How Bond Ratings Work

Bond RatingsBonds are not the easiest investments to figure out. A bond fund, apart from its description, doesn’t tell you much about all the risks involved either. In an environment where investors chase higher yields, the greater risk of loss can be quickly ignored. Bond ratings make it easy for you to understand the default risk of a bond, while still taking into account all the other risks.

What Are Bond Ratings?

Bond ratings are credit scores for governments and companies. It measures the issuer’s financial strength and ability to make interest and principle payments to bondholders. For investors, these grades are an easy way to do a credit check without digging into financial statements.

The ratings are easy enough to understand. The higher the bond rating, the lower the risk of default. For that, the company gets a lower cost to borrow. For you, it’s a lower interest rate on the bond, but a higher chance you’re paid in full. Continue Reading…

Happy Hour: Heartbleed And Marks Memo

Welcome to the end of the week and another edition of Happy Hour! Just sit back, relax, and enjoy your end of the week roundup of all things interesting in the land of money.

Heartbleed Bug

Last week I mentioned how code is flawed. This week we were reminded again. A big security flaw popped up in the encryption used by sites to hide information like usernames, passwords, and credit card numbers. It’s called Heartbleed. This article explains it better than I can.

Not every site was compromised. Still, everything I’ve read suggests changing your passwords. Continue Reading…

Expected Return: Avoid The Seduction of Big Numbers

When it comes to expected return, we love big numbers. We gravitate to it like paparazzi to a celebrity. We do it with performance and projections because it sells.

But there’s one tiny problem. Our expectations change with the market.

A while back I covered how asset allocation lowers volatility. In it, I showed how four different asset mixes performed against an all stock and an all bond portfolio. It looked like the graph below. It showed how volatility lowers as you decrease the amount of stocks in your portfolio. But did it?

Of course it did. It was a simple exercise to prove a point. But it also showed how much better an all stock portfolio performed over the same period. Continue Reading…

Happy Hour: Has HFT Rigged The Market?

Welcome to the end of the week and another edition of Happy Hour! Just sit back, relax, and enjoy your end of the week roundup of all things interesting in the land of money.


A media storm erupted this week because of the 60 Minutes story - Rigged and the release of a new book by Micheal Lewis. Once again, headlines make drastic claims about the market and your money.

What’s the best way to sell a book? Get a 60 Minutes infomercial and make bold statements about how Americans are getting ripped off.

Kidding aside, people are always looking for an advantage. It’s human nature. History is repeating itself for the thousandth time. Only this iteration is computerized. Continue Reading…

The Tax Deadline Is Only Two Weeks Away

Tax DayAre you ready to join the mad rush to the tax deadline or did you finish your return early? There’s about two weeks left to get your return finalized, signed, and sent to the IRS. With that in mind, I’ve put this reminder together with info to help you make the most of your refund and get that tax return in on time.

The Deadline Is Here

Once again, April 15th is the deadline fast approaches. That’s the day your tax return and any taxes owed are due. Or, you can file a tax extension, to get an extra six months.  Even with an extension, the IRS still wants that money paid by the deadline. Continue Reading…