returns http://www.wisebread.com/taxonomy/term/222/all en-US 8 Types of Investors — Which One Are You? http://www.wisebread.com/8-types-of-investors-which-one-are-you <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/8-types-of-investors-which-one-are-you" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/businessman_reading_a_newspaper.jpg" alt="which type of investor are you" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Do you tend to invest in a particular way? Identifying which type of investor you are can help you understand the potential pitfalls of your investment approach &mdash; and how to improve your chances for better investment returns. Which type of investor are you?</p> <h2>1. Automatic investor</h2> <p>The automatic investor is all about convenience. Everything related to investing is set on autopilot. Automatic contributions to investment funds come out of every paycheck or are withdrawn from the bank account on a certain day of the month. This type of investor doesn't spend much time or effort thinking about investing, and doesn't need to since everything is automatic. They don't have to remind themselves to invest; it's checked off their financial to-do list.</p> <p>The potential downside for the automatic investor is losing touch with where investment funds are going and how the investment portfolio is performing. If you are not paying attention, you may not have investment selections that meet your current goals, and you may not identify and remove low performing investments or funds with high fees. If you don't check in at least occasionally, this hands-off approach may cost you. Rebalancing your portfolio once or twice a year by transferring funds to maintain your desired proportions of stocks to bonds should be sufficient to keep your investment portfolio on track. (See also: <a href="http://www.wisebread.com/the-most-important-thing-youre-probably-not-doing-with-your-portfolio?ref=seealso" target="_blank">The Most Important Thing You're Probably Not Doing With Your Portfolio</a>)</p> <h2>2. Daily Dow watcher</h2> <p>The Dow watcher is constantly up to speed. They know at any time if the stock market is up or down. The current market price and chart is only a tap away on their smartphone. This type of investor knows how much their portfolio is worth and worries about how much they are losing when the market has a bad day. Nothing goes over the Dow watcher's head.</p> <p>The risk for the Dow watcher is that he or she can easily get stressed out by day-to-day ups and downs in the market. They may even get discouraged when the market is going down and decide to sell stock when the price is low &mdash; the worst time to sell! It's good to be informed, especially when it comes to your investments, but if you find yourself too glued to the Dow's daily performance &mdash; it might be a good idea to <a href="http://www.wisebread.com/want-your-investments-to-do-better-stop-watching-the-news" target="_blank">step away from the news</a> for a bit. Checking in on the stock market and your investment portfolio quarterly is probably more than frequent enough, and you can use the time you save for something more productive and enjoyable.</p> <h2>3. Active trader</h2> <p>The active trader is a studious investor. This type of investor tries to time the market by figuring out that a stock is going up before other investors realize it &mdash; and then selling when it is near the peak price before most investors figure out that it is going down. This type of investor pores over market and economic data, reads business articles, and is well-informed about business trends and news. He or she is willing to take risks for a chance at big returns.</p> <p>If you're an active trader, tread carefully; you can easily lose significant money if your timing is off. Trading fees can also get expensive if your investment approach requires making a lot of trades. You are much more likely to make money from buying good stocks and holding them for the long haul.</p> <h2>4. Conscientious investor</h2> <p>Conscientious investors put their money where their morals are. They have limits to what activities and products they are willing to be involved with in order to make a buck. For example, some conscientious investors invest only in socially-responsible or environmentally-responsible companies, and avoid owning shares in companies that promote values or products contrary to their moral principles. This type of investor is likely to exert economic influence through consumer purchasing decisions as well as through their stock picks.</p> <p>This type of ethical investing unfortunately can limit a person's investment options, which may result in lower returns. But some things are worth more than money to conscientious investors. (See also: <a href="http://www.wisebread.com/a-simple-guide-to-socially-responsible-investing?ref=seealso" target="_blank">A Simple Guide to Socially Responsible Investing</a>)</p> <h2>5. Property investor</h2> <p>Not every investor owns stocks. The property investor owns real estate, collectibles, gold, and maybe even bonds. He or she wants to invest in things that they can understand and control to some extent. This type of investor may not trust Wall Street and avoids the volatility of stocks.</p> <p>Historically, however, stocks have had great investment returns compared to other investment types, so property investors who shy away from the stock market could be missing out. Large cap value stocks can be a relatively safe way to start off in stock investing for first-time stock investors.