stock market http://www.wisebread.com/taxonomy/term/1549/all en-US The Top 5 Index Funds to Own Now http://www.wisebread.com/the-top-5-index-funds-to-own-now <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/the-top-5-index-funds-to-own-now" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/man_reading_paper_000031064290.jpg" alt="Man deciding which index funds he should own now" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Can you tolerate some market volatility? Is investing in passively-managed index funds still part of your diversification strategy? Hang in there if it is, because <a href="http://www.wisebread.com/3-steps-to-getting-started-in-the-stock-market-with-index-funds">index funds</a> are still a good choice.</p> <p>If you're hot on the trail for index funds to invest in, here are the top five index funds to own right now.</p> <h2>1. Vanguard High Dividend Yield Index Fund Investor Shares (<a href="https://personal.vanguard.com/us/funds/snapshot?FundId=0623&amp;FundIntExt=INT">VHDYX</a>)</h2> <p>Morningstar rating: 5 stars</p> <p>This large capitalization fund was designed for investors seeking long-term growth and those who can withstand greater volatility. This is an income-focused fund that invests in large U.S. companies that tend to pay higher dividends. Some of its holdings include ExxonMobil, Proctor &amp; Gamble, and JP Morgan Chase, to name a few.</p> <h2>2. Vanguard PRIMECAP Fund Investor Shares (<a href="https://personal.vanguard.com/us/funds/snapshot?FundId=0059&amp;FundIntExt=INT">VPMCX</a>)</h2> <p>Morningstar rating: 5 stars</p> <p>A long-term capital appreciation fund that invests in large and mid-cap companies with an emphasis on the technology and health care sectors. The fund follows a well-established investment strategy of dividing its portfolio amongst several fund managers for diversity of thought. Its holdings include Texas Instruments, Inc., Eli Lily &amp; Co., FedEx Corp., and many others.</p> <h2>3. Vanguard PRIMECAP Core Fund (<a href="https://personal.vanguard.com/us/funds/snapshot?FundId=1220&amp;FundIntExt=INT">VPCCX</a>)</h2> <p>Morningstar rating: 5 stars</p> <p>The PRIMECAP Core Fund is very similar to its younger sibling, PRIMECAP Investor Shares. This is a large cap fund that invests using the investment strategies of multiple fund managers. The key difference is the fund has both value and growth perspectives. Some of its holdings include Texas Instruments, Inc., Eli Lily &amp; Co., Google, and Johnson &amp; Johnson.</p> <h2>4. Vanguard U.S. Value Fund (<a href="https://personal.vanguard.com/us/funds/snapshot?FundId=0124&amp;FundIntExt=INT">VUVLX</a>)</h2> <p>Morningstar rating: 4 stars</p> <p>This is a large to mid capitalization fund that remains vested in about 200 companies using a qualitative approach that seeks to identify undervalued stock. Due to its broad-market exposure, investors should expect greater volatility and therefore invest with a long-term investment horizon. Some of the fund's major players are Pfizer, Inc., AT&amp;T, Chevron, ExxonMobil, and Wells Fargo &amp; Co.</p> <h2>5. Vanguard Consumer Staples Index Admiral Shares (<a href="https://personal.vanguard.com/us/funds/snapshot?FundId=5484&amp;FundIntExt=INT">VCSAX</a>)</h2> <p>Morningstar rating: 4 stars</p> <p>This fund is comprised of U.S. consumer staples, such as Wal-Mart, Costco, Coca-Cola Co., and PepsiCo. As a result, the fund will realize volatility consistent with consumer behavior, and investors should expect greater fluctuations. This is a very high-risk investment and it's advisable that it is used to hedge an already well-balanced portfolio.</p> <p><em>Are index funds part of your portfolio? Which?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/qiana-chavaia">Qiana Chavaia</a> of <a href="http://www.wisebread.com/the-top-5-index-funds-to-own-now">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-top-5-etfs-you-should-buy-now">The Top 5 ETFs You Should Buy Now</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/3-steps-to-getting-started-in-the-stock-market-with-index-funds">3 Steps to Getting Started in the Stock Market With Index Funds</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-reasons-social-media-is-still-a-smart-investment">5 Reasons Social Media is Still a Smart Investment</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-reasons-to-ditch-other-stock-investments-for-the-sp-500">5 Reasons to Ditch Other Stock Investments for the S&amp;P 500</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/why-index-funds-are-the-best-choice-for-new-investors">Why Index Funds Are the Best Choice for New Investors</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Investment diversification index funds market volatility stock market Fri, 24 Apr 2015 11:00:07 +0000 Qiana Chavaia 1396634 at http://www.wisebread.com 5 Reasons Social Media is Still a Smart Investment http://www.wisebread.com/5-reasons-social-media-is-still-a-smart-investment <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/5-reasons-social-media-is-still-a-smart-investment" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/social_media_000040645286.jpg" alt="People being active on social media for a smart investment" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Welcome to the heyday of the social media stock. Not only is the value of shares in companies like LinkedIn and Facebook soaring, but experts also say these companies have got lasting power and major growth potential, making them good long-term investments. Sure, these companies have seen their fair share of challenges. Last year the <a href="http://www.federalreserve.gov/monetarypolicy/files/20140715_mprfullreport.pdf">Federal Reserve</a> called their valuations &quot;stretched&quot; and <a href="http://www.slate.com/blogs/moneybox/2014/05/06/twitter_s_stock_crashed_after_its_post_ipo_lockup_period_expired.html">Twitter's stock value</a> slumped to an all-time low. But these companies have lived and learned from their fumbles. Advocates say they've ironed out many of the kinks, making them better poised for a bright future than ever. Here are five reasons to favorite social media in your portfolio.</p> <h2>1. Social Media Is Overtaking Search</h2> <p>Businesses are always looking for better ways to promote themselves and connect with customers, and <a href="http://www.socialmediaexaminer.com/SocialMediaMarketingIndustryReport2014.pdf">social media is overtaking search</a> as one of the most sure-fire, influential ways of doing so. Over 90% of marketers now say that social media is important to their business. That's a strong indicator of social media's import and staying power, both in the business world and on the market.</p> <h2>2. New Revenue Streams Are Emerging</h2> <p>As more and more people take to using social media, the companies that own these networking sites are devising new ways to generate revenue. Twitter, for example, just created a brand new revenue stream by purchasing Niche, a sponsored content generator that connects social media stars with brand names. Facebook is making massive investments in satellite and aerospace technology, which advocates say could prove to be incredibly valuable down the road.</p> <h2>3. Big Data Is an Untapped Cash Cow</h2> <p>Social media companies own massive amounts of raw data that could reveal valuable information about things like how people make purchase decisions or what goods and services they may require in the future. Indeed, Facebook ingests approximately 500 times more data each day than the New York Stock Exchange does. &quot;Facebook is sitting on <a href="http://moneymorning.com/2014/04/10/the-two-best-social-media-companies-to-invest-in-now/">a hidden goldmine</a> if it can figure out a way to monetize the user data of its over one billion user base,&quot; tech sector specialist Michael A. Robinson told Money Morning.</p> <h2>4. The Growth Potential Is Huge</h2> <p>For every four minutes spent online, one is spent using social media. And, particularly with mobile device usage on the rise, experts say there's lots of room for growth. Bruno Del Ama, CEO of Global X Funds, says social media is one of the fastest-growing segments in global capital markets. In fact, there are very few companies growing as fast as Facebook, Twitter, LinkedIn, and Yelp. &quot;I think one of the most interesting things about these companies that's misunderstood is these are actually very defensible business models,&quot; Del Ama told CNBC. &quot;It's very, very difficult to go after, say, a Facebook or a Twitter. Once they build these networks, it's very difficult to displace them once you have&hellip; billions, in the case of Facebook, of users in your network.&quot;</p> <h2>5. Mark Cuban Says They're Solid</h2> <p><a href="http://www.cnbc.com/id/101867483">Social media stocks</a> are not in a bubble, billionaire investor Mark Cuban told CNBC. &quot;It's not 1999 all over again by a long shot,&quot; said the Dallas Mavericks owner, who made his fortune as an Internet entrepreneur. Yes, social media companies have large valuations. But unlike the '90s, they have good business models and strong revenue growth, too. That makes them solid long-term investments.</p> <p><em>Are you investing in social media stocks? Why or why not?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/brittany-lyte">Brittany Lyte</a> of <a href="http://www.wisebread.com/5-reasons-social-media-is-still-a-smart-investment">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-2"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/who-cares-about-where-the-stock-market-is-headed">Who Cares About Where The Stock Market Is Headed?</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/its-time-to-purchase-like-its-1999">It&#039;s Time to Purchase Like It&#039;s 1999</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-to-avoid-gambling-away-your-investments">How To Avoid Gambling Away Your Investments</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/survive-the-bear-market-10-steps-to-ride-the-downturn">Survive The Bear Market: 10 Steps To Ride The Downturn</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-creative-ways-to-invest-during-a-weak-market">5 Creative Ways to Invest During a Weak Market</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Investment investing social media stock market Mon, 02 Mar 2015 22:00:10 +0000 Brittany Lyte 1314958 at http://www.wisebread.com Best Money Tips: Ways to "Beat" the Stock Market http://www.wisebread.com/best-money-tips-ways-to-beat-the-stock-market <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/best-money-tips-ways-to-beat-the-stock-market" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/business-boxing-4018611-small.jpg" alt="businessman boxing" title="businessman boxing" class="imagecache imagecache-250w" width="250" height="167" /></a> </div> </div> </div> <p>Welcome to Wise Bread&#39;s <a href="http://www.wisebread.com/topic/best-money-tips">Best Money Tips</a> Roundup! Today we found some great articles on ways to &quot;beat&quot; the stock market, saving for retirement, and prepping for guests with Dollar Store buys.</p> <h2>Top 5 Articles</h2> <p><a href="http://moneysmartlife.com/ways-to-beat-the-stock-market/">9 Ways to &quot;Beat&quot; the Stock Market</a> &mdash; If you want to beat the stock market, watch out for high fees and don&#39;t be afraid to take some risks. [Money Smart Life]</p> <p><a href="http://frugalportland.com/saving-for-retirement-at-each-stage-of-life/">Saving for Retirement at Each Stage of Life</a> &mdash; If you are in your 30s, consider gradually increasing the amount you save for retirement as your salary increases. [Frugal Portland]</p> <p><a href="http://www.savvysugar.com/How-Stock-Guest-Room-Cheaply-32376276">Prep For Guests With Dollar Store Buys</a> &mdash; Did you know you can buy bathroom supplies and general cleaners at the Dollar Store? [PopSugar Smart Living]</p> <p><a href="http://livingonthecheap.com/wipe-debt-good/">How to wipe out debt - this time, for good</a> &mdash; Wipe out your debt once and for all by learning new money habits. [Living On The Cheap]</p> <p><a href="http://andthenwesaved.com/cheap-honeymoon-ideas/">Cheap Honeymoon Ideas</a> &mdash; To save money on your honeymoon, try to travel in the off season. [And Then We Saved]</p> <h2>Other Essential Reading</h2> <p><a href="http://www.narrowbridge.net/how-to-stay-on-top-of-student-debt-and-save-while-in-school/">How to Stay On Top of Student Debt and Save While in School</a> &mdash; Save money and stay on top of your debt while in school by purchasing your books used. [NarrowBridge Finance]</p> <p><a href="http://yesiamcheap.com/2013/11/online-basics-every-new-business-needs/">Online Basics Every New Business Needs</a> &mdash; Every new business needs to provide links to its ecommerce site. [Yes, I Am Cheap]</p> <p><a href="http://parentingsquad.com/5-co-sleeping-myths-busted">5 Co-Sleeping Myths Busted</a> &mdash; It is a myth that co-sleeping prevents independence. [Parenting Squad]</p> <p><a href="http://www.greenpandatreehouse.com/2013/11/how-should-you-choose-a-home-security-system/">How Should you Choose a Home Security System</a> &mdash; When choosing an home security system, consult reviews and consider whether or not you want motion sensors. [Green Panda Treehouse]</p> <p><a href="http://onecentatatime.com/becoming-successful-freelancer/">Becoming a Successful Freelancer</a> &mdash; To become a successful freelancer, let your presence be felt. [One Cent At A Time]</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/ashley-jacobs">Ashley Jacobs</a> of <a href="http://www.wisebread.com/best-money-tips-ways-to-beat-the-stock-market">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-3"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-reasons-social-media-is-still-a-smart-investment">5 Reasons Social Media is Still a Smart Investment</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/who-cares-about-where-the-stock-market-is-headed">Who Cares About Where The Stock Market Is Headed?