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Happy Hour: Detroit’s Bankruptcy & Being Average

July 19, 2013

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Jon

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.

Detroit’s Bankruptcy

This was inevitable. Detroit filed for bankruptcy yesterday, making it the largest municipal bankruptcy to date. I’m sure the local news organizations will have a field day with this one. You can expect to see a lot of “Is (insert city name) next?” kind of stuff. It’s already happening in Chicago. Just give it time if it hasn’t started in your area. Continue Reading…
3 Safe Investments That Went Wrong

July 18, 2013

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Jon

We’re drawn to the idea of a safe investments because nobody likes to lose money. Over the past few years investors have turned to bonds, income stocks, and gold for safety. It paid off until now, because safe investments don’t last forever.

Where safety is concerned, the term safe investments is an oxymoron. They don’t exist. There are safer investments, though, and for a small window of time they pay off. To find them, it helps to dig into those old safe investments we’ve heard about the past few years and find out why each is no longer safe. To do that, you need to understand the risks and why investors were buying it. Continue Reading…
Different Types Of Investment Risk

July 16, 2013

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Jon

Investing is full of ways to make money. Yet, despite what you may have heard, there are no safe investments. Anything you put your money into has risks. Whether its stocks, bonds, real estate, a business, and even your savings account, it pays to understand the different types of investment risk involved in anything before putting your money to work.

Investment Risks

Investment risk is simply the possibility of real losses. It’s often confused with volatility, which is the daily swings in asset prices. While those swings can be unnerving at times, the concern is when prices swing down and stay down. This is because of one or more types of investment risks covered below has become a reality. Continue Reading…
Happy Hour: Hedge Fund Ads & Earnings Season

July 12, 2013

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Jon

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.

Hedge Fund Ads

This week, the SEC made the poor decision to lift the ban on hedge fund advertising. Its been 80 years since the ban took effect. While there still are restrictions in place limiting who is eligible, (you must be accredited which means have a net worth of $1 million or more, not counting your home, or have an annual income over $200,000 in the past two years) understand that these funds have underperformed the S&P 500 in recent years. In other words, anyone with money in a hedge fund was better off in an index fund! Continue Reading…
Market Cap Weighted Index: Benefits And Pitfalls

July 11, 2013

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Jon

Index funds are the most popular investment product used today. Most of those funds are based on a market cap weighted index.

But do you know how market cap weighting works? Or how it affects your portfolio? It pays to know how the index works, so you understand how the fund and your money is invested.

Cap Weighted Index

An index is used to measure the performance of financial markets. A market cap weighted index uses, you guesses it, market cap to build the index. Market cap is the stock price multiplied by the total number of outstanding shares.

In a cap weighted index, the stock with the largest market cap gets the highest weighting in the index. The second largest gets the second highest weighting and so on, down to the smallest market cap stock. But it doesn’t end there. Continue Reading…
Contrarian Investing: Going Against The Grain

July 9, 2013

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Jon

Just like arguments, there are two sides to every investment. Behind that are investors reacting to news, both good and bad. When enough people believe the news, it moves prices. Sometimes that information is spot on and it warrants a price swing. Other times it’s not, yet the majority reacts anyways. That is where contrarian investing comes in.

When everyone is running for the exits, most people don’t think to walk inside. Most just follow along and head for the door. It may sound counterintuitive to go against the grain. Yet, a contrarian investor sees an opportunity, does the opposite, and walks inside.

What Is Contrarian Investing

Contrarian investing is an investment strategy that goes after the unpopular choice, the beaten down stock (or sector), and doesn’t follow the crowd. Continue Reading…