightorward straightorward:: 1. We utilize our knowledge, knowledge, experience and network to perpetually seek out experienced money managers. 2. We team our clients with these managers, who create investment strategies designed specically and individually to leverage their expertise.
3. We ocus on delivering excellent excellent service. 4. We deliver deliver timely and concise perormance perormance and tax reports. 5. We operate with unwavering integrity. Specialization is the art o doing one or a ew things exceptionally well. well. We pride ourselves ourselves on executing the most vital tasks to perection. This, o course, sounds simple and similar to some o our competitors’ jargon, but ater having been an SVP at a ew o the large brokerage rms, I know what the competition is oering. What they are not oering you - strong perormance,, steadast commitme ormance commitment nt and peace o mind through a risk-controlled investment investment program - has been the primary ocus or creating Frontier Financial Advisors. Today is the best time to improve your current nancial relationships. relationships. Part o the success success o
LETTER LET TER FROM THE CHAIRMAN
General Electric’s turnaround was Jack Welch’s staunch pledge to terminate marginal employees and continually upgrade GE’s workorce. That same pruning process should be employed by all investors: • If your brokerage rm stinks, send them to the showers. • If your stockbroker’s stockbroker’s service light is not on, send him to the garage. • If your mutual funds act like dead sh, throw them right back. • And nally, if you’re not a good stock picker, limit your sel-inficted pain.
We have celebrated 25 years o declining interest rates, which has led to great gains in both bond prices and portolios, but this rally is over. over. The real estate market, which has been a great place to grow capital or the past ve years, has cooled. Money fows to perceived value and new opportunity - toward investments investments that people believe will demonstrate a signicant and stable rate o return - and due to the recent bear market, the
growth stock sector o the equity markets is the right place to be. It is critical that you have the best nancial team in place today to position yoursel or the next three to ve years. Complacency is inexcusable when it comes to your hard-earned money. We welcome the opportunity to ully demonstrate our innovation and how we might be a great addition to your current team. Sincerely, Michael L. Weiss, Founder Frontierr Financial Advisors Frontie P.S. Our website, www.walls www.wallstreetrontier.com, treetrontier.com, provides a wealth o inormation. O particular value is our exclusive EquityTube. EquityTube. Our monthly threeminute video depicts what has transpired in our clients’ accounts during the prior thirty days, and I invite you to take a peek at www.equitytube.com. www.equitytube.com.
WWW.WALLSTREETFRONTIER.COM
WWW.MINERVINIPRIVATEACCESS.COM
L E A H C I M T U O B A
ABOUT MICHAEL WEISS The most important thing to our customers - and to us - is that we do exactly what we say we’re going to do exactly when we say we’re going to do it. Ater two decades in the nancial industry, Michael is still innovating in the arena o high-networth investing. investing. His investment products products and enterprises have included the Refection Portolio, an independently managed discretionary investment und program or high-net-worth individuals that he successully ran or six years, and GreenTrak, a groundbreaking nancial perormance reporting company that was the rst to oer investors the ability to review their accounts on a consolidated and individual account basis. By the time GreenTrak GreenTrak was sold to a public company, it was monitoring perormance and preparing tax inormation or more than $25 billion in assets and counted some o the best-known nancial companies as its clients, including Merrill Lynch, Chase Bank, UBS and
Donaldson Lukin & Jenrette, as well as some o the largest U.S. accounting rms. In addition to being involved in his own enterprises, Michael has served as senior vice president at such established nancial institutions as PaineWebber, S.G. Cowen & Company and CIBC Oppenheimer & Company.