</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/its-time-to-purchase-like-its-1999">It&#039;s Time to Purchase Like It&#039;s 1999</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-creative-ways-to-invest-during-a-weak-market">5 Creative Ways to Invest During a Weak Market</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/survive-the-bear-market-10-steps-to-ride-the-downturn">Survive The Bear Market: 10 Steps To Ride The Downturn</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Investment best money tips investing stock market Tue, 12 Nov 2013 09:48:03 +0000 Ashley Jacobs 1093854 at http://www.wisebread.com Life Is Like Investing in the Stock Market http://www.wisebread.com/life-is-like-investing-in-the-stock-market <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/life-is-like-investing-in-the-stock-market" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/3573894263_1fafd0afa1_z.jpg" alt="stock market" title="stock market" class="imagecache imagecache-250w" width="250" height="166" /></a> </div> </div> </div> <p>Remember that famous quote in &quot;Forrest Gump&quot;? Forrest said, &quot;My momma always said, 'Life was like a box of chocolates. You never know what you're gonna get.'&quot;</p> <p>While I believe there's lots of truth to that statement, I'm going to modify that quote to try and get you to think differently. Here's my version &mdash; &quot;Life is like investing in the stock market. You'll go through your share of ups and downs. But as long as you're able to persevere through them, in the long run you'll come out on top.&quot; (See also:&nbsp;<a href="http://www.wisebread.com/why-invest-in-the-stock-market">Why&nbsp;Invest in the Stock Market?</a>)</p> <p>Let's review some stock market history. There's no doubt that investing in the stock market is risky. To illustrate, take a look at the returns from the <a href="http://www.moneychimp.com/features/market_cagr.htm">S&amp;P 500</a> over the past 15 years:</p> <ul> <li>2011: 2.05%</li> <li>2010: 14.87%</li> <li>2009: 27.11%</li> <li>2008:&nbsp;-37.22%</li> <li>2007: 5.46%</li> <li>2006: 15.74%</li> <li>2005: 4.79%</li> <li>2004: 10.82%</li> <li>2003: 28.72%</li> <li>2002:&nbsp;-22.27%</li> <li>2001:&nbsp;-11.98%</li> <li>2000: -9.11%</li> <li>1999: 21.11%</li> <li>1998: 28.73%</li> <li>1997: 33.67</li> </ul> <p>As you can see, in some years the stock market did really well. But in others, it performed horribly. How does this relate to life?</p> <p>I'm sure that in your own life, you've had your good days when everything seems to go right. But you've also had your bad days, where a lot of things seem to go wrong.</p> <p>How do you get through the hard times? Before I try to answer that, let's take a look at the stock market's approach.</p> <h2>Don't Put All Your Eggs in One Basket</h2> <p>The S&amp;P 500 is named as such because the list includes 500 of the biggest companies in the U.S. As we invest in the index, all of the companies work together to provide us with the wealth we seek.</p> <p>But not all companies perform at the same level. Companies that do well help carry the weight for other companies that perform poorly, so that the overall value of the index has increased over time.</p> <p>For instance, in 2009, MetroPCS opened at a price of $14.86 per share, but closed the year by dropping all the way down to $7.63. Amazon, however, opened the year at $54.36, and closed the year at an astounding price of $134.52 per share. Yet as a result of the contributions of all 500 companies, the S&amp;P 500 grew by an amazing 27.11 percent in 2009.</p> <h2>What's the Point?</h2> <p>Don't go through life alone. Just as the S&amp;P 500 can be seen as a community of 500 companies, you need to be a part of a larger community as well.</p> <p>Life can get hard. When it does, sometimes we need someone to cry with us when we cry. <a href="http://www.wisebread.com/10-fun-practically-free-ways-to-make-new-friends">We need friends</a> to help bear our burdens.</p> <p>Other times, when life is good, we want others to celebrate with us in our victories. We want our friends by our side to thank them for sticking with us through thick and thin.</p> <p>Let's get back to the stock market. Looking at stock market returns year-by-year may cause you to lose sleep at night. But if you invested for the long haul, you'd end up a winner.</p> <p>Over the past 40 years, from 1972 to 2011, the S&amp;P 500 had an annual growth rate of 9.86%. This means that if you started investing back in January 1972 with just $1,000, by December 2011, you'd have $42,990!</p> <p>This shows the power investing through thick and thin, and having a long-term perspective.</p> <h2>Your Own Growth</h2> <p>Similarly, you can experience tremendous growth in your own life. If you're at a low point in life right now, you can position yourself for a brighter future. How?</p> <p>Seek the help of friends and mentors. There are lots of people who have been further along on the road of life than you. They've faced the same challenges you're facing. And the good news is that many of them are willing to offer guidance and help you get out of your rut.</p> <p>I'm also a big advocate of reading good books and learning valuable skills. The <a href="http://personalmba.com/best-business-books/">Personal MBA reading list</a> is a great place to start. If cost is a concern, you can always borrow these books for free from <a href="http://www.wisebread.com/4-reasons-why-you-should-support-your-local-library">your local library</a>.</p> <p>If you take action now, I'm sure that good things will come to you later.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/darren-wu">Darren Wu</a> of <a href="http://www.wisebread.com/life-is-like-investing-in-the-stock-market">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-4"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-top-5-index-funds-to-own-now">The Top 5 Index Funds to Own Now</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-reasons-social-media-is-still-a-smart-investment">5 Reasons Social Media is Still a Smart Investment</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/smart-investors-have-these-6-traits-do-you">Smart Investors Have These 6 Traits — Do You?</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/make-friends-and-be-happy-why-cultivating-relationships-is-good-for-you">Make Friends and Be Happy: Why Cultivating Relationships Is Good for You</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/who-cares-about-where-the-stock-market-is-headed">Who Cares About Where The Stock Market Is Headed?</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Investment Personal Development build community stock market support Tue, 09 Oct 2012 10:24:41 +0000 Darren Wu 954801 at http://www.wisebread.com 5 Reasons to Ignore the January Effect http://www.wisebread.com/5-reasons-to-ignore-the-january-effect <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/5-reasons-to-ignore-the-january-effect" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/iStock_000010813141XSmall.jpg" alt="January Calendar" title="January Calendar" class="imagecache imagecache-250w" width="250" height="249" /></a> </div> </div> </div> <p>It's that time of year where the stock-market myth about the January Effect rears its ugly head, so it's also time to point out why investors shouldn't alter their existing investment strategies to try to chase returns that are no more likely to materialize than if they did nothing at all.</p> <p>The concept of the January Effect is that stock prices tend to increase in the month of January each year, more so than other months. Therefore, investors who purchased securities during the month of December are, in theory, likely to be rewarded with outsized gains if they sell later in January of the new year. The concept gained prominence in the 1980s based on a review of historical data showing the phenomena was relatively common going all the way back to 1925. The theory is that in December, investors sell losing stocks at year-end to offset capital gains elsewhere, thus artificially depressing share prices of stocks that were already negative on the year. Investors then swoop in and re-buy those same shares in January.</p> <p>According to a recent <a href="http://www.cnbc.com/id/40548635">CNBC article</a>, December is the new January, and investors should start buying now. They go on to recommend purchasing this year's losing stocks in the S&amp;P 500 index. Well, I'm not buying it at all. Here are several reasons why this advice should be ignored:</p> <h2>Market Efficiency</h2> <p>There's an age-old debate about efficient markets and whether the theory holds true, but in essence, many economists believe that there is so much information provided to the investing public in real time, that at any given time, asset prices do reflect all currently known information, and thus assets are fairly valued. While some would counter that insider information and near-term panics like the recent flash-crash alter the notion of efficient markets, the January Effect would be immune to these characteristics (i.e. no more likely to experience insider trading than any other stock). In this particular example, since the January Effect myth is so widely propagated, it is unlikely to occur each and every year without investors arbitraging the spread in performance and reducing it to random chance.</p> <h2>The Internet</h2> <p>The Internet takes market efficiency to a whole new level. Whereas historically the January Effect was relegated to academic papers, books, and newspapers, now there are instant reminders like the aforementioned CNBC article constantly prompting investors to fulfill the prophecy. This just results in front-running, hence eliminating the purported benefit.</p> <h2>It's Not Guaranteed</h2> <p>There have been some years where the January Effect did not achieve its desired effect. Do you want to experiment this year and find out if this is one of those years? Investing in an FDIC-insured CD provides you with a guaranteed return. Stock market investing does anything but.</p> <h2>Standard Deviation and Investment Risk</h2> <p>Would you bet $100 to win an extra $1 in a game of chance? Probably not. While overly simplified, the concept holds true. If attempting to exploit the January effect, you are, in essence, taking on market risk with very high volatility for a marginal return. By subjecting yourself to a brief attempt to &quot;beat the market&quot; with this gimmick, you're putting yourself at undue risk given the relatively paltry return.</p> <h2>Commissions, Taxes, and Net Benefit</h2> <p>Shifting money from your existing holdings in order to exploit this supposed effect and then selling again within a month is likely to erode any possible benefit that was realized. Not only would you incur commissions on the buying and selling, but you will have generated tax liabilities on the strategy as well. At the end of the day, what will the net benefit be? A highly randomized return minus commissions.</p> <p>To recap, it has been proven time and time again that the best approach for retail investors is to stick to a long-term investment strategy focusing on diversification and low fees, and not reacting to external market jitters and hype. I may well be proven wrong come January, but I would chalk that up to random chance. I'll take my boring, <a href="http://www.wisebread.com/etfs-offer-incredible-benefitswith-a-dark-side">ETF investing approach</a> any day.</p> <p><em>Are you going to experiment with the January Effect?