The Halloween effect just might be more of a trick than a treat – think less chocolate and more witch’s brew. The end of October and beginning of November mark the start of the six-month period of November-April during which, historical evidence shows, stocks have outperformed when compared with their performance during the other six months of the year, May-October, or with the performance of a general buy-and-hold strategy. This outperformance continues to lend credence to the concept of market timing and fuel the debate over active versus passive investment strategies. And so, with another potential bumper period for stocks possibly about to get under way, we owe it to our lazy selves to address the topic and speak to why we shouldn’t give the wolf in sheep’s clothing any candy, why it is not advisable to indulge in this active strategy in spite of evidence of a persistent seasonal pattern. Continue reading
We could assume that because we now find you reading an article related to investing, you have either purchased investment vehicles at some point in your life, you currently own investments, or you have an interest in learning more about investing with the intention of possibly even engaging in that crazy activity. The stock market has been doing great, again, right? But before you go diving down the rabbit hole one more time (or for the first time), ask yourself a couple of questions: How well do I know myself? Should I even be investing at all? Before selecting a fund, before determining your asset allocation, before putting even one cent on the table, you owe it to yourself to have a frank conversation with yourself about, well … yourself. Specifically, you owe it to yourself to assess your true risk profile. Getting a handle on this could be one of the most important activities you ever undertake as a current or would-be investor. The bottom line? Taking a risk-attitude questionnaire is not enough.
It is a common mistake to conflate ‘bonds’ and ‘safe investing’ and invest accordingly, taking on more risk than they either realize or desire. This oversimplification can result in a shortfall of funds when you need them the most.
If you know you will need your money (or at minimum: most of it) back at some point in the somewhat-near future – say, the next few year – you need to make sure you are investing in instruments appropriate not only to your risk tolerance but also your investment horizon.
Before you can invest, you have to save – and if you are saving for essentials or emergencies, you had better keep those savings safe. And that is where cash comes in.
First, let’s clarify this term ‘cash’ – in most financial contexts (including this article) this does not necessarily mean physical bills in your wallet (or stuffed under the mattress), but highly liquid and safe assets denominated in your home currency. Next, let’s look at cash and cash-like options for typical savers. Continue reading
One of the most common first questions to find on financial forums is “which of these funds should I invest in?” In some cases, these are folks who have freshly found themselves with 401(k) options for the first time. In other cases, the poster already has a wild mix of funds that overlap, thus providing a comforting illusion of diversification. Continue reading
If you haven’t heard of Bitcoin, you will soon – either as its adoption (and value) continues to skyrocket, or as the bubbly atmosphere it inhabits bursts in spectacular fashion. But many of the news outlets and new adopters alike are missing the larger and more important question: can this decentralized digital phenomena become a legitimate currency … or is it already? Continue reading
The internet is full of positively glowing reviews of peer-to-peer lending programs like Lending Club or Prosper just a few months into their experience.* The problem is: this coverage frequently lacks a well-rounded look at all of the risks and complications of P2P investing (or speculating) over the long haul. Beyond tax headaches and default risk, there are also issues of institutional, concentration, liquidity and call risk. Continue reading
The world of investing is vastly complex, but only if you let it be. There are some great books and websites on which to get started, but even these can be a bit much for someone looking to put their first few dollars (or hundred or thousand) into a retirement account. Before you look any further, though: hurry up and wait – remember that there is no rush to figuring out the perfect portfolio when still in the early stages of funding it. That said, here are some general guidelines that many folks follow with their portfolios, and which may help you frame the core decisions you want to make.
The most important decision in portfolio construction is deceptively simple on its surface: how much should you allocate toward stocks and how much toward bonds? Sure, some include cash or commodities as well, but the basic issue comes down to risk – and (too) many people go all-in on stocks without realizing the rewards do not match the risks taken. Some will say that ‘this time is different’ but history shows that as hard as it is to time stocks, it may be even harder to time bonds. Continue reading
Thanks to careful savings, a lucky windfall or a well-deserved raise, you find yourself with some cash on hand and are not sure what to do with it. While there is no single answer, perhaps the most important part of the question is the variable – the actual amount (though it will depend on the person) makes a big difference in options for the decision.