Neff Advisors

How Can We Help You Become a More Successful Investor?
If you want to consistently grow money, it is critical for you to review the Big Picture of Investing. First, you will want to understand more about these various Macro Investment Groups. A few of these different groups are common stocks, bonds, cash, real estate, producing land, energy, insurance, precious metals, and others. Second, you should recognize that these Macro Investment Groups are continually, and often independently, moving through their own individual Macro Value Cycle. Third, you need to learn and monitor what factors influence their ever changing Macro Value Cycle. Last, as a shrewd investor, you should time your ownership entrance and exit, to capture a significant part of the potential appreciation in their Macro Value Cycle. The essence of successful investing is to buy into a Macro Investment Group when it is being undervalued by the market and sell when it is fully valued. Look at this 10 year graph on the S&P 500 for the Stock Macro Value Cycle. Can you see the full value cycle? These cycles repeat through history. Look at this 102 year graph on the Dow Jones Industrial Average (1900-2002) .

Let's remember the years 2000 through 2002. You probably already know that most common stocks you would have owned had a decrease in value. But in this same time frame, if you would have owned bonds or real estate, evidence shows that you would have probably grown your asset base. Even having your money in cash would have shown a better outcome. Without a doubt, the most critical desicion one makes in investing, is to enter the correct Macro Investment Group near its prime time for investing.

The next step is to find a good way to participate in a choosen Macro Investment Group. We call these Sectors, but sometimes they are referred to as Industry Groups. We used our approach to search for the undervalued Sectors within the targeted Macro Stock Investment Group. This is when we review for Style also. When we speak of Sector we mean major areas of our economy such as Financial, Healthcare, Industrial, Energy, Technology, etc. When we say Style we are referring to Value versus Growth, and Small Capitalization versus Large Capitalization. The resulting analysis must fit into our criteria regarding the Investor Value Cycle. Here is a list of these Sector/Industries.

Once we have discovered a good Macro Investment Group and a worthy Sector/Style, our attention turns to finding some reasonably valued investment instruments. We use independent sources for our fundamental financial information; all material you could pay for and study yourself. We also use the trade secret Market Cycle Timer to help find these investments. This Market Cycle Timer helps us to recognize when a specific investment instrument appears undervalued. Here we are attempting to buy the undervalued investment instrument when it is in the lower portion of its on going, but current Macro Value Cycle.

The second step of the Market Cycle Timer process was designed to help us take action, void of our emotion, to trigger the actual purchases. We try to buy the target investment instrument "on sale". This can usually be done multiple times over several months, as the target investment instrument is moving through its own individual Value Cycle bottoming process. We will usually have 2 to 3 reasonable buying opportunities. We use the trade secret Market Cycle Timer, scaling into the investment instrument several times, taking advantage of each opportunity displayed. Usually this is driven by the overall market moves. We use the discipline of this scaling in approach attempting to lower our buying risk, trying to get a better, lower net entry price. We believe this is the prudent method to achieve a reasonable cost position in the investment. Look at this chart on Microsoft (MSFT), noting the two buying opportunites in July and October of 2002.

Our Market Cycle Timer scales us out about the same way when we are Harvesting our investment position. Look at this chart of Amgen Inc. (AMGN). Our Market Cycle Timer indicated a Sell in the first quarter of 2000. But, you can see there were other times you could have sold in the next 12 months at a similar price. On the other hand, many times it pays to sell your position at the first opportunity, note The Procter & Gamble Company (PG) in January of 2000.

Our experience has revealed that we should plan to invest twice and plan to harvest twice. Therefore, our website guidelines and our operating approach will be as follows: we recommend that you initially buy 50% of your total target purchase amount and then follow up with a second 50% later. But we are certain that there will be times you will wish you would have done it all at one specific time. It's not perfect, but it is a reasonable guideline that we often follow. Unless there is other useful evidence known or revealed. This Market Cycle Timer does make mistakes. However, it is very useful in illustrating when to be investing or harvesting.

Critical Issues To Better Understand and Provide Investing Concepts
To better demonstrate our approach, we want you to learn more about the important terms we will be using in our website. Some of these concepts that we display could serve you well throughout your investing lifetime. So let's go a bit more in depth.

In the Big Picture, these "Macro Investment Groups" should have some favorable components before you would ever consider buying. First, can the target investment significantly appreciate in value? Second, can it produce enough cash flow to eventually pay for itself? Third, are there any tax benefits that help make it work, fitting your own personal tax situation? Take a look at this table, which two or three of these Macro Investment Groups will become your life's focus for learning and personal use for growing your net worth?

Asset Table
Asset Group Can Appreciate Create Cash Flow Tax Benefits
Production Land yes yes yes
Rental Property yes yes yes
Your Home yes no yes
Common Stocks yes no no*
Dividend Stocks yes yes no*
Preferred Stocks yes yes no*
Bonds yes yes no*
Cash yes yes no*

*If owned in a tax deferred account then they can grow tax free.

Now let's explain more about the "Investing Value Cycle". So if all these Macro Investment Groups can appreciate then why do so many individuals lose money? Why is it that only about 5% of Amercian households are millionaires? What explains this situation? One key is to better understand where these Macro Investment Groups are located in their own, ever changing, Investing Value Cycle. Are they temporarily undervalued by fear, just normally undervalued, reasonably valued, just normally overvalued, or overvalued by greed? Figuring out their Value Cycle Position will reveal a lot about the investment's Risk/Reward ratio. Look again at our Investor Value Cycle.

One of the sad outcomes often expressed in a normal Investing Value Cycle movement is the impact it has on the general media press reports. Therefore, the attitude in the general public. Among successful investor peer groups, it is felt that some in the general public tend to sell near the fear (Avoid) portion of the Investor Value Cycle. Also, sometimes they appear more receptive to buy near the greed (Harvest) portion of the cycle. We want to report that we have attempted to design our approach to operate in all these value positions.

So You Want To Be a Millionaire
It can be easy to become a millionaire. First, you must consider that it is possible, at a young age! Start early in your life and let the "time value of money" concept do the work for you. Be a disciplined saver every month. Do your required savings in a Tax Deferred Account. Then, throughout your life, focus your time on what is required to do quality Macro and Sector Allocations.

Unfortunately, we know some who were once millionaires and then lost a major part of their assets the past several years. They probably are wishing they would have done their Macro/Sector allocations appropriately. Now here is a helpful exercise for those folks. Hopefully, this will give you an idea of how to reduce the chances of this happening again. What would impact a normal Macro Investment Group's Value Cycle? Think about the impact of these changing Economic and Market Factors. What impact would they have on a given Macro Investment Group? What impact would they have on your asset base? If you would have been monitoring these factors, would you have moved out of common stocks in 2000? Look at this chart on the S&P 500 .

Macro Groups
Factors Stocks Bonds Cash Land Real Estate
Corporate Earnings
Interest Rates
International Conflicts
Value of the Dollar
Wages
Grain Prices
Government Subsidies

So Now You Want To Be a...Multi-Millionaire
Whether they own Stocks, Bonds, Real Estate, or their Own Business, these people display the desire, energy, and focus to make it happen. The most successful investors do their homework, buy lower and sell higher, and get out quicker when they have made a mistake. They win a higher percent than they lose (effectiveness), but also you can bet they win big more often than they lose big (efficiency). So are these investors more knowledgeable, have better information sources, listen to wise mentors, are better money managers, measure risk/reward better, know the key factors to watch, or just pay more attention? The answer is...YES on all counts. If you really do your homework and make key decisions correctly, there is a chance that you can become a multi-millionaire!

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