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There’s one question that’s been asked since last year and still hasn’t been answered – when will the Fed raise rates? Nobody has the answer, not even the Fed. Still, we ask the question because when it does happen, it will affect most asset classes.
If you’re living under a rock, interest rates are at all time lows. That’s not a big secret but we’re stuck with this reality…for the moment.
From different angles this is either good or bad news. Continue Reading…
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We love to make money, but we hate to lose money even more. The ultimate investing strategy is the one that never loses money. Except that strategy doesn’t exist. The next best option is to control your investment risk to avoid the biggest losses.
Lets imagine someone gifted enough to guess every losing year in the stock market. Of course, it’s more then just picking the losing years. They’d have put their money in cash for the losing years but be invested in the market for every other year too. They’d have to bat 1,000 and stick with it over time.
The chart below shows exactly what their performance would look like, minus the losses in blue. Continue Reading…
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I ran across a hypothetical question – what happens when Vanguard owns everything? – which was followed up with a rebuttle and reply. For something that will never happen it was a decent read with a nugget of information buried at the bottom:
Financial Analysts Journal paper by Rodney Sullivan and Morningstar’s own James Xiong that raises a warning flag about spillover effects with market-cap indexing. In the words of the authors, the growth in market-cap indexing has led to “increased volatility” and “marketplace fragility.”
That brings up another question – whether indexing can get too big? Continue Reading…
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Imagine having to save, dollar for dollar, what you need in retirement. Now add in inflation. Your dollars need to keep up with the rising prices of all that stuff you’ll want and need in retirement. You’d have to out save that anchor slowly dragging down your dollar’s purchasing power.
This is why you invest.
Your money must keep up with the rising cost of inflation. In truth, inflation is what you’re really trying to beat when you invest.
Saving money is the first step in everyone’s process. Step two is to protect your savings from, and grow it faster than, inflation because your savings goes further when you do. Continue Reading…
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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…
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There 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…