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Recently US stocks, in nearly two months, surged the most. This was led by both energy and retail companies, on speculation of an oil price increase to $5 per barrel and Wal-Mart Stores Inc. as well as Costco Wholesale Corp. sales that exceeded analysts’ forecasts.

The gains have made the Dow Jones Industrial Average gain up to 214 points and were responsible for the tremendous rise to its highest ever, since January 3, in Nasdaq Composite Index as it closed. Exxon Mobil Corp. has posted huge gains as it led energy shares to their highest leap counting from March boosted by a weaker dollar.

Wal-Mart is on a four-year high climb, while Costco, in 11 weeks in a row, realized huge gains.

Rallying the most in five years, Verizon Communications Inc. has become the largest mobile communications company in the United States after the firm’s wireless unit agreed to purchase Alltel Corp. in a $28.1 billion deal.

According to experts, despite the fact that the economic conditions look bleak, things aren’t really that bad, since there are still some glimmer of hopes as the market from time to time breathes a “sigh of relief.”

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Rumors of higher interest rates to boost lending income of Japanese banks cause Japanese stocks to soar, extending advantage gained in May.

The biggest gainer this time is Mitsubishi UFJ Financial Group Inc., which is the largest publicly traded financial institution in Japan.

Sony Corp., emerged stronger following a more than expected US economic growth, while Tokyo Electric Power Co., the largest Japanese utility, increased following the decline of crude oil recently. Aderans Holdings Co. and several other entities under Steel Partners gained momentum following a motion at a shareholder’s instance to get rid of management.

The Nikkei 225 Stock Average reached a high of 214.07, or 1.5 percent. This closed at 14,338.54 in Tokyo trading. Counting from January 10, this was the highest ever as it capped a gain of 2.3 percent this week. We see a 27.51 or 2 percent increase in the Topix index to 1,408.14.

“Investors appear to be shifting their funds from bonds to stocks as an inflation hedgeWith short-term rates likely remaining low, higher longer-term rates will help boost profitability at financial companies,” said fund management head Hisakazu Amano, T&D Asset Management Co., Tokyo.

In another earlier post, I had discussed the metric of Earnings Per Share or EPS. These allow us to gauge whether or not the share market is currently over pricing them.

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However, there is another strategy to employ when you’re looking for long term growth - Mid Cap companies. The logic works like this - Large companies are already stable, and their growth in the market is more or less assured. This means less risk. Along with this risk, comes lower returns. Assuming all other market factors will be stable, you can expect a growth from them that is not phenomenally above what the market is giving you.

This is also because they have passed their period of rapid growth, and are not in mostly stable markets with stable product life cycles. However, smaller companies have tremendous potential to zoom up. These are the mid cap companies. Firms that have an established business model, and are on a growth path. However, the path is slippery, and not all firms make it. That is why it is a high risk strategy to invest in them.

But if you have a long investment horizon, and a reasonably competent fund manager, it stands to reason that the risk will even out over the long term, and you should be able to get returns that consistently outperform the markets. Of course, substantial research needs to be done before your fund invests in them, but isn’t that what you’re paying them for?

A majority of Japanese stocks incurred severe losses as they were being weighed down by trading companies and shipping lines, amidst declining commodity prices and cargo rates.

Companies, like Mitsubishi Corp. and Mitsui & Co. that get greater than one-half of their realized profit from commodities, sent trading companies grazing the bottom. Kawasaki Kisen Kaisha Ltd. after having incurred huge losses led a decline by shipping lines.

“Some investors want to reduce their holdings of commodity-related stocks as volatility increases. I expect the stock market’s nauseating gyrations to continue,” according to said Hideo Arimura, who helps oversee US$26 billion at Mizuho Asset Management Co., Tokyo.

