Happy Hour: Not Much Has Changed

Earlier this week, I found a video on Youtube of Peter Lynch speaking at the National Press Club back in 1994. It’s embedded below. If you’ve read Lynch before, you’ll recognize a lot of what he says.

He covers the basic ideas around how he invests: know what you own, invest in what you understand, focus on facts, study market history, take advantage of volatility in markets, and use your edge.

Here are a few of his more entertaining and useful quotes from the event: Continue Reading…

Tax Harvesting: How Investing Lowers Taxes

Tax HarvestingThere are only a few ways to get out of paying taxes. Tax evasion is the wrong way to do it. Tax avoidance is the other, legal way around it. My point is, taxes are a cost you can manage and tax harvesting is a piece of a tax efficient investment plan.

Most of us have fairly consistent income. It’s usually investment income that changes from year to year. The tax code is set up in a way that investment income is taxed at different rates. When you invest through a taxable account you have to plan for income tax on interest earned, along with capital gains tax, and dividend tax.

The tax code lets you use or harvest investment losses to offset capital gains. And a forward thinking investor might sell a gain today to avoid higher taxes in the future. Continue Reading…

Happy Hour: Using The Strong Dollar

A strong US dollar has been terrible for the returns of international funds. If you’re thinking of giving up on those funds, now is probably a bad time to do so.

Like markets, currency exchange rates rise and fall over time. Right now, the US dollar is rising. At some point in the future the dollar will peak versus other currencies, and eventually fall. Anyone who sells now, will kick themselves for missing out. Why? It’s no different than selling after the stock market falls. Selling at the bottom rarely turns out well. Continue Reading…

Why You Should Own Stocks And Bonds

Stock Market LossNo other asset class lives up to the long term returns of stocks. Despite that fact, most investors don’t stick it out long enough during the periods when stocks perform poorly and the big losing years tend to drive investors insane.

Of course, accepting that losses are inevitable helps to deal with the year to year results many investors obsess over. There are ways to invest, using different assets, that help make those stock losses more bearable. By combining two assets like stocks and bonds, you get a smoother ride over time because stocks and bonds don’t always move together.

Your allocation doesn’t need to be complex either. One of the most often cited allocations is a 60/40 Portfolio. It’s made up of 60% stocks and 40% bonds. How you choose to build each portion is up for debate. Continue Reading…

Happy Hour: Cash Wars

petty fight broke out this week between Charles Schwab, Wealthfront, and Betterment over whose cash was better. The issue came about when Schwab opened its own free robo-advisor platform of automated portfolios with a small cash allocation. I guess Wealthfront and Betterment figured the best way to combat this is to make “free” look like a bad thing.

It was only a matter of time before the bigger brokerages offered a competing service. What’s funny is all three services basically have cash allocations to some degree. Hell, every brokerage account does. Continue Reading…