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/darwins-money">Darwins Money</a> of <a href="http://www.wisebread.com/5-reasons-to-ignore-the-january-effect">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-5"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/looking-to-invest-right-now-5-basic-investing-tips-for-any-market">Looking To Invest Right Now? 5 Basic Investing Tips For Any Market</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-top-5-index-funds-to-own-now">The Top 5 Index Funds to Own Now</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-reasons-social-media-is-still-a-smart-investment">5 Reasons Social Media is Still a Smart Investment</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/is-real-estate-a-good-investment">Is Real Estate a Good Investment?</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/its-time-to-purchase-like-its-1999">It&#039;s Time to Purchase Like It&#039;s 1999</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Investment financial risk investment advice stock market Thu, 09 Dec 2010 13:00:09 +0000 Darwins Money 372566 at http://www.wisebread.com ETFs Offer Incredible Benefits...with a Dark Side http://www.wisebread.com/etfs-offer-incredible-benefitswith-a-dark-side <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/etfs-offer-incredible-benefitswith-a-dark-side" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/cow_1.jpg" alt="Cow" title="Cow" class="imagecache imagecache-250w" width="240" height="180" /></a> </div> </div> </div> <p>Exchange-traded funds (ETFs) are simultaneously one of the best financial innovations retail investors have seen in decades, while at the same time misunderstood on a grand scale. While I've enjoyed the benefits of investing with ETFs and consider myself to be at least a moderately sophisticated investor, I've also fallen prey to faulty assumptions and expectations for certain ETFs. Rather than paint the whole ETF category with a single brush, I want to highlight some of the specific misunderstandings I and others have had so that you can be more confident and informed about what you're looking for in an ETF. Some of these examples may save you from a regretful mistake down the road.</p> <h3>Don't Buy the Name (or the Ticker)</h3> <p>Something people don't often think about is the notion that the names and ticker symbols of ETFs are kind of like giant billboards saying &quot;Buy Me!&quot; As someone who follows the industry relatively closely, I often see new ETFs launch based on sensational headlines. For instance, shortly after the story broke that China was restricting export of rare earth metals needed for everything from GPS systems to military applications, there was a mad rush into any name tied to the mining of rare earth minerals. For example, while the launch of this <a href="http://www.etfbase.com/rare-earth-metals-etf/">Rare Earth Metals ETF</a> was timed perfectly with headlines invoking panic, the makeup of the ETF isn't exactly a pure play on these metals at all (hence, the name also includes &quot;Strategic Metals,&quot; whatever that means). Many of the companies in the top holdings also mine other materials that <em>aren't</em> rare earth metals. Surely, thousands of investors jumped into that investment thinking they could exploit the news that China was blocking exports of these critical materials, only to find later that the ETF wasn't very representative of that asset class.</p> <p>ETFs are often given memorable ticker symbols as well. Consider the Market Vectors Agribusiness ETF (MOO) and Claymore/MAC Global Solar Energy (TAN). While the catchy ticker symbols may be cute, perhaps the makeup of the ETF, the expense ratio, or the strategy isn't actually your best option in that space &mdash; but you'll sure remember that ticker symbol!&nbsp; And that keeps investors coming back, it gets the ETF mentioned on CNBC, and it makes it tough to get out of your mind. The reason I share those examples is to illustrate that aside from being a basket of stocks, commodities, debt instruments, or any asset class for that matter, these ETFs generate income for the custodian or parent company by way of shares transacted. When they're competing against three other ETFs with essentially the same investment strategy, they need to be innovative in how they market their product. So be careful, be selective, and do a simple search in Google Finance or Yahoo Finance to see if there are other ETFs in the same sector that are a better fit for you.</p> <h3>Understand How ETFs Work</h3> <p>One of the biggest complaints about ETFs is that they didn't perform the way the investor expected them to. This isn't just a retail investor complaint, but even professional money managers are routinely involved in litigation accusing ETF companies of deceptive practices and improper disclosure. The most prominent complaint today is the performance of leveraged ETFs. People erroneously assume that three-times-daily leveraged (3X) ETFs will have returned about triple the underlying index over time. They don't. Aside from the fact that it's three times as painful on the way down, even if the underlying index is flat or slightly up, over long periods of time, leveraged ETFs experience value decay due to daily resets. This is a mathematical certainty that I learned too late as an early investor in leveraged ETFs. To demonstrate the point, just match up any two opposing (long/short) ETF pairs in Google Finance and over a year or longer period, they'll almost always <em>both</em> be negative. If you're wondering how both a long 3X and a short 3X ETF could both lose money at the same time, it's due to this daily reset value decay.</p> <h3>Don't Overpay</h3> <p>There are a few ways you could end up paying more for an ETF than you thought. First off, make sure you know what the expense ratio is for your ETF. For a basic broad-market ETF, you can often get below 0.15%, especially with Vanguard ETFs. For something a little more sophisticated, expenses are typically in the 0.4% to 0.8% range. Paying over 1% in fees is probably unnecessary as there are often competing ETFs with lower fees or the strategy may not be worth the additional costs in the long run. Since most ETFs aren't actively managed, it's tough to justify commissions in the 1.5% and higher range, but they are out there.</p> <h3>Beware of Low-Volume ETFs</h3> <p>Another problem with many ETFs arises when they are relatively obscure and thinly traded.&nbsp; In this case, there's a very wide bid-ask spread. This means there's a gap of several cents between what you pay for an ETF and what you can sell it for. If there's a 30 cent gap between the bid and the ask price, and you bought 1,000 shares in a typical market order, you basically just lost $300 the moment you bought the ETF. To avoid this problem, check out the bid-ask spread when trading and focus on higher-volume ETFs. High-volume ETFs often have a bid-ask spread of a single penny, very much like a typical high volume stock.</p> <h3>Watch Out for Tax Demons</h3> <p>Many investors buy first and research later. This is especially troublesome from a tax standpoint for certain classes of ETFs. For instance, an ETF holding <a href="http://www.high-yield-passive-income.com/mlp-investments.html">Master Limited Partnerships</a> (MLP) might be appealing due to its high yield. But because of the MLP tax structure, investors need to file an additional tax form called a K-1. Not only is this an added level of complexity at tax time, but it also comes very late in the spring, forcing you to file your taxes in March or even as late as April, as opposed to earlier in the year when you would have everything else in order had you steered clear of this asset class. Another example of a tax demon is that if you buy the gold ETF (GLD), you have to pay the higher ordinary income tax rate instead of the capital gains rate when you sell because gold is taxed as a &quot;collectible&quot; under IRS rules. These are just a few problems investors encounter with exotic ETF classes. If you're unsure of tax implications, do some research, read the fact sheet on the ETF homepage, and make sure you won't be surprised come tax time.</p> <p>In summary, I think ETFs are great instruments for retail investors, and they open the door to many new asset classes, strategies, and ways to diversify portfolios. They are also generally less expensive than mutual funds, trading stocks, and other asset classes individually. However, without reading the fine print, investors are often disappointed with the results, which is why ETFs are starting to get a bad rap. Since one of the best benefits of an ETF is the low fee structure, you can take that a step further with <a href="http://www.wisebread.com/commission-free-etfs-a-great-option-for-cost-conscious-investors">Commission-Free ETF Investing</a> to get the best of both worlds.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/darwins-money">Darwins Money</a> of <a href="http://www.wisebread.com/etfs-offer-incredible-benefitswith-a-dark-side">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-6"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-top-5-index-funds-to-own-now">The Top 5 Index Funds to Own Now</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/8-ways-etfs-can-put-more-money-in-your-pocket-than-mutual-funds">8 Ways ETFs Can Put More Money in Your Pocket Than Mutual Funds</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-ways-to-profit-from-obamas-cuba-announcement">5 Ways to Profit From Obama&#039;s Cuba Announcement</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-reasons-social-media-is-still-a-smart-investment">5 Reasons Social Media is Still a Smart Investment</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/commission-free-etfs-a-great-option-for-cost-conscious-investors">Commission Free ETFs: A Great Option for Cost Conscious Investors</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Financial News Investment Beginning Investor ETF Investing ETFs stock market Mon, 06 Dec 2010 13:00:14 +0000 Darwins Money 356736 at http://www.wisebread.com What's in Store for the Economy? http://www.wisebread.com/whats-in-store-for-the-economy <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/whats-in-store-for-the-economy" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/iStock_000005556364XSmall.jpg" alt="" title="" class="imagecache imagecache-250w" width="250" height="269" /></a> </div> </div> </div> <p>So does anybody really know where the economy is headed? For a little while there, things seemed to be looking up, thanks to improved stock prices. But with the market having slipped again and unemployment continuing to brew, it's hard to feel confident about the economy these days. Not to mention that we seem to be heading into round two of a stubborn recession, due to uncertain financial conditions in Europe.</p> <p>How we perceive this economy is completely dependent on the needs of the politician that&rsquo;s reporting it. What few people realize is that the Federal Reserve, the Secretary of the Treasury, and all those other economists and talking heads all have an agenda, whether it&rsquo;s to bolster the confidence of the American people in the current Administration or to shake that confidence down to the core.</p> <p>The truth is that the economy, just like a most other things in life, simply can&rsquo;t be measured in straight line gains and losses. The economy is so much more than a line graph on a chart. It&rsquo;s beyond stock and options trading and big corporations. It&rsquo;s more than just mom and pop stores and consumers. It&rsquo;s almost a living, breathing organism. The housing market, the stock market, the banks, the consumers, and the government all have a small but significant role to play in the equation and the contributions of each simply can&rsquo;t be measured in finite terms.</p> <p><strong>For instance, let&rsquo;s look at the housing market.</strong> Even though there seems to be more activity in the housing market when it comes to house sales, there is still an overwhelming number of houses falling into foreclosure. Does this mean that the housing market is recovering or that it&rsquo;s still in dire straits? Big banks are finally showing signs of stability and their recovering stock prices prove it. But maybe it's because of the huge subsidies they've received. And is our economy really on the mend when small bank after small bank (somewhere in the neighborhood of 20-50 or more a month) continues to shut its doors?</p> <p><strong>And what about the stock market?</strong> Are we as consumers supposed to be comforted by the fact that the stock market has recovered nicely from its lows? If you notice the market's behavior, there have been equally as many &quot;up&quot; days as there are &quot;down&quot; days, and this is the normal ebb and flow of the <a href="http://www.wisebread.com/who-cares-about-where-the-stock-market-is-headed">ever-volatile stock market</a>. We haven't really made as much progress as it seems.