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The Topix index has been swinging, six times, between opposite ends of gains and losses. This has further resulted in ending down 2.98, or about 0.2 percent, to 1,376.69. This week, there has been 1.4 percent gauge lost, trimming a two-month rally by 22 percent up to May 16. The Nikkei 225 Stock Average increased by 33.74, or 0.2 percent, and closed at 14,012.20, and incurred a 1.5 percent loss.

Crude oil fell 1.8 percent, the largest losses ever incurred since April 30, to $130.81 per barrel yesterday. Gold, on the other hand, plunged 1.1 percent from a one-month high. Copper hit bottom this week.

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A number of U.S. carriers that include United Airlines parent UAL Corp. incurred losses in New York trading, taking a benchmark stock index to its lowest week since the terrorist attacks on Sept. 11, based on speculations that the risk for bankruptcy is increasing.

The sudden rise this week by 2.3 percent (86 percent 12 months) in jet fuel prices has been stripping the airlines of cash and prompting analysts to increase their loss estimates’ scope.

“We view the value of the stocks as primarily coming from the chance that fuel prices plummet before the carriers must seek bankruptcy court protection. This is certainly one possible outcome, but we are not holding out much hope,” said analyst Kevin Crissey, UBS Securities LLC.

“If [jet fuel] prices continue to go higher, some of the airlines could be at risk of bankruptcy by early next year,” according to Philip Baggaley, Standard & Poor’s analyst.

The biggest US carriers may be in for a $7.2 billion operating loss in 2008. Northwest Airlines Corp., US Airways and AMR are most definitely the ones who will seek protection under Chapter 11 bankruptcy.

Everyone has bad days. Even the best of the best cannot guarantee continual high performance. So before you ditch your broker, you need to look for a few more signs other just the last two years performance.

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First of all, know that if your portfolio is underperforming an equivalent index fund for say, 5 years, then there’s something wrong. Take asset allocation into this. If your investments are shared betwen stocks, bonds, and overseas shares, then take the equivalent indexes, weigh them by your percentages of allocation, and you should get an idea of how much you should have gotten by now.

Second, look at the way your broker is buying and selling. Is he buying assets that have performed well recently? These tactics are called Performance Chasing, and is a poor tactic for investing wisely. If you see this happening, it’s a sure sign that you’re man isn’t doing a good job.

Next, you look at the total fees that you’re paying. This includes buying and selling fees, hidden costs, and not just the fees that your fund manager is charging you. The overall costs should not come to more than 1% of the total money invested. If it’s above that, your chances of outperforming are rather grim.

These simple tips should let you know if you have to keep your broker, or kick him out.

When people refer to ethical investing, they usually mean ethical practices, or the avoidance of unethical ones. However, we’re talking about a different sort of ethical investing.

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There is a new breed of mutual funds that are around called Socially Responsible Mutual Funds, or (SRI’s). These funds have an underlying asset base consisting of companies or organizations that are reputed for being ‘clean’, or in practicing ethical business.

So if you’re a vegetarian, you might not want to let your money go to a company that relies on the killing of animals such as Kentucky Fried Chicken (KFC). There are websites which give you all the lowdown you need on Socially Responsible Investing.

Analysis over the years have shown however, that the return on these funds is slightly lower than average. Over a long term period, you are likely to get a return that is 0.7% less that regular investments if you practice SRI.

However, it is also true, that those who invest in these funds usually don’t care about the slightly lower returns. In addition, they are unlikely to sell when the markets are down like other investors, and this can lead to extremely good returns over the long run!

So if you’re looking to expand your share in earth saving activities, then this is a great way to contribute to what you believe in.

Ah finally: School is over and the world is your oyster. Career opportunities are spread before you like the proverbial red carpet. Your youthful passion makes you want to make your mark, earn enough money to move out of your parent’s home, buy a car, explore the world, look very fashionable, and get a life partner.

Although this stage is the best stage to spend, it is also the best stage to save. Avoid debt as much as possible in this stage. Get a health and disability insurance coverage. You will never know when an unfortunate event will happen to you. If you do happen to be in great shape, do not worry as insurance would not cost you that much.

