How did you react to the stock market’s (defined, in my mind, as the S&P 500 index) recent precipitous drop? If you’re like many investors, you moved out of ‘risky’ assets such as stocks and into ‘safe’ assets such as money market funds and stable value funds. Unfortunately, the seeming safety of fixed income investments is a mirage… hidden forces, such as the danger of inflation, make ‘safe’ investments less safe than first glance. Paradoxically, the recent movement to safer portfolios has put many people at risk for a reduction in the real value of their money in inflation adjusted dollars.
As noted in a CNN article today, one way to gauge the market’s reading of current conditions is by reading the bond yields. Twice I’ve taken a look at how you can use Treasury Inflation Protected Securities plotted with the Daily Treasury Yield Curve to get a glimpse at the market’s inflation expectations (TIPS adjust their value due to CPI). Some other interesting ratios are presented, the treasury yield curve on its own, and the spread between junk bonds and government debt.
Ever made a mistake in investing? Yeah, I bet you have. I have too.
The reasons that investors make mistakes are numerous and hard to detail, but the Wall Street Journal took a really good shot at it today. Covering everything from the pain of selling at a loss to mental accounting, it’s one of the best personal finance articles I’ve read in a long time. Oh, and I read a lot. Everyone has biases which make mistakes possible, the question is how can we recognize them and adapt? Read on…
Master Limited Partnerships are publicly traded Limited Partnerships, most often investing in the extraction and transportation of raw materials. A limited partnership is a limited liability corporate structure which contains Limited Partners, and at least one General Partner. This gives the funds great tax advantages with liquidity advantages coming from their listing on a public exchange. The lack of understanding of MLPs also means they are a great place to start looking for market pricing disconnects and investment opportunities.
Unlike the swine flu, the personal finance bug is a relatively hard bug to get. Unfortunately (for them), far too many people avoid putting any thought into their future until that ‘future’ is right around the corner. Investing is a topic that comes up a lot when I talk with people. How you field open ended questions like “How do I invest in stocks?” is a make or break question in which you need to figure out before your trust is deserved. I’ve come up with a step by step method which I use to narrow my confidant’s thoughts and distill their true intentions. Read on, then leave me comments on your style.
Oftentimes the best place to look for value is in a place few others know to look.
Go ahead and quote that; I just made it up. Closed end funds are an often overlooked place in the market for your investment funds. CEFs are mutual funds which trade on exchanges and lack the price arbitrage functions of Exchange Traded Funds. This means that Closed End Funds can be (and often are) priced significantly differently from their underlying assets.
The way the financial community seems to be covering it, we are currently attending the funeral of Asset Allocation. Long live Asset Allocation!
A common topic on financial pages world wide web wide (a cheer for alliteration?) is about the supposed death of asset allocation. Asset Allocation is the idea that the best retirement play for most investors is to allocate financial resources among a number of investment baskets. Supposedly by spreading one’s investments across a diverse set of asset classes it is possible to catch the hot performance in any corner of the market while absorbing any shocks in other corners. Of course, the uninspiring performance of asset classes during the ‘Great Recession’ seem to throw this theory into question. Read on and decide for yourself if we need to find some pallbearers for this financial heavyweight.
Investing in real estate? Too Soon!
Just kidding. Real estate investing is not limited to house ‘flipping’ or becoming a landlord. There are other ways to play real estate – to the downside or the upside. Real estate investing can cover much more than simply buying residential property to rent or resell. Read on for a look at a few of those ‘other’ forms.
Gold, the 79th element in the periodic table, is perhaps the most controversial of any investments. Every investor seems to have an opinion on the metal. Some people, particularly enamored with the constitution, read into it the necessity for the government to only issue gold (and silver) coins.
Regardless of your viewpoint on the legality of fiat currency, perhaps you have decided to invest some of your hard earned funds into the stuff. There are many ways to approach investing in gold; I will lay out a few approaches to gold investing in this article.
Dollar Cost Averaging (DCA) is sometimes touted as the savior for all of investing’s problems. Reality, on the other hand, is a bit different – in this post we’ll show why lump sum investing usually beats dollar cost averaging when you have both options. We’ll use the S&P 500 in the United States as an […]