</p> <p>And while the credit card industry looks to be recovering after a tough period of tight credit, issuers are still keeping an eye on the kind of customers they extend credit to. Getting approved for a prime credit card may be just a tad bit easier than it was a couple of years ago, but things certainly haven&rsquo;t returned to those days of yore when subprime loans, easy credit and quick cash ruled the day. Those days won&rsquo;t be back anytime soon, if at all.</p> <p>So as far as the economic recovery is concerned, the truth is that we don&rsquo;t know what&rsquo;s going on and where this economy will be in the near term. I believe that the so-called financial &ldquo;experts&rdquo; are just as in the dark as we are. Sure they can look at their statistical data and make some educated guesses, but in the end, it&rsquo;s really no more accurate or scientific than predicting tomorrow&rsquo;s weather. Sometimes they get lucky and get some things right, but, more often than not, they&rsquo;re nowhere even close.</p> <p>So, I&rsquo;ve vowed to take a step back from the overwhelming wave of &ldquo;knowledge&rdquo; and information being floated around out there about the state of our economy, and I've decided to make sound financial decisions based on what works for me. I&rsquo;m no longer listening to the people who once told me that debt and leverage were the ways to get what I wanted out of life five years ago, but who are now telling me (in an about face) that no debt is good debt.</p> <p>It would be nice to have that peace of mind of knowing that you can pay your mortgage with only one income if you have to. And wouldn't it be great if you didn't have to worry about losing your car because you hold the title to it? But here's the irony &mdash; if we work to minimize our credit card debt, cut down on spending, and make a commitment to live within our means, would we be influencing the course of our economy for the better? While becoming more financially responsible and putting a lid on spending may be what's good for our family budget, who knows what kind of collective impact such changes would have on our economy. After all, doesn't the economy rely on a spending, consumerist base? If we become a nation of hard-core savers, where does this leave the economy?</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/silicon-valley-blogger">Silicon Valley Blogger</a> of <a href="http://www.wisebread.com/whats-in-store-for-the-economy">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-7"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/9-reasons-why-the-us-economy-is-kicking-the-worlds-butt">9 Reasons Why the U.S. Economy Is Kicking the World&#039;s Butt</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/do-these-8-things-to-profit-from-the-improving-economy">Do These 8 Things to Profit From the Improving Economy</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/what-i-miss-about-the-recession">What I Miss About the Recession</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/why-inflation">Why Inflation?</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-housing-market-is-finally-rebounding">The Housing Market Is Finally Rebounding</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Financial News Economy finance housing market stock market Thu, 22 Jul 2010 12:00:09 +0000 Silicon Valley Blogger 181548 at http://www.wisebread.com The Debate Between Buy and Hold vs Timing The Market http://www.wisebread.com/the-debate-between-buy-and-hold-vs-timing-the-market <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/the-debate-between-buy-and-hold-vs-timing-the-market" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/iStock_000008125274XSmall.jpg" alt="" title="" class="imagecache imagecache-250w" width="250" height="165" /></a> </div> </div> </div> <p>It's interesting to see that with the advent of computerized trading and value discount brokers, a new era of people investing with the idea of getting rich overnight has exploded, even as statistics show that most short term investors do not make money over the long term. This is in the heart of an interesting debate that rages on in financial circles: <strong>should we buy and hold on to our investments for the long term or is timing the market the way to go?</strong></p> <p>The buy and hold faction is quick to say that you'd be crazy to think you can beat the market over time, and that an eye on the long term is how you're going to make money via the stock market. But the other side &mdash; those market timers who've decided to cut their teeth on stock and options trading via their trusty TradeKing accounts &mdash; make the point that many investors who've held on to their investments are now lamenting that as a result of buy and hold, they'll need to be part of the work force for quite a bit longer than they expected.</p> <h3>A Closer Look At Buy And Hold</h3> <p>Let's take a closer look at <a href="http://www.wisebread.com/buy-and-hold-investing-four-ways-to-make-it-more-effective">buy and hold investing</a>, shall we? So how about a quick game of one question Jeopardy: &ldquo;the most famous buy and hold investor?&rdquo; If you answered, &ldquo;who is Warren Buffett?&rdquo; then congratulations, you know your investment gurus! Warren Buffett is not only one of the most famous investors around, but also one of the most successful investors in history. Buffett is a market mover whose track record has been scrutinized by the investing public. When asked how long he intends to hold his chosen stocks, he gives a somewhat surprising reply, &quot;we will hold stocks forever.&quot; And while this sounds somewhat extreme, he's also been extremely successful with employing a value investing stance over time.</p> <p>The buy and hold proponents argue that predicting short term market moves is nearly impossible, and according to them, you can expect long term investing to give you much better results. But what about the recent stock market debacle that's decimated many a long term portfolio? While recent stock market numbers don&rsquo;t look great, if you ask nearly anybody who has been involved in buy and hold investing, they will tell you that while their portfolio has decreased in value, it&rsquo;s still up significantly from when they first opened their investment broker account, even after taking inflation into consideration. The key to this positive outcome lies in the assumption that you started investing a long time ago, when assets, in general, were quite cheap.</p> <h3>The World of Market Timing</h3> <p>The market timers and stock traders take the short term approach. These folks enjoy online stock trading, believing that they can make short term investments and predict those small day to day stock price changes well enough to make a decent profit over time. They use technical indicators and other economic data to make their educated predictions. When their trading dashboard numbers flash green, they quickly sell their positions to bag a profit. Their stance here is that by buying and selling quickly, they quickly lock in a profit and feel more in control of their financial destinies. Turn on any of the financial news networks and you'll find that many of the analysts here are short term traders who are trying to time the market. There are shows on these networks that sometimes spend an entire hour or more asking the question, &ldquo;what will the market do tomorrow?&rdquo;</p> <h3>Best Moves For The Average Investor</h3> <p>We can certainly appreciate the great arguments made on both sides, but I believe that <strong>for the average investor, it's best to stick with the long term investment approach</strong>. This would entail diversifying, developing a decent asset allocation that fits your goals and requirements, and owning mutual funds, index funds, or ETFs over a period of time. Over the long term, buy and hold investing coupled with a regular portfolio rebalancing strategy has proven to be a more successful approach for the retail investor. Stock market timing has tended to work out relatively better for institutional investors or traders with deep pockets because of their ability to hire professionals, obtain top resources, and use advanced strategies that often require experience and larger amounts of money to succeed. Now there are, of course, investors such as myself who employ both methods but with varying degrees of involvement: I have a core investment portfolio of mutual funds but on occasion, will dabble in some individual stock picking and market timing with my &quot;mad money.&quot; What's important here is that regardless of which approach you take, you accept and are fully aware of the <a href="http://www.wisebread.com/15-ways-to-manage-risk-in-your-financial-life">financial risks</a> you are taking.</p> <p>While I would stop short of offering a hard and fast position on this debate, I'll say this: any investor has heard that the stock market rewards patience. So take a look at your portfolio. If you have done well with your current strategy, then stick to what you've been doing; but if your results are flat or negative, perhaps you should try something new and consider beefing up your investment knowledge. After all, aren&rsquo;t we all doing this for one reason? We all want to make money!</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/silicon-valley-blogger">Silicon Valley Blogger</a> of <a href="http://www.wisebread.com/the-debate-between-buy-and-hold-vs-timing-the-market">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-8"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/survive-the-bear-market-10-steps-to-ride-the-downturn">Survive The Bear Market: 10 Steps To Ride The Downturn</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/buy-and-hold-investing-four-ways-to-make-it-more-effective">Buy-and-Hold Investing: 4 Ways to Make It More Effective</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-top-5-index-funds-to-own-now">The Top 5 Index Funds to Own Now</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/10-times-you-shouldnt-invest-in-stocks">10 Times You Shouldn&#039;t Invest in Stocks</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/7-stocks-warren-buffett-loves-and-you-should-too">7 Stocks Warren Buffett Loves — And You Should, Too</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Investment buy and hold market timing stock market stocks Tue, 16 Mar 2010 14:00:02 +0000 Silicon Valley Blogger 5820 at http://www.wisebread.com Buy-and-Hold Investing: 4 Ways to Make It More Effective http://www.wisebread.com/buy-and-hold-investing-four-ways-to-make-it-more-effective <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/buy-and-hold-investing-four-ways-to-make-it-more-effective" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/buy and hold dead.jpg" alt="Buy and hold is dead?" title="Is buy and hold resting in peace?" class="imagecache imagecache-250w" width="250" height="141" /></a> </div> </div> </div> <p>The buy-and-hold investing strategy is kind of like my dad's 1981 Toyota pickup truck: dependable, reliable, old, and a little raggedy looking. It's been around forever and everyone always takes it for granted.</p> <p>But every time it breaks down, people tell him to dump it already. Enough with the 29-year old car already, they say.</p> <p>Buy and hold investing just had a break down and everyone is rushing to claim it's no longer a valid investing strategy. If you read the news about investing, you'd think buy-and-hold was outdated, antiquated, and broken.</p> <p>I do believe it needs a fresh coat of paint and maybe a new bumper, but the engine under the hood is still as sound as ever.</p> <h2>What the Media Says</h2> <p>Go to Google, type in &quot;buy and hold dead&quot; and you'll see what I'm talking about. Last year the stock market sucked and critics decided to run some analysis on how the S&amp;P 500 did in the previous ten years. Here's what that would look like:</p> <p><img border="1" alt="S&amp;P 500 1999 to 2009" src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/u781/s_p_500_buy_hold.jpg" /><br /> <em>Courtesy of <a href="http://finance.yahoo.com/">Yahoo! Finance</a></em></p> <p>Now, most of these experts consider 10 years a really long time, which is kind of disingenuous. But what this &quot;analysis&quot; did was support the idea that buying a stock and holding it for a long period of time (10 years) no longer worked. Look at the data! It's over! Panic! Buy more papers and read our website!</p> <p>To that I say: Paprikash!</p> <p>Buy-and-hold still works, but if you're having trouble believing and want to try something to beef up your buy-and-hold investing, here are four ways to invest when you have a long-term view on a stock.