Watch your debt. All the youthful exuberance can burn a hole in your finances, and the fire burns faster than your capacity to earn money. You run at risk of getting buried by credit card debt. Use debt with prudence.

If you started investing at a much earlier stage, you are now on a head start from your peers. You hold investing knowledge and experience that still some of your peers are still starting to learn and master now. If you do happen to be those “some”, it is still not late to start. Make monthly contributions to an equity fund. It is always said that stocks perform better than any other investment instrument out there in time. Time is an ally; let it help you not burden you in the long run.

If you manage to get disciplined in this age bracket, you’re in one, healthy wealth ride!

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Friends would usually tell you that it is the best time to enter the market. But you doubt if you can effectively monitor and manage efficiently your portfolio. That is where Mutual Funds enter. Mutual Funds are created by pooling investor’s money and having an elected Fund Manager to manage and monitor the markets for you for a fee. Usually, Mutual Funds works best for individuals who lacks the knowledge and the know-how of entering the markets and those who lacks the time to monitor their portfolios. So how do Mutual Funds work?

You buy shares of your Mutual Fund by its net asset value per share. The NAVPS is computed at the end of the current trading day as it is the only time where the total assets of the Mutual Fund are computed. After buying shares of your Mutual Fund, it’s now up to the fund manager how to perform.

There are a lot of types of Funds out there. Some funds invest in bonds, equities, forex, derivatives, options futures and many others. Of course, each investor has to consider the risks involved in these instruments and derivatives listed above.

If time and expertise is what you lack and you want a share of the market’s growth, Mutual Funds are definitely for you. But before investing in any kind of instrument, you have to take into consideration the risks involved.

Trading the markets makes one a winner and another loser. As my mentor used to tell me, “Markets are summarized by greed, hope, fear and desperation”, all mistakes traders commit including me are always related to the four market moods. I have listed 5 of the most common mistakes we traders make and feel free to choose your own weakness.  

1.       Failing to cut losses

We have to admit that we are humans and we are susceptible in making mistakes. Failing to cut losses not only is expensive for your portfolio, but also a way to wipe it clean.

2.       Adding up to a Losing Position

Cutting loses is bad. Adding up to a losing position is even worse. Some people use this measure to bail out on a position. Simply put you bought 10 shares of XYZ at $50.00 and it fell to $45.00. Some people would buy another 10 shares at $45.00 and sell the whole position at $47.50. Sounds great right? Not really. It is not only getting riskier, but it also gives you more tension in your trading knowing that you are averaging down and might wipe your portfolio clean.

3.       Trading with Emotions

Remember what my mentor told me a while ago? Greed, Hope, Fear and Desperation is the way to go in telling what the current mood of the market is. We have to admit that we traders are motivated with greed, but we also need to understand that in order to be successful in this field, we have to operate like a system, operating without our emotions. Emotions cloud our judgement and logic.

4.       Loving A Position

Yes we understand you made a lot of money in that trade. Even if that issue made you a lot of money previously, you have to take into consideration that past performance is not an indication of future results. No shortcuts are to be made in trading. We really have to do our homework.

5.       Trading the Board and the News

Some trading hours could be boring. And when boredom and impatience strikes traders, all they do is look at the board or the Newswire and stare. Now here comes the fun part, you’ve been staring at ticker symbol ABC for quite some time and you see that it steadily rises to 7%. Sounds great right? You type a buy order at your terminal and the trade is executed. Minutes before closing, you see the ABC correcting and those people who are buying it 2 hours ago are now dumping it. Now you are forced to liquidate and cut your losses. Sounds familiar? Never enter a trade without a trading plan and without doing your homework. What separates gamblers from traders is that traders have systems and plans to follow while gamblers throw their darts at the board.

We have to admit that we cannot remove these overnight. It entails discipline and determination. After all, sometimes you have to get hurt in order to learn, and learning is required if you dream of beating the street.