Here are some books that I like. Intelligent Investor, The Little Book that beat the market, Dhandoo Investor, Rule # 1 and Buffet's letters to the shareholders. Rule # 1 has all the conditions for a screen to find the stocks but I would use Return on Invested Capital instead of ROE. Here are some picks, these are undervalued compared to their industry. These showed on my scan last quarter. VCP, GLBL and RNO.
BEARX (Prudent Bear Fund) http://finance.yahoo.com/q?s=bearx It's positive this year (+1.40%) even though the market is up double digits, plus it has a generous 3.30% yield. DXESX (Direxion Emerging Markets Bear 2x Inverse) http://finance.yahoo.com/q?s=dxesx Definitely not for the weak hand. It's gotten mauled this year (-35% YTD). This one routinely moves 2-4% everyday so the current yield of 4.65% should be an afterthought. If you think the bear is upon us, this would be a great play...it rose 75% in 5 weeks during the emerging market rout last spring. Good luck.
Check with a life insurance agent for additional ideas. Also, check with your church or any church for that matter on annuitized annuities. Religious org may pay higher interest rate and you get a deduction. Try to plan for a future income stream with at least part of your investment.
To add bear fund would be overkill. It's effectively the same as reducing your long side exposure by the cost of your bear fund. Try to limit your volatility through diversification between stocks and bonds. Check out also Claymore DEF low volatility etf that according to their website historically outperformed SP500 with less volatility.
It is a custom scan but the ideas were from the books that I had mentioned. This year during the Berkshire Hathaway shareholder meeting Buffet said that ROIC is more important than ROE. ROE can be misleading at times. Here are the parameters. ROIC > 20% Revenue Growth > 10% EPS Growth > 4 * Revenue Growth Debt/Equity < 0.5 and PE < Industry Average PE. My target price is when the PE = Industry Average PE. Out of all the stocks I narrow it down to 3-4 stocks with the greatest potential return. I buy it when it makes a new high and keep on adding to it every time it gets below the 50 dma. You'll only have to run the scan 4 times a year and can hopefully watch the money grow. From reading many value investors' books they think it takes 3-5 years for the market to realize the true value. Since we are buying a new high, we would expect the stock to keep on moving if it is actually undervalued. Therefore, if in a year the price is below what you paid for then take the loss. We are trying to buy near the Margin Of Safety, so hopefully the losses would not be too huge.
Anyone has any experience/suggestions on any insurance products as long term investments?! Maybe fixed annuities to add to the mix?! Bluedog
Investing income regularly for the long haul, 10 years plus, then unless you will be retiring in 10-15 years, the solid option is 100% long stocks. Just plough your income into a couple of index trackers, S&P maybe 65%, Russell 2000 35%, something like that. Bonds right now have a poor yield, which after taxes is barely beating inflation, and over 10 years the principal will be ravaged in real terms. Cash is even worse. It would take a real horrible 10 year period for stocks for them to underperform bonds & cash from today's prices IMO. We already had a once in a generation bear market just 5 or 6 years ago, the odds of that happening again are slim and most corrections/bear markets should be 20-30% maximum. You also have an advantage in investing during a correction/bear market. Just dollar cost average for 6-12 months if you are worried about the near-term prospects. Commodities might be worth it for some diversification and because they are currently in a secular bull market. You could put 15-25% into them, reducing your allocation to S&P/Russell stocks appropriately. I would stay away from active managers - the vast majority underperform the indices, and charge higher fees. You also have far higher risk due to managers quitting, changing their strategy, or just losing their edge. Even with their being a few (very few) talented managers, the average investor's ability to pick them is pretty poor. If you really think you have found the next Buffett, then maybe invest 10-20% actively. But 3 years of underperformance on the S&P and you should drop them.