</p> <h2>Moving Average</h2> <p>I read about this one over at MSN Money. The author of <a href="http://articles.moneycentral.msn.com/learn-how-to-invest/stock-markets-real-return-paltry.aspx?page=1">this story</a> uses a 12-month moving average to determine whether it's time to buy into the stock or to sell out and put the money into something safe like bonds.</p> <p>It's a pretty interesting concept since it doesn't involve a lot of buying and selling. Check out the S&amp;P over that same period of time with the 12-month moving average line. The idea is to buy when the black line goes over the red line and sell when it goes under:</p> <p><img border="1" alt="S&amp;P Moving Average" src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/u781/S_P_Moving_average.jpg" /></p> <p>According to the chart, you should've sold off your S&amp;P stock right at the end of 2000, and not gotten back in until mid-2003. Look at the swoon you saved yourself from! Then you would've ridden the bull market all the way up to the beginning of 2008. Oh and that crash in late 2008? You would've been safe and sound.</p> <p>That's ten years and only four moves (including one false alarm in 1999) &mdash; not bad at all.</p> <p>Now, I'll be perfectly frank: I think technical analysis like this is kind of junky. I would never just buy and sell when a chart told me it was time.</p> <p>But if you have a long-term interest in a stock this gives you an interesting way of skipping over the bad times and being in there for the good times.</p> <p><strong>Upside: </strong>Easy to follow, few transactions to pay fees on.</p> <p><strong>Downside: </strong>Taxes are a pain unless you're in a tax-protected account like a Roth, relying on a chart.</p> <h2>Value Averaging</h2> <p>I first heard about this strategy from <a href="http://cashmoneylife.com/2008/10/14/dollar-cost-averaging-vs-value-averaging/">Cash Money Life</a> and I had to <a href="http://www.thewriterscoin.com/2008/11/07/value-averaging-take-the-blindfolds-off/">write about it myself</a>. It's very similar to dollar-cost averaging, which is simply making regular investments over a period of time to smooth out the ups and downs of the market. It's a very safe, very conservative strategy.</p> <p>What value averaging does is smarten up your traditional dollar-cost strategy. In my own words:</p> <blockquote><p>You want to have $5,000 invested at the end of the year so you invest the first $1,000, then wait until your next buying period. If the market goes up, you invest less. If the market goes down, you invest more. At the end of the year, you&rsquo;ve invested the same $5,000 but you&rsquo;ve made small changes as to when you put your money into the market. It&rsquo;s classic buy low, sell high.</p></blockquote> <p>For more on this strategy, check out <a href="http://www.studyfinance.com/jfsd/pdffiles/v13n1/marshall.pdf">this paper</a> that goes into a lot more detail.</p> <p><strong>Upside:</strong> Easy, simple, conservative.</p> <p><strong>Downside:</strong> Must pay attention to the market and decide when it's &quot;high&quot; or &quot;low.&quot;</p> <h2>Take Your Money and Run</h2> <p>This is one <a href="http://www.thewriterscoin.com/2008/07/17/rethinking-the-buy-and-hold-strategy/">I came up with in 2008</a> when things started to go really bad. I was still enamored with buy and sell, but wanted to find a way to avoid some of the pitfalls.</p> <p>So I started to think like a trader: take your profits when you can get them and try to minimize the losing of money. One way of doing this is to set an artificial barrier &mdash; once you gain that amount you sell off and take some profits.</p> <p>This may not sound like buy and hold anymore and I don't know how much of a fan I am of this concept anymore, but it's worth a look.</p> <p>Say you decide 20% is your bar. If you gain 20% in a stock, you sell off some (or all) of it to reap the rewards. Then you have to decide when to get back in, which opens up a whole can of worms.</p> <p><strong>Upside:</strong> You'll never lose money if you don't sell at a loss.</p> <p><strong>Downside:</strong> When do you buy again? Artificial barrier is very unscientific.</p> <h2>Options</h2> <p>Trading options is <a href="http://www.thewriterscoin.com/2009/12/16/option-trading-complicated/">not as complicated as you think</a>. In fact, in many cases they are less risky than investing in stocks. And one way to use a long-term view on a stock with options is called a covered call.</p> <p>This strategy is one of the most basic options moves out there, and it works like this: you own a stock and you sell calls on those stocks. What this means is you get some money from selling the calls and you will do better than just owning the stock if it:</p> <ul> <li>Stays flat</li> <li>Goes down</li> </ul> <p>If the stock goes up beyond the strike price of your call, your stock is still going up but you did worse that just owning the stock. Still, two out of three ain't bad.</p> <p>Check out <a href="http://www.investopedia.com/terms/c/coveredcall.asp">Investopedia's Covered Call</a> entry for more details on this strategy.</p> <p><strong>Upside: </strong>Very straightforward, protects you on two out of three outcomes.</p> <p><strong>Downside:</strong> Need to learn options, open an options-trading account.</p> <h2>Buy-and-Hold Is Here to Stay</h2> <p>There are a bunch of ways of making buy and hold more attractive, and these are just four of them. I especially like the idea of using the moving average strategy in a tax-protected account like a Roth IRA and owning dividend-yielding stocks.</p> <p>This way you're not exposed to the huge drops, you get your dividend payments, and you don't pay any taxes on all the times you buy in and sell off.</p> <p>The fundamental engine under buy and hold's hood seems to be as good as ever, although recent events have changed a lot of people's minds.</p> <p><em>Do you still believe in buy-and-hold?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/carlos-portocarrero">Carlos Portocarrero</a> of <a href="http://www.wisebread.com/buy-and-hold-investing-four-ways-to-make-it-more-effective">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-9"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-debate-between-buy-and-hold-vs-timing-the-market">The Debate Between Buy and Hold vs Timing The Market</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-top-5-index-funds-to-own-now">The Top 5 Index Funds to Own Now</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-reasons-social-media-is-still-a-smart-investment">5 Reasons Social Media is Still a Smart Investment</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/12-wacky-and-not-so-wacky-investment-strategies-that-actually-work">12 Wacky (and Not-So-Wacky) Investment Strategies That Actually Work</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/3-survival-instincts-that-harm-investors">3 Survival Instincts That Harm Investors</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Investment buy and hold investments stock market Tue, 09 Feb 2010 17:00:07 +0000 Carlos Portocarrero 5115 at http://www.wisebread.com 2010 Predictions from Wall Street and Main Street: Who's Smarter? http://www.wisebread.com/2010-predictions-from-wall-street-and-main-street-whos-smarter <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/2010-predictions-from-wall-street-and-main-street-whos-smarter" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/New Years Eve.JPG" alt="New Year&#039;s Eve" title="Time&#039;s Square on New Year&#039;s Eve" class="imagecache imagecache-250w" width="250" height="142" /></a> </div> </div> </div> <p>It's that time of year again: everybody who's anybody sits in front of a camera and gives predictions on the year ahead. But just how smart are these &quot;experts&quot;? We do more than give them air time; we go back and see just how smart they are by comparing previous-year predictions with what actually happened.</p> <p>Every December for the last five years <a href="http://moneytalksnews.com">Money Talks News</a> has hooked up with David Wyss, the chief economist for giant research firm <a href="http://www.standardandpoors.com">Standard &amp; Poors</a>. We sit him down in a studio and ask him what changes he expects for the coming year in three critical consumer categories: stocks, housing and oil.</p> <p>But then we do something else: we go out, hit the streets and ask the same questions of the first three people we can find willing to talk to us on camera. The idea behind this little experiment is to see if the high-priced experts on Wall Street are really any smarter than a random stranger on the sidewalk. You might be surprised at the results. Watch the following 90-second story and see how Main Street compared to Wall Street with predictions for 2009 and who got it right. Then we&rsquo;ll get to the predictions for 2010.</p> <h3>How Smart Were They? Predictions from 2009</h3> <div class="video">&nbsp;</div> <p><embed width="480" type="application/x-shockwave-flash" allowfullscreen="true" src="http://blip.tv/play/kjqBuvhOAg%2Em4v" allowscriptaccess="always" height="300"></embed></p> <p>The first (maybe not so) surprising thing we learned from that story is that when it came to predicting what would happen in 2009, random strangers on the sidewalk gave pretty much identical answers as one of the most experienced economists on Wall Street. And as far as accuracy? Both David Wyss and our people on the street did a decent job of predicting how the year would go for stocks, housing and oil prices, but none hit the nail on the head.</p> <p>Consider this part of David Wyss&rsquo;s comment on stocks:</p> <blockquote><p>We're close to a bottom now, and I think we've probably hit the worse point already.</p></blockquote> <p>When he said that in mid-December of 2008, the Dow Jones Industrial Average was around 8,700, and that&rsquo;s pretty much where it finished the year. But was it the worse point? Hardly. Several months after he made this prediction the Dow bottomed at 6,440 so it fell an additional 26%. From there it bounced back, however, to end the year at 10,428 for a calendar-year gain of about 19%. That makes his prediction of 10-15% gains look pretty good. But had he said not to invest at all until the market bottom in March, we could be up 62%.</p> <p>Of course, nobody can accurately predict a market bottom no matter how smart they are. But it&rsquo;s interesting to note that Wall Street predictions were no more clairvoyant than yours when it came to predicting the direction of stocks last year. Ditto for our other categories. Wyss&rsquo;s predictions weren&rsquo;t far off, but then neither were sidewalk amateurs. Oil was around $75/barrel when I got my predictions on tape in mid-December. It ended the year closer to $80, which makes Wall Street&rsquo;s and Main Street&rsquo;s prediction of $90 not that far off the mark. Ditto with housing: both professional and amateur guesses of a 10% decline were pretty close to the 8% drop we actually experienced. But 2009 is now behind us: what&rsquo;s in store for this year? Here&rsquo;s the story we shot in mid-December 2009 with predictions for 2010.</p> <h3>How Smart Are They? Predictions for 2010</h3> <div class="video">&nbsp;</div> <p><embed width="480" type="application/x-shockwave-flash" allowfullscreen="true" src="http://blip.tv/play/kjqBu6ggAg%2Em4v" allowscriptaccess="always" height="300"></embed></p> <p>This year Wall Street and Main Street gave different answers. Our Wall Street economist was much more optimistic. Wyss said stocks would rise 12%, and our woman on the street said down 10%. On oil, both Wall Street and Main Street are looking for an increase: Wall Street says $80 per barrel (about where it is right now) and Main Street says between $85 and $90. On housing, our expert was kind of vague, saying only that we might have a bit more decline ahead, but for the year we&rsquo;d be up. Our more pessimistic man on the street said down another 10%.</p> <p>We&rsquo;ll be continuing our tradition by comparing predictions to reality at this time next year &mdash; stay tuned. But I&rsquo;ll leave you with a tidbit of knowledge gained from 10 years as a stock broker, 20 as a money reporter, and 30 as an investor: The only thing accurately predictable is that our world is unpredictable. That&rsquo;s why I keep some money in the market and some on the sidelines at all times. I own some oil stocks because they&rsquo;re likely to go up if oil does, offsetting some of the pain of higher gas prices. I regard my home as simply the place where I live, not an investment. And I try to live like I&rsquo;m going to die tomorrow, but invest like I&rsquo;m going to live forever. I also keep my debt to a minimum. That's why I just published <a href="http://moneytalksnews.com/store">Life or Debt 2010</a>. Check it out!