ABOUT MICHAEL WEISS As CEO o Frontie Frontierr Financial, Michael continues to invent alternative strategies or nancial asset management. In choosing to create Frontier Frontier as a small, exclusive rm, Michael has ocused sharply on the needs and concerns o investors, rather than solely on expanding the amount o assets under management. management. Michael is also chie investment ocer o Weiss Capital Group II, LLC, which is a general partner o two U.S.-based hedge unds. When he’s he’s not busy thinking about smarter approaches to investment, Michael can be ound paying it orward. Michael has had some great sports, business and lie coaches and believes in volunteering his time and sharing his experiences to help others. He lives in New York York City with his wie, Leslie, and their goldendoodle, Callie. Examinations: NASD Series 24 - General Securities Principal June 2003 NASD Series 7 - General Securities Representative December 1987 NASD Series 65 - Investment Adviser February 2005 NASD Series 63 - Uniorm Securities Agent State December 1987 Lie and Health Insurance License July 2003
Education: B.A. Economics, 1986, Union College
Y C I L O P Y C A V I R P
PRIVACY POLICY Frontier Financial Advisors, herein reerred to as FFA, requires that you provide current and accurate nancial and personal inormation. FF FFA A will protect the inormation you have provided in a manner that is sae, secure and proessional. FFA and its employees are committed to protectprotec ting your privacy and to saeguarding your inormation. Saeguarding Customer Documents We collect nonpublic customer data orally, in checklists, in orms, in written notations and in documentation documentatio n as provided to us by our customers or evaluation, registration, licensing or related consulting services. services. We also create internal lists o such data. During regular business hours, access to customer records records is monitored so that only those with approval may access access the les. During hours when the company is not in operation, the customer records records are locked. locked. No individual who is not authorized shall obtain or seek to obtain personal and nancial customer inormation. No individual with authorization to access personal and nancial customer inormation shall share that inormation in any manner without the specic consent o a rm principal. principal. Failure
to observe FFA’s procedures regarding customer and consumer privacy will result in discipline and may lead to termination. Sharing Nonpublic Personal and Financial Inormation FFA is committed to the protection and privacy o its customers’ and consumers’ personal and nancial inormation. FF FFA A will not share such inormation with any aliated or nonaliated third party except: • When necessary to complete a transaction in a customer account, such as with a clearing rm or account custodians; • When required to maintain or service a customer account; • To resolve customer disputes or inquiries; • With persons acting in a duciary or represen tative capacity on behal o a customer; • With rating agencies, persons assessing compliance with industry standards, or attorneys, accountants and auditors o the rm; • In connection with a sale or merger of FFA’s business; • To protect against or prevent actual or potential raud, identity thet, unauthorized transactions, claims or other liability; • To comply with federal, state or local laws, rules and other applicable legal requirements;
PRIVACY POLICY • In connection with a written agreement to provide investment management or advisory services when the inormation is released or the sole purpose o providing the products or services covered by the agreement; • In any circumstance circumstancess with a customer’ customer’ss instruction or consent; or • Pursuant to any other exceptions enumerated in the New York York Inormation Privacy Act.
Frontier Financial Advisors Client Opt-Out Frontier Provisions It is not a policy o FFA FFA to share nonpublic personal and nancial inormation with aliated or unaliated third parties except under the circumstances noted noted above. Since sharing under the circumstances noted above is necessary to service customer accounts or is mandated by law, there are no allowances made or clients to opt out. Newsletters I you wish to subscribe to our email communications, we will use your name and email
address to send the newsletter newsletter to you. you. Out o respect or your privacy, we provide you with a way to unsubscribe. Please see the “Choice/ Opt-out” section, below. Choice/Opt-out When you register or our site, we use your email address to send you internal communications rom www.walls www.wallstreetrontier.com. treetrontier.com. I you’ve registered to receive email communications rom us and later change your mind, you may contact us to have your name removed rom our distribution lists. You may also opt out o any o our communications by simply utilizing the “unsubscribe” “unsubscribe” link in any email or newsletter we send. Removal rom Frontier Financial Database Individuals who willingly provide contact inormation to us by mail, phone or email, through our website or in any other way in response to ourmarketingactivitiesmay receivesubsequent periodic inormation rom FFA on new products
PRIVACY POLICY and services or upcoming events. events. I you don’t wish to receive such inormation, please let us know by sending an email to ino@rontiera.com or by writing to the ollowing address: Frontier Financial Advisors Frontier 44 Wall Street, 10th Floor New York, York, NY 10005 Please provide FFA with the exact name and address as it was originally provided. provided. We will be happy to remove your name rom our database and will do everything possible to honor your request or removal. To unsubscribe rom FFA’s email communications, send an email to ino@rontie ino@rontiera.com ra.com Please put “UNSUBSCRIBE” “UNSUBSCRIBE” in the subject eld and include the email address where you receive received d the content, along with any additional email addresses you would like suppressed. We will do our best to prevent our email content rom being sent to you in the uture.
