So many money managers tried to cut corners and change tenants of their funds and missions. So many frugal individual investors became undisciplined, quick-buck artists, and all paid a price. Conventional thinking was turned on its head during 90s and now it will have to be turned again. I don’t think we have to do a complete 360-degree turn, but unrealistic attitude among investors is also playing a role in emotional heartbreaks. I don’t think we will ever buy and hold forever, again; by same token, I don’t think we can buy stocks same way we roll dices.

Focus Group of Week Insurance (property and casual)

The insurance industry has been quietly yielding a lot of ground and is beginning to look very intriguing. These stocks made fantastic rebounds after post 9-11 nosedive. However, that initial euphoric ride has come to a halt and now there are questions or dilemmas that must be answered before Street has nerve to upgrade sector. Perhaps biggest question mark is how much government support will be provided for terrorism insurance. This is a major sticking point as pointed out in a column in Chicago Tribune. Before September 11th, costliest terrorist act on planet was $907 million for attack on Nat West in London in 1993. So far, running tab for 9-11 is $40 billion! Even costliest natural disaster, Hurricane Andrew, has only added up to $19.6 billion in 2002 dollars. (For record, Oklahoma attack cost $125 million and first WTC attack amounted to $725 million.) The House passed a bill for government to pay 90% of cost related to future terrorist attacks. Currently, Senate’s version has government picking up 90% after industry pays $10 billion. It seems apparent that government help is guaranteed, obviously House bill is more attractive to industry, but in either case once this is resolved on Capitol Hill, I think, sector will turn it around.

The insurance index, IUX suggest that there will be a major breakout through 300.

A good way to measure pulse of industry is to keep an eye on AIG. The company has been on high spin for a couple of weeks now; this suggests that long anticipated retirement of Moe Greenberg is around corner. If, and when that happens, stock will come under some knee-jerk pressure, if it can hold its own I think that will be a bold statement for entire sector. By way, while there is talk of dirty bombs and subsequent terrorist attacks, truth is that insurance companies have been able to use hysteria to raise rates exponentially.

Our picks in group include Progressive (PGR), Allstate (ALL), and Ambac Financial Group (ABK). If bottom fishing were your game, we’d use recent earnings warning-induced weakness in St. Paul (SPC) as an opportunity to begin building a position.

Progressive Corp (PGR) $56.30 Aside from company’s charismatic founder this company has really stayed ahead of curve and lived up to its namesake. That is one of reasons stock continues to outperform industry. Even with its great chart, stock is trailing below industry average PE of 29. Its price to sales ratio is 1.62 versus 2.62 for industry. The company has also enjoyed very steady sequential growth. The stock acts like its extended short-term, but long-term outlook is fabulous and we think stock is a buy at any price below $60.00. Our year-end target is $75 and twelve-month target is $90.00.

Allstate (ALL) $37.00 In April, WSJ wrote a report on how company could save money by working with retailers on replacement parts as opposed to sending out claims checks. I’m not sure if company feels skittish about taking advise from a newspaper, but it underscores fact that there are ways for insurance companies to derive additional revenues. Though company warned and lowered guidance in February, they have since confirmed current guidance. Yet, stock is still in a downward trajectory and may have to test 200-day moving average around $35.00 before turning. Another area to look to buy stock is with a close above $39.00. In meantime, it’s trading at a PE lower than industry, a price to sales ratio of 0.90 versus 2.62 and a price to book of 1.50 versus 2.30.

Ambac Financial Group (ABK) $66.50 This is a hybrid company as they also provide investment services, interest rate swaps and cash management services among other non-insurance businesses. That said, this is clear momentum champ in space and we all know that new highs begat new highs. The stock is trading what looks like a real low trailing PE of 16 versus industry average 29, but five-year range for company has seen highest PE at 18.6 so this could be a problem. However, stock looks like it has room to $70.00 and a breakout from there should land stock north of $75.00.

Investment and Growth

A major key to building wealth is in making your money work for you, instead of you working for your money. If you work for five days in a week and spend all your income without investing any of it, you will have forever lost those five days of work. Forever. Wealthy people take a portion of income from each day and put it into investments that grow on their own, automatically and without any further work, over a long-term period. That way, a portion of each day that you work for money ends up working back for you for many years to come. That is a major key to wealth, getting a percentage of your income every day to work back for you without your intervention.

You do this by taking at least 10% of your daily income before taxes and bills, and putting that into a long-term investment for a minimum of about three years.

Good investments include stocks, mutual funds, certain types of bank accounts that have high and above-inflation interest rates, real estate investment vehicles, bonds, royalty-producing assets, self-maintaining businesses, and so on. These investments do not require you to work for your money. You simply invest, walk away, and your money grows all on its own.

Even one dollar can turn into a million dollars in a certain amount of years at a certain compound interest rate. One dollar, just one dollar, can grow into a million dollars all on its own without your intervention. You would be pleasantly surprised to know that a single dollar placed into an investment that grows at 20% a year will become $1 million in 75 years. That is just one dollar! All you would need to do is leave it alone, go away, go to sleep for 75 years, just leave it alone. When you return it will be $1 million without any effort from you, other than your placing that single dollar at beginning!

Now, if instead you put in a dollar every single day into same 20% a year growth investment, you would end up with $1 million in 32 years instead of 75. In fact, a dollar a day would become $1 billion in 66 years at a 20% a year growth rate. A higher interest rate would dramatically shorten that time.

This shows you that you can never have too little to start with. Whatever your income today, force yourself into habit of investing 10% of your income before you pay bills or taxes or anything else. Pay yourself first – it is your money and your life. And it gets even better. The 1990s was an era where stocks rose phenomenally. In 1990s decade, over 200 stocks rose by 1000%, some by up to 20,000%. Many fell again in 2001 but on long-term, all good companies always rebound to even higher heights. People in 90s invested various amounts and found themselves wealthier for that. Some invested just $50 a week, and if that was their 10%, that was good enough. It grew. Others invested more. $10,000 invested just once at beginning of 1990 in certain stocks turned out to be valued at around $5 million by end of 90s. Others turned a few million dollars into well over one billion in same period. All this wealth growth happened without any extra effort excep! t putting money away into investment.

These people were not doing anything secret – they were investing in publicly available investments. They were investing in well-selected shares in stock market – and anyone can do this. You can do it as well starting now. Just remember, choose your investments well, invest consistently, and put 10% aside from every single paycheck or income. Consistency is key. Compound interest will always work for you without asking anything from you. Your only part is to be consistent, to choose good investments, and to stay put on long term. Short-term investing usually does not earn as much as long-term investing and it is usually a lot riskier.

As you can see, there isn’t much to it. It is all in inside job and outside execution. You can do both of these starting today. No one is in a position whereby they are unable to do anything. There is nothing you cannot be, do or have, because it all starts within you and nothing outside you can stop you. As Henry Ford once said, “Whetehr you think you can or you can’t, either way you are right.”

David Cameron Gikandi, CEO ImagesOfOne.com and author of the Complete Internet Marketing Outline, A Happy Pocket Full of Money: Your Quantum Leap into the Understanding, Having and Enjoying of Immense Wealth and Happiness, and more. Download these and As A Man Thinketh, The Science of Getting Rich and Think and Grow Rich from http://www.ImagesOfOne.com.