</p> <p>&nbsp;</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/stacy-johnson">Stacy Johnson</a> of <a href="http://www.wisebread.com/2010-predictions-from-wall-street-and-main-street-whos-smarter">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-10"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-top-5-index-funds-to-own-now">The Top 5 Index Funds to Own Now</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-reasons-social-media-is-still-a-smart-investment">5 Reasons Social Media is Still a Smart Investment</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-does-the-fannie-mae-and-freddie-mac-bailout-affect-you">How does the Fannie Mae and Freddie Mac bailout affect you?</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/its-time-to-purchase-like-its-1999">It&#039;s Time to Purchase Like It&#039;s 1999</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/who-cares-about-where-the-stock-market-is-headed">Who Cares About Where The Stock Market Is Headed?</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Investment gas prices housing stock market Sun, 10 Jan 2010 22:00:02 +0000 Stacy Johnson 4481 at http://www.wisebread.com Getting Kids Started with the Stock Market http://www.wisebread.com/getting-kids-started-with-the-stock-market <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/getting-kids-started-with-the-stock-market" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/stock market.jpg" alt="stock market board with bull and bear fighting" title="stock market board with bull and bear fighting" class="imagecache imagecache-250w" width="250" height="167" /></a> </div> </div> </div> <p>Recently, a reader asked how to give stock to kids in her life in an effort to inspire a life-long interest in investing. Now seems like a <a href="http://www.wisebread.com/why-young-investors-should-stay-the-course-and-continue-to-invest">great time to start investing</a> but opening an account for someone who isn't your child (a nephew or niece, for example) isn't as straightforward as handing over cash.</p> <p>The investments may cause a burden on the child or the family members. Here's why:</p> <ul> <li>There may be fees associated with the account, such as annual maintenance fees and transaction costs.</li> <li>Account owners may owe income taxes on dividends and stock sales.</li> <li>The account value will likely impact the <a href="http://www.fafsa.ed.gov/">financial aid status</a> of the child (though the investments should be useful in paying for educational expenses).</li> </ul> <p>Ideally, you can open an account with low or no fees and the account will be structured in a way that minimizes the tax consequences. Issues to consider in addition to fees, taxes, and financial aid:&nbsp;</p> <ul> <li>ownership and control of the account (usually the parent or legal guardian controls the account as its custodian)</li> <li>methods of making additional contributions (purchasing additional shares of stock or mutual funds)</li> <li>type of investment:&nbsp;individual stocks and/or mutual funds</li> <li>tax structure of the account:&nbsp;college savings account (such as a 529 plan or Coverdell ESA-Educational Savings Account), Roth or Traditional IRA&nbsp;(kids can have these types of accounts but need earned income to qualify for funding the account), and regular/custodial account that will be taxed at the child's tax rate, usually lower than the parent's rate.</li> </ul> <p><em>Finally, the tricky thing about opening an account for someone else is that typically you'll need the Social Security Number (SSN)&nbsp;of the child and/or the custodian. Privacy concerns, even among friends and family, may cause well-intentioned gift-givers and recipients to shy away from starting an investment account or allowing another person to open the account.</em></p> <p>Still, there are ways to get kids started with investing. Consider these methods: &nbsp;</p> <p><strong>1) Get things ready to start directly investing in shares of a chosen company using a DRIP-Dividend Reinvestment Plan, generally a low-cost option<br /> </strong></p> <ul> <li>Choose a company with a DRIP (<a href="http://www.wisebread.com/slow-drip-into-investing">see explanation of DRIP</a>) or Direct Investment Program. Companies that have these plans include Target, Best Buy, Lowe's, Home Depot, Nike, Disney, Harley Davidson, Pepsico, Procter &amp;&nbsp;Gamble, and 3M.</li> <li>Compare plan options at <a href="http://www.dripadvice.com/index.html">DRIP&nbsp;Advice</a> or do your own research of start-up fees, minimum investment amounts, maintenance fees, etc.</li> <li>Request or download and print enrollment forms.</li> <li>Get some tangible item that represents the company: order the annual report (or download and print one), a logoed shopping bag, store gift card, or a company product (Nike shoes) for example.</li> <li>Write a check to fund the account opening and initial purchase of shares. You can write a check to the child or the parent; or give cash.</li> <li>Put everything together in a <a href="http://www.wisebread.com/36-green-gift-wrapping-ideas">nicely wrapped package</a> (your gift and paperwork).&nbsp;</li> <li>Let the parent or legal guardian take care of opening the account.</li> </ul> <p><strong>2)&nbsp;Transfer funds from your account to the child's account</strong></p> <ul> <li>You'll need to start by owning some investments that you think will be worthwhile to transfer to someone else<strong>. </strong>Presumably, if you are interested in helping a young person learn about the stock market, you've acquired some investing experience and hold some sort of investments that can be transferred. However, you may want to start learning yourself and you can acquire stock now to be transferred later.&nbsp; <strong><br /> </strong></li> <li>Initiate a transfer.</li> <li>Tell the child recipient about the<a href="http://www.fool.com/personal-finance/taxes/2003/09/05/transfer-stock-to-kids.aspx"> gift / transfer</a> and pass along accompanying paperwork.</li> <li>Let the child and parents open an account to receive the stock.</li> </ul> <p><em>Using approaches 1 and 2, you can avoid having access to the child's Social Security Number, so that the parent doesn't need to feel uncomfortable about sharing personal information. </em></p> <p><strong>3)</strong> <strong>Open a 529 Plan for college savings<br /> </strong></p> <ul> <li>Choose a <a href="http://www.wisebread.com/529-plans-for-college-expenses-what-s-cool-and-what-s-quirky">529 Plan</a> offered through your state, another state, or an <a href="http://www.independent529plan.org/index.html">independent group for participating private schools</a>. Typically, you'll choose from a menu of plans that invest in mutual funds and bonds, rather than selecting individual stocks.</li> <li>Sign up for the plan as the account owner and designate the child to whom you want to make a gift as the beneficiary.</li> <li>Make a contribution to the plan to open the account and then make periodic contributions, such as a gift for birthdays and special occasions.</li> <li>Create a memorable gift by wrapping a savings bank or some item that represents higher education (a t-shirt or sweatshirt of a favorite college) with an accompanying mention of the contribution (or, if the child is old enough, copies of the plan statement).</li> <li>Keep in mind that funds in the 529 plan need to pay for qualified educational expenses and you can change the beneficiary (though that would negate the value and intent of the gifts over the years).</li> <li>The child will get a general idea of how investing works but won't be able to make decisions about the investment beyond choosing various plans, similar to the selection of a 401(k) plan; also the child probably shouldn't contribute to the account as he/she is not the owner and the beneficiary can easily be changed.</li> </ul> <p><strong> </strong><strong>4)&nbsp;Try these options</strong></p> <ul> <li>Open an account with a <strong>mutual funds company,</strong> such as <a href="http://www.vanguard.com/">Vanguard</a> or <a href="https://ww3.janus.com/Janus/Retail/HomePage">Janus</a>. Initial minimum investment is high:&nbsp;$3,000 for Vanguard and $1,000 for Janus (or just $500 with Janus if you make automatic investments). Both companies offer various account types such as Custodial Accounts for Minors and Coverdell ESAs. Investments will be in mutual funds rather than individual stocks.</li> <li>Open an account with an <strong>online brokerage company</strong> such as <a href="https://us.etrade.com/e/t/home">E*Trade</a> or <a href="http://www.tdameritrade.com/welcome3.html">TD&nbsp;Ameritrade</a>.&nbsp; Account requirements vary but you can get started with a nominal investment amount and avoid maintenance and transaction fees. You can invest in stocks, bonds, <a href="http://www.wisebread.com/mutual-funds-for-wise-bloggers">mutual funds</a>, and exchange-traded funds (ETFs).</li> <li>Open an account with <a href="http://www.sharebuilder.com/sharebuilder/Default.aspx">ShareBuilder</a>, which has minimal account fees depending on the plan. You can start a Coverdell ESA&nbsp;or Custodial Account. (See this post for a comparison of <a href="http://www.wisebread.com/stock-investing-online-sharebuilder-vs-discount-brokerage">ShareBuilder vs. Online (Discount)&nbsp;Brokerage Company</a>.)</li> <li>Buy a share and stock certificate from <a href="http://www.oneshare.com/">Oneshare</a>. This option seems cool as the gift includes a framed stock certificate and start-up guide, but is the most expensive approach. The process looks simple but you'll still need the child's SSN&nbsp;for a gift.</li> </ul> <p>To help guide your decision, talk with your CPA, financial advisor, plan administrator, etc. and whoever may be responsible for keeping up with the investment.</p> <p>Have you had great success (or unintended consequences) in starting an investment account for a child?&nbsp;Share your experiences in the comments.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/julie-rains">Julie Rains</a> of <a href="http://www.wisebread.com/getting-kids-started-with-the-stock-market">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-11"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-top-5-index-funds-to-own-now">The Top 5 Index Funds to Own Now</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-reasons-social-media-is-still-a-smart-investment">5 Reasons Social Media is Still a Smart Investment</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/its-time-to-purchase-like-its-1999">It&#039;s Time to Purchase Like It&#039;s 1999</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/who-cares-about-where-the-stock-market-is-headed">Who Cares About Where The Stock Market Is Headed?</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/looking-to-invest-right-now-5-basic-investing-tips-for-any-market">Looking To Invest Right Now? 5 Basic Investing Tips For Any Market</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Investment investing for kids stock market Tue, 29 Dec 2009 14:00:19 +0000 Julie Rains 4203 at http://www.wisebread.com 3 Ways Technology Makes Personal Finances Easier http://www.wisebread.com/3-ways-technology-makes-personal-finances-easier <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/3-ways-technology-makes-personal-finances-easier" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/mint-iphone-app.png" alt="Mint.com iPhone app" title="Tracking my finances via the Mint.com iPhone app" class="imagecache imagecache-250w" width="250" height="375" /></a> </div> </div> </div> <p class="openforum-link"><em>This article is </em><a title="Warning: The Government Mail You Received Might Be a Scam" href="http://mylifescoop.com/featured-stories/2009/11/3-ways-technology-makes-personal-finances-easier.html"><em>Wise Bread's contribution</em></a><em> to <a href="http://mylifescoop.com/personal/">Life Scoop</a>, where ordinary people learn how to make surprising things happen with technology.</em></p> <p>From saving money to staying on budget, technology has made it easier than ever to stay on top of my personal finances. Here are 3 ways technology has helped me save money and time.&nbsp;</p> <h2>1. Banking, budgeting, and investment tracking always within reach.</h2> <p><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/bofa-bloomberg-iphone.png" alt="iPhone apps from Bank of America and Bloomberg" /><br /> <em>iPhone apps from Bank of America and Bloomberg</em></p> <p>Smartphones (and even regular cellphones) puts control of my finances in my pocket.</p> <p>Banking has become much easier since I got my <a href="http://www.apple.com/iphone/">iPhone</a>. I can check balances, transfer money between accounts, and look for the nearest ATM just by pulling out my phone. Even folks with regular cellphones can check bank balances and/or get low balance alerts via text messages.