DISCLOSURE Frontier Financial Advisors is a registered investment advisor located located at 44 Wall Street, Street, 10th Floor, New York, New York. This inormation is intended only or clients and interested investors residing in states and countries in which Frontier Financial Advisors is qualied to conduct investment advisory services or is qualied or exemption rom exclusion registration requirements. requirements. Nothing in this presentation is intended to provide specic nancial advice to any investor nor is intended to be the primary basis or investment decisions. Please contact Frontier Financial Advisors at 646-419-4444 to nd out i we can conduct advisory business in the state or country where you reside. Any subsequent direct direct communication with a prospective client shall be conducted by a Frontie Frontierr Financial Advisors representative who is either registered registered or qualies or exemption or exclusion rom registration in the state or country where the prospective client resides. Beore investing in any program, you must obtain, read and thoroughly examine its disclosure documents, which include Form
ADV, the Advisory Agreement and all other documents provided by the clearing rm. The Minervini Select® Program engages in leverage and short sales, which may increase the risk o investment loss. You should comcommit only risk capital to any investment in the stock market. Capital invested invested in the Minervini Select® Progr Program am will experience volatility, which means that i you need to close your account at an inopportune time, you may lose a substantial portion o your investment. investment. The Minervini Select® Program has only three-plus years o operating history. history. Keep in mind that the past perormance o any investment is not necessarily indicative o uture results. The inormation contained in this document may not be reproduced or reorganized. The user assumes the entire entire risk o its use. Frontier Financial Advisors, LLC, expressly disclaims all warranties o originality, merchantability or tness or any particular purpose. This material and any views expressed herein are provided or inormational purposes on an
E R U S O L C S I D
DISCLOSURE “as is” basis only and should not be construed in any way as an endorsement or inducement to invest in any specic program. This document does not discuss any advisory services provided by Frontier Financial Advisors or perormance returns by clients o Frontierr Financial Advisors and represents only Frontie Michael Weiss’s personal opinions and viewpoints. Frontie Frontierr Financial Advisors manages its clients’ accounts accounts by using a variety o investment techniques and strategies not necessarily discussed in this book or appropriate or all types o investors. Any investment investment program may be volatile and can involve the loss o principal. Past perormance perormance is no guarantee o uture returns. Frontier Financial Advisors’ website, emails and books provide links to websites produced produced by other providers, or your convenience. FFA is not responsible or errors or omissions in that material and does not necessarily approve o or
endorse the inormation inormation provided. provided. Users who gain access to that material are subject to copyright and other restrictions on its use imposed by those providers.
INFORMATION Credits: Written by: by: Michael Weiss Weiss Layout and Design: Dion Cini Market Analysis and Research: Research: Daniel Mendoza Integration:: Faheem Mufahi Integration Video Production: Production: Phil Petrie
Special Thanks To: Marc Weiss, Frank Cordovano, Cordovano, Martin Alberti, Joey Lowe, Dennis Tang, Tang, Jessica Cox and John Assara
Contact Us: Frontier Financial Advisors Frontier Michael Weiss, Founder 44 Wall Street, 10th Floor New York, York, NY 10005 Phone: 646-419-4444 E-mail: ino@rontie ino@rontiera.com ra.com www.wallstreetrontier.com www.equitytube.com www.minerviniprivateaccess.com
N O I T A M R O F N I
PUBLISHED BY: The Wall Street Institute For Stock Market Proessionals Copyright © 2009 by Michael M ichael L. Weiss. All Rights Reserved. NO PART OF THIS BOOK MAY BE REPRODUCED OR TRANSMITTED IN ANY FORM OR ANY MANNER, ELECTRONIC OR MECHANICAL, INCLUDING PHOTOCOPYING, RECORDING OR BY ANY INFORMA TION STORAGE ANDRETRIEVAL SYSTEM, WITHOUT PERMISSION IN WRITING FROM THE PUBLISHER.
Frontier Financial Advisors Frontier 44 Wall St. 10th Floor New York, York, NY 10005 www.wallstreetrontier.com www.equitytube.com Phone: 646-419-4444
The Wall Street Institute For Stock Market Professionals
Wall Street Money Management Secrets 12 Financial Asset Management Strategies That Professionals Use To Succeed In Declining Stock Markets
Michael L. Weiss
The Wall Street Institute For Stock Market Professionals
Whenever I read or hear new advice, I digest it and then consider the source. Most o the time, it is subjective or inected with special interest. It is not easy to be a successul investor. investor. My journey in the stock market began more than twenty years ago. Through repetition, I learned the nuances o investing, and in this book, my rst, I will reveal to you those things that I know can make your investing lie miserable. Avoid them, be disciplined and dogmatic about your investment strategy, and success will be yours. This book is your denitive list o twelve investment mistakes. Minimizing your investing mistakes is similar to limiting your losses. It is imperative i you are to be successul.
Michael Weiss is a successul investment advisor and entrepreneur in practice or over over twenty years. He is the ounder o Frontier Financial Advisors, a registered investment advisory rm specializing in managing money based on Mark Minervini's SEPA® methodology.
