Diversified stock mutual funds may be the best funds if you want to make money investing in 2014 and 2015, but keep an eye open as 2014 unfolds in case corporate profits disappoint. In that event, the best funds could be some that most investors aren’t even aware of.
For the 5 years leading up to 2014, the best way for the average investor to make money investing was to simply buy diversified stock mutual funds and hold on. If you did this you could have earned 150%. These were the best funds for primarily two simple reasons. Corporate profits were growing, and the stock market had previously suffered losses of over 50% due to the financial crisis and the recession it created. Stocks looked cheap. We have many more Mutual Funds Investing Help Articles Now Available.
Corporate sales did not grow by leaps and bounds; and the economy was lackluster with totally unacceptable levels of unemployment, which still linger. Record low interest rates stimulated corporate profits and made stocks look attractive. That’s why the best funds for average investors were the ever-popular diversified stock variety. In 2014 and beyond it might not be so easy to make money investing.
Above all else, stock prices are based on investor expectations of growing corporate profits (net earning per share), and earnings growth could be disappointing in 2014 and beyond. What this means to you is that the stock party could be coming to an end, and you may want to broaden your horizons in your search for the best funds. Uncle Sam is no longer aggressively lowering interest rates to stimulate the economy, and the bull market in stocks is getting long in the tooth (old). So, how do you make money investing and what are the best funds if things turn sour?
The best funds could be those that represent a bet that the stock market will fall. I know that the average investor is unaware of the fact that you can bet on the upside or you can just as easily bet on the downside. Some folks even think that to bet against stocks is illegal or just plain un-American. Not so. It’s a free country and we have free markets. It’s nothing new either. People got rich taking “short” positions during the Great Depression of the 1930s by betting that stock prices would fall… in order to make money investing on the downside. Investors in the know have been doing it ever since.
Today it’s easier than ever to make money investing is this way. You simply buy an ETF (exchange traded fund) that moves in the opposite direction vs. the stock market: an “inverse fund”. They trade as stocks, so you’ll need a brokerage account (like with a discount broker) to buy and/or sell them. Some of them come with financial leverage of 2 or 3 to 1. These are the simplest way to make money and are the best funds when the stock market is falling.
How do you find them? You can simply enter “inverse ETF” into a search engine. Or, on a day when the stock market is taking a big hit search for the biggest gainers in the ETF arena. Your discount broker’s website should make your research simple, since ETFs are extremely popular with investors. How do they work and how do you make money investing in them? Here’s an example.
Let’s say that the stock market as measured by the S&P 500 Index declines by 30% in 2014 or 2015. The ETF with stock symbol SDS is designed to go UP by 60%. Instead of losing money, you make money with financial leverage of 2 to 1.
These may or may not be the best funds for you, but I think you should know your options. Most years the market is up, and for the past five years it’s been on a roll. If or when economic forecasts and corporate earnings expectations weaken in 2014, the market trend could change. If you are an average investor, your goal should be to make money investing OVER THE LONG TERM. This has become increasingly difficult since the year 2000, as stock investors have twice taken huge losses in the stock market since then.
If you want to be proactive, you now know the best funds to jump on when (or before) the tide turns. Investors simply do not make money investing in diversified stock mutual funds in a falling market, even if they are in the best funds in that category. They lose money. Can you imagine actually making money vs. losing it in a declining stock market?
The stock market could continue to rise in 2014 and 2015. On the hand, keep yours eyes open. Every few years the market gets into trouble, and the best funds if you want to make money investing in bad times are those that swim against the tide. We have many more Mutual Funds Investing Help Articles Now Available.