</p> <p>Budgeting -- really, sticking to a budget -- is now 10 times easier with my iPhone. One of the problems I had with sticking to a budget was keeping track of my spending. At first, I was good about keeping receipts and entering the totals into a spreadsheet at the end of the day. But as the days went by, I got lazier about entering receipts each day. Eventually, I stopped tracking my spending altogether.</p> <p>These days, I can enter amounts I've spent into my phone right away. Even when I didn't have a smartphone, my regular cellphone had a way to store simple notes. This made it easier to keep track of my spending on a day to day basis.</p> <p>Once I started using <a href="http://www.mint.com/">Mint.com</a> (and their great iPhone app), the process got even simpler. If I use a debit or credit card, the transaction is added to my Mint account automatically. Even better, Mint does a good job of automatically categorizing expenditures, which makes analyzing my spending at the end of the month easier and more accurate.</p> <p>Finally, keeping track of how my favorite stocks are doing is now a breeze with the <a href="http://www.bloomberg.com/">Bloomberg</a> iPhone app. I can now easily check my portfolio daily, and make trades as soon as I notice trends or hear interesting news. Rather than waiting until the end of the month to look over statements or meeting with my broker once every quarter, I can now stay on top of my investment portfolio while waiting in line or when I'm having lunch. The iPhone has made me a faster and smarter investor.</p> <h2>2. Crowdsourcing my way to better buying decisions.</h2> <p><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/yelp-amazon-iphone-400.jpg" alt="iPhone apps from Yelp and Amazon" /><br /> <em>Making smarter buys with consumer reviews on Yelp and Amazon.</em></p> <p>Between local business review site <a href="http://www.yelp.com/">Yelp</a> and <a href="http://www.amazon.com/">Amazon</a>'s customer reviews, I now buy with a lot more confidence. No more wasting money on restaurants or products that disappoint. Nowadays, I hardly ever walk into a new restaurant before checking out what fellow foodies have to say about the place on Yelp. And I almost never buy something without checking Amazon's user reviews. Thanks for the recommendations, world!</p> <p>By the way, both Amazon and Yelp have iPhone apps so I can look up reviews while standing in front of a new restaurant or walking around a big box store.</p> <h2>3. More data than ever available to consumers.</h2> <p><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/zillow-screenshot.gif" alt="Zillow provides real estate info previously only available to real estate agents" /><br /> <em>Zillow provides info previously only available to real estate agents.</em></p> <p>The Internet has been a boon to consumers hungry for information. Not just product reviews, but large scale trending data that helps them make big purchases. I'm looking to buy a home in the next year or so, and I've been a frequent visitor to <a href="http://www.zillow.com/">Zillow</a>. I haven't even contacted a real estate broker yet, but I feel like I already know more about the real estate market in my area than my parents ever did when they were house shopping.</p> <p>Rather than depend on an agent to feed me limited information, I can use Zillow to get a list of all houses on sale in my neighborhood, details about each home (including nearby schools, lots of photos, and a bird's eye view of the neighborhood), and even historical charts of the home and neighborhood's value. Technology has given us home shoppers unparalleled information that was previously only available to professional real estate agents.</p> <p>Once I am ready to make an offer, I can use another site, <a href="http://www.smarthippo.com/">SmartHippo</a>, to shop for mortgages. SmartHippo is Yelp-for-mortgages. Consumers review their lending institutions and even individual agents. Again, leveraging the power of the crowd to make smarter buying decisions!</p> <div class="field field-type-text field-field-guestpost-blurb"> <div class="field-label">Guest Post Blurb:&nbsp;</div> <div class="field-items"> <div class="field-item odd"> <p>For more ways to do everyday tasks better, faster, and smarter, check out these great tips from <a href="http://mylifescoop.com/personal/">Life Scoop</a>:</p> <ul> <li><a href="http://mylifescoop.com/top-10/2009/11/10-great-blogs-for-advancing-your-career.html">10 Great Blogs for Advancing Your Career</a></li> <li><a href="http://mylifescoop.com/featured-stories/2009/11/the-wired-kitchen.html">Building a Wired Kitchen</a></li> <li><a href="http://mylifescoop.com/featured-stories/2009/11/jetset-nearly-effortlessly.html">5 Tips For Jet-setting (Nearly)&nbsp;Effortlessly</a></li> </ul> </div> </div> </div> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/greg-go">Greg Go</a> of <a href="http://www.wisebread.com/3-ways-technology-makes-personal-finances-easier">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-12"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/6-smartphone-apps-to-help-you-save-big">6 Smartphone Apps to Help you Save Big</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-top-5-index-funds-to-own-now">The Top 5 Index Funds to Own Now</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/15-modern-life-skills-everyone-should-master">15 Modern Life Skills Everyone Should Master</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-to-calculate-future-value-and-why-it-matters">How to Calculate Future Value, and Why It Matters</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/6-interesting-ways-technology-can-help-you-buy-a-home">6 Interesting Ways Technology Can Help You Buy a Home</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Credit Cards Investment Technology iPhone lifescoop mint mortgage online banking stock market Yelp Zillow Tue, 17 Nov 2009 14:00:01 +0000 Greg Go 3829 at http://www.wisebread.com It's Time to Purchase Like It's 1999 http://www.wisebread.com/its-time-to-purchase-like-its-1999 <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/its-time-to-purchase-like-its-1999" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/stock-market.jpg" alt="" title="" class="imagecache imagecache-250w" width="250" height="188" /></a> </div> </div> </div> <p><embed width="480" height="300" src="http://blip.tv/play/kjqBpa4JAg%2Em4v" type="application/x-shockwave-flash" allowscriptaccess="always" allowfullscreen="true"></embed></p> <p>If you believe the US economy is never going to recover, grab some canned food and a gun and head for Montana. But if you do, it&rsquo;s probably time to invest. Or at least spend.</p> <p>As I point out in the accompanying news story, prices on some major assets are priced like it&rsquo;s 1999. And if past is prologue that means there&rsquo;s money to be made. Perhaps major money. I live in South Florida, so many of the recession&rsquo;s effects may be amplified here. But we&rsquo;re seeing housing prices not seen in this century. I just looked at a house for $300,000 that sold in 2005 (note: this was at least a year before the market peaked) for $570,000.&nbsp;Commercial properties that made no economic sense just a few years ago now present a better cash-on-cash return than most other investments, and they come with tax write-offs that make them even more appealing. And stocks? As the market tanked earlier this year, I started buying. &nbsp;Since January, I&rsquo;ve invested about $90,000, and as I write this I&rsquo;m up about $31,000: an unrealized gain of about 35%. &nbsp;(I&rsquo;ll share my exact portfolio in future posts.) And if you think the stock train has already left station, check this out: even after gaining more than 50% from this year&rsquo;s lows, the stock market today is still below where it was in January of 2000. If you could go back 10 years in time and be able to buy stocks, wouldn&rsquo;t you want to?&nbsp;</p> <p>And if spending sounds more fun to you than investing, you&rsquo;re still in fat city. Boats&hellip;especially used boats&hellip; are way cheaper than they were a few years ago. It&rsquo;s much easier to drive a hard bargain on cars, both new and used. Same with motorcycles. And if travel&rsquo;s your thing, hotels, planes and cruises are a lot easier on the pocketbook today than they were a few years ago. They&rsquo;re also less crowded.</p> <p>The media loves to shout the blues with headlines about how life sucks when the economy tanks. Don&rsquo;t get me wrong: it does suck for those who can&rsquo;t find work. But for those who do have a job, a healthy savings account and some optimism about the long-term, it doesn&rsquo;t get any better than this. &nbsp;Opportunity in the form of lower prices doesn&rsquo;t knock all that often: if you have the wherewithal, my advice is to answer the door.&nbsp;</p> <p>I leave you with the words of legendary investor Warren Buffet. <em>Be fearful when others are greedy and greedy when others are fearful</em>.</p> <p>Are you making smart buys in this recession? If so I&nbsp;would love to hear about your picks and tips in the comments!</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/stacy-johnson">Stacy Johnson</a> of <a href="http://www.wisebread.com/its-time-to-purchase-like-its-1999">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-13"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/real-estate-investing-is-cheaper-and-easier-than-you-think">Real Estate Investing Is Cheaper and Easier Than You Think</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/is-paying-off-your-mortgage-early-costing-you-money">Is Paying Off Your Mortgage Early Costing You Money?</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/think-the-housing-bubble-was-bad-check-out-these-other-crazy-investment-bubbles">Think the Housing Bubble Was Bad? Check Out These Other Crazy Investment Bubbles</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-creative-ways-to-invest-during-a-weak-market">5 Creative Ways to Invest During a Weak Market</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-reasons-social-media-is-still-a-smart-investment">5 Reasons Social Media is Still a Smart Investment</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Investment Real Estate and Housing Economy investing real estate recession deals stock market Fri, 09 Oct 2009 16:00:02 +0000 Stacy Johnson 3698 at http://www.wisebread.com 5 Creative Ways to Invest During a Weak Market http://www.wisebread.com/5-creative-ways-to-invest-during-a-weak-market <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/5-creative-ways-to-invest-during-a-weak-market" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/invest-money.jpg" alt="" title="" class="imagecache imagecache-250w" width="250" height="167" /></a> </div> </div> </div> <p>With the stock market finally recovering this past month, even closing at highs for the year, a lot of investors may be breathing a sigh of relief about their stock investments. You may have checked your online broker recently and discovered your balance looking a bit healthier than it did several months ago. But given the volatility we've seen over the past year or so, can we really trust that the markets are reflecting a true recovery in our economy, or is this just a technical bounce?</p> <p>A lot of armchair market pundits I've been reading are keen on predicting that we're going to see a <a href="http://www.wisebread.com/recession-journal-iv-could-this-be-the-last-entry">double dip recession</a>. And interestingly, market insiders are also making defensive moves right now, apparently bailing out of their equity positions while the market registers this year's highs. This caught my attention, given that these very same insiders were known to be buying heavily when the market was carving out a bottom (at DJIA mid 6000).</p> <p>So if you're worrying about what you should be doing with your investments right now, you're certainly not alone. But instead of wondering whether you should hang on tight or abandon everything for cash, I'd like to suggest that we think outside of the box a little and investigate some alternative approaches to investing. Here are 5 creative ways to invest right now.</p> <h2>1. Invest in lending notes.</h2> <p>While I've known of peer to peer lending for a while now, it's only recently that I've looked into it earnestly as an investor. I was particularly intrigued by the potential returns you can make by investing in notes (between 7% to 9.6% as an annual average). For more details, you can check out my Lending Club review and evaluate this particular lender's personal loan rates to gauge what you can earn as an investor.</p> <h2>2. Explore foreign currency investments.</h2> <p>Are you interested in adding some foreign exposure to your portfolio beyond owning traditional international equities? Then you may be interested in foreign currency CDs which are certificates of deposit that are invested in various world currencies. There are variants of this product that may give you downside protection (most currency CDs do expose you to currency risk): for more information, check out my EverBank review, which discusses such products in more detail.</p> <h2>3. Ladder your cash instruments.</h2> <p>Short term cash reserves aren't the most exciting things these days, given the low yields they've got right now. So for the short term reserves I have, I've opted to use a CD ladder, which requires staggering the purchase of certificates of deposit of various terms so that they reach maturity at various times. <a href="http://www.wisebread.com/laddering-for-higher-more-stable-returns">Laddering</a> allows you to diversify across CDs of differing rates thereby giving you a chance to enjoy a higher average rate of return. They also grant you some level of liquidity because of the different maturity dates represented in your CD portfolio. Here's are some of the best CD rates I've found, which you can explore for this strategy.</p> <h2>4. Diversify into precious metals.</h2> <p>For further diversification, consider delving into other asset classes such as precious metals, and in particular, gold. Investing in gold has paid off for long term investors over the last decade, but like any other investment, can be subject to volatility during certain periods. A good rule of thumb is to put only a small portion of your funds (say 5% to 10%) into this category for diversification purposes. Investors normally flock to precious metals when there's fear in the markets and the streets.</p> <h2>5. Diversify into commodities.</h2> <p>Aside from putting a small portion of your funds in precious metals, you may also want to investigate the possibility of buying a commodities fund, index or ETF. Relatively speaking, commodities are not a very popular asset category and are not widely found in the average investment portfolio. The truth is, they are meant to represent only a very small part of your holdings due to their volatile nature. However, if you are looking for one way to hedge your core equity portfolio (e.g. against inflation), then you may want to put a little bit of money in a commodity index fund like the <strong>PIMCO Commodity Real Return Strategy Fund (PCRDX)</strong>.&nbsp; This particular type of investment has both its champions and critics, so do your best to learn about it before investing.</p> <p>So what about investing in the obvious? Now that stocks and real estate are down from their price peaks, you may start feeling tempted to move the lion's share of your portfolio into these weakened areas. I would caution you from making such radical moves though, since outright market timing can be a dicey game (you can be wrong, after all!). Instead, look into rebalancing your investment portfolio if you haven't done so already, in order to keep to your original <a href="http://www.wisebread.com/asset-allocation-for-all-markets">asset allocation</a> (by shifting your funds accordingly, you're actually buying low). Or if you really want to invest in real estate, make sure you study the local markets. Alternatively, you can simply go for REITs, which are so much easier to manage. But if you're thinking about <a href="http://www.wisebread.com/buying-a-home-without-a-20-down-payment">buying a house</a> to live in, I believe that now is a good time to buy!</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/silicon-valley-blogger">Silicon Valley Blogger</a> of <a href="http://www.wisebread.com/5-creative-ways-to-invest-during-a-weak-market">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-14"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/who-cares-about-where-the-stock-market-is-headed">Who Cares About Where The Stock Market Is Headed?</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/its-time-to-purchase-like-its-1999">It&#039;s Time to Purchase Like It&#039;s 1999</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-to-avoid-gambling-away-your-investments">How To Avoid Gambling Away Your Investments</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/survive-the-bear-market-10-steps-to-ride-the-downturn">Survive The Bear Market: 10 Steps To Ride The Downturn</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-reasons-social-media-is-still-a-smart-investment">5 Reasons Social Media is Still a Smart Investment</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Investment Economy investing investment stock market Wed, 23 Sep 2009 16:00:05 +0000 Silicon Valley Blogger 3615 at http://www.wisebread.com How To Avoid Gambling Away Your Investments http://www.wisebread.com/how-to-avoid-gambling-away-your-investments <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/how-to-avoid-gambling-away-your-investments" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/gambling.jpg" alt="" title="" class="imagecache imagecache-250w" width="250" height="155" /></a> </div> </div> </div> <p>Investing has been the subject of debate between me and my colleagues, on and off throughout the years. Some of my friends consider participating in the <a href="http://www.wisebread.com/going-all-in-what-texas-holdem-can-teach-you-about-investing">stock market a form of gambling</a>, while I say &quot;it depends.&quot;&nbsp; While I agree that not everyone should be risking their money in certain investments, I believe that by taking on an extreme view against investing in general, you could be missing out on potential growth in your net worth. Unfortunately, in recent years, what's happened in the stock market may validate what some people already think -- that investing is indeed synonymous with gambling.<br /> <br /> But for those who are young, able-bodied, employable and with a good income stream, putting money in the stock market is still a good bet (pun intended).&nbsp; For instance, while I'm pretty conservative when it comes to my money -- I'm debt free but for my mortgage -- I am one who also enjoys investing and who has happily reaped the benefits of this activity over the years. So if you're nervous about investing, here are a few tips to help you find the confidence to make that first step as a stock investor:</p> <h3>How To Prevent Your Investments From Turning Into A Gamble</h3> <p><strong>1. Learn about investing.</strong><br /> These days, many online brokers and mutual fund companies offer a lot of resources and information that you can use to boost your knowledge about the stock market. When I first started investing, I only had books, magazines and publications to turn to, unlike today with the wealth of information at our fingertips. I'd encourage you to check out our TradeKing review or this coverage I have of ETrade, where you'll see the kind of resources that are available to you for free by simply joining a well rated brokerage.&nbsp; You'll get very strong support at mutual fund companies like Vanguard and Fidelity as well, or at independent financial sites like Motley Fool and SmartMoney.<br /> <br /> <strong>2. Have enough of a cash cushion.</strong><br /> Make no mistake, the stock market is rife with risk. But don't forget that there are other risks too, when you decide to keep all or most of your money in a safe, liquid account.&nbsp; While it's important to ensure that you do have some money saved up in a savings account, don't overdo it because over time, you may not be earning enough in interest to make up for the effects of inflation.&nbsp; You'll need stocks and other investments to prevent your assets from losing ground due to inflation. For most people who earn an income or have cash flow, their <a href="http://www.wisebread.com/figuring-the-size-of-your-emergency-fund">emergency fund</a> can serve as the cash cushion here.&nbsp;&nbsp;&nbsp; <br /> <br /> <strong>3. Diversify, diversify, diversify.</strong><br /> The key to managing your risks with investing is a little thing called diversification. I've often written that diversification is the foundation of any solid investment plan. Create a portfolio that represents all the <a href="http://www.wisebread.com/asset-allocation-for-all-markets">major asset classes</a> such as stocks, bonds, cash, and maybe include real estate and gold (or precious metals) in the mix. For stocks, you'll want to diversify further by getting representation in foreign and domestic companies.<br /> <br /> <strong>4. Gamble only with a little.</strong><br /> Should you trade stocks online? Some people make the mistake of equating investing with trading, which are two different animals. The prudent approach is to create what is called a &quot;core and explore&quot; portfolio. The one I have consists of core investments in solid, high quality investments such as index funds and ETFs, while I cap the amount of money I use for &quot;fun, experimentation and exploration into wild investments&quot; at 4% of my total portfolio.&nbsp; That way, I can indulge my interest in trading the market.<br /> <br /> <strong>5. Stick with what you're comfortable with.</strong><br /> Go with the kind of portfolio that will make you sleep at night. Deciding to put most of your funds in aggressive stocks and risky investments like penny stocks or options (unless you have great experience in options trading), is gambling, if you're an average investor.&nbsp; Instead, use your goals and self-understanding to invest according to your <a href="http://www.wisebread.com/asset-allocation-for-all-markets">risk profile</a>.<br /> <br /> <strong>6. Stick with easy to understand, well known investments.</strong><br /> What can be more popular and easy to understand than <a href="http://www.wisebread.com/mutual-funds-for-wise-bloggers">mutual funds</a>?&nbsp; These boring funds often get some flack for being ... well, boring, but you'll increase your chances of making money over the long term with a simple diversified portfolio of index funds.&nbsp; <br /> <br /> <strong>7. Avoid making emotional decisions. </strong><br /> I used to think that market timing is bad. Today, I don't necessarily think it is, unless you're timing the market <a href="http://www.wisebread.com/how-the-economic-crisis-challenges-our-financial-beliefs">based on emotion</a>.&nbsp; Remember that with market timing, you risk being whipsawed by volatile prices.&nbsp; If you time the market by basing your decisions on a clear investment strategy and loads of analysis, then it's a different story. That said, market timing is only appropriate for skilled and experienced traders, while the average investor should probably avoid participating in such a risky exercise. <br /> <br /> <strong>8. Understand your risks.</strong><br /> Know the risks you take before you put your money on the line without any guarantees, so do your research and read your prospectuses before you invest.&nbsp; It's also important to understand the relationship between risk and reward, as well as your own investment profile.&nbsp; <em>Ask yourself: what kind of investor are you?</em>&nbsp; Here's more on how to <a href="http://www.wisebread.com/15-ways-to-manage-risk-in-your-financial-life">manage your financial risk</a> as well as some <a href="http://www.wisebread.com/looking-to-invest-right-now-5-basic-investing-tips-for-any-market">basic investing tips</a> we've shared here before.<br /> <br /> <br /> To close, I believe that it's all semantics when one compares investing to gambling. You're a gambler if you trust luck to take care of your fortunes in the markets.&nbsp; You're an investor if you've put careful thought into your investment plan and decide to execute your strategies accordingly.&nbsp; While both actions involve risk, they don't mean the same thing to me.&nbsp;&nbsp;</p> <p>&nbsp;</p><br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/silicon-valley-blogger">Silicon Valley Blogger</a> of <a href="http://www.wisebread.com/how-to-avoid-gambling-away-your-investments">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-15"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/who-cares-about-where-the-stock-market-is-headed">Who Cares About Where The Stock Market Is Headed?</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-creative-ways-to-invest-during-a-weak-market">5 Creative Ways to Invest During a Weak Market</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/survive-the-bear-market-10-steps-to-ride-the-downturn">Survive The Bear Market: 10 Steps To Ride The Downturn</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-reasons-social-media-is-still-a-smart-investment">5 Reasons Social Media is Still a Smart Investment</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-to-make-the-most-of-your-401K">How to Make the Most of Your 401K</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Investment investing investment stock market Mon, 06 Jul 2009 16:47:35 +0000 Silicon Valley Blogger 3340 at http://www.wisebread.com