</p> <h2>6. Bargain investor</h2> <p>This is the kind of investor that pounced on GM stock when it was $1 per share in 2009. Of course there is risk that bargain stocks could become worthless, but there is potential for the stock price to bounce back. The bargain investor looks carefully at P/E ratios to check the share price relative to earnings per share when deciding what stock to buy.</p> <p>Bargain hunters should be wary though &mdash; sometimes stocks with low prices are trading at a low price for a good reason. The bigger the bargain, the more research is merited into why the price is so low before you buy.</p> <h2>7. Company loyalist</h2> <p>The company loyalist owns a disproportionate amount of stock from an individual company. This could be a trendy stock that inspires loyalty like Apple or Tesla, or the company loyalist could own a large amount of his or her own employer's stock.</p> <p>Owning a large amount of any single company stock can be risky. The company could <a href="http://www.wisebread.com/how-these-8-company-stocks-fared-following-scandal" target="_blank">experience a major scandal</a> or product failure and the stock price could tank. Remember Enron? Owning a lot of stock in the company you work for is even riskier, because if something goes wrong you'll not only lose value in your stock fund, but you may lose your job at the same time. Some financial advisers suggest that owning more than 10 percent to 15 percent of your company's stock may be too much.</p> <h2>8. Portfolio tweaker</h2> <p>The portfolio tweaker is not really an active trader, but likes to adjust and fine tune his or her portfolio frequently by making transfers between funds to get the desired balance between large cap, mid cap, small cap, foreign, domestic, growth, value, and bond investment categories.</p> <p>While it is good to adjust your portfolio occasionally to meet your investment goals, frequently selling investments that are performing well just to meet an arbitrary &quot;balance&quot; in your portfolio may not be the best move and could hurt your overall return. As we advised the automatic investor, portfolio rebalancing once or twice per year is a good interval for most investors.</p> <h2 style="text-align: center;">Like this article? Pin it!</h2> <div align="center"><a data-pin-do="buttonPin" data-pin-count="above" data-pin-tall="true" data-pin-save="true" href="https://www.pinterest.com/pin/create/button/?url=http%3A%2F%2Fwww.wisebread.com%2F8-types-of-investors-which-one-are-you&amp;media=http%3A%2F%2Fwww.wisebread.com%2Ffiles%2Ffruganomics%2Fu5180%2F8%2520Types%2520Of%2520Investors%2520Which%2520One%2520Are%2520You.jpg&amp;description=8%20Types%20of%20Investors%20%E2%80%94%20Which%20One%20Are%20You%3F"></a></p> <script async defer src="//assets.pinterest.com/js/pinit.js"></script></div> <p style="text-align: center;"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/u5180/8%20Types%20Of%20Investors%20Which%20One%20Are%20You.jpg" alt="8 Types of Investors &mdash; Which One Are You?" width="250" height="374" /></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/dr-penny-pincher">Dr Penny Pincher</a> of <a href="http://www.wisebread.com/8-types-of-investors-which-one-are-you">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-3-rules-every-mediocre-investor-must-know">The 3 Rules Every Mediocre Investor Must Know</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/how-too-much-investment-diversity-can-cost-you">How Too Much Investment Diversity Can Cost You</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/is-dollar-cost-averaging-the-right-strategy-for-you">Is Dollar Cost Averaging the Right Strategy for 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/want-your-investments-to-do-better-stop-watching-the-news">Want Your Investments to Do Better? Stop Watching the News</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-essentials-for-building-a-profitable-portfolio">5 Essentials for Building a Profitable Portfolio</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Investment automatic company stock dow ethical investing portfolio property investors returns risk stock market stocks types Fri, 08 Sep 2017 08:00:05 +0000 Dr Penny Pincher 2017190 at http://www.wisebread.com Is Dollar Cost Averaging the Right Strategy for You? http://www.wisebread.com/is-dollar-cost-averaging-the-right-strategy-for-you <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/is-dollar-cost-averaging-the-right-strategy-for-you" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/saving_money_and_banking_for_finance_concept.jpg" alt="Saving money and banking for finance concept" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>You've just received a bonus or an inheritance, and you know that investing your money in stocks and bonds is one of the best ways to create long-term wealth. But you're also worried that your investments might lose value instead of gaining it.</p> <p>It's a common struggle: You want the financial rewards that can come with investing, but the potential risk of losing money nags at you. (See also: <a href="http://www.wisebread.com/how-to-get-over-these-5-scary-things-about-investing?ref=seealso" target="_blank">How to Get Over These 5 Scary Things About Investing</a>)</p> <p>An investing strategy known as dollar cost averaging might be the answer.</p> <h2>What is dollar cost averaging?</h2> <p>In dollar cost averaging, you invest just a small chunk of money at a time. This differs from the more traditional approach to investing, in which you'd invest all the money that you've targeted for stocks, bonds, or real estate at the same time.</p> <p>Say you've inherited $6,000. You'd like to invest that money in the stock market so that it will grow over time. If you were investing in the traditional way, you'd invest that money all at once. With dollar cost averaging, though, you would invest more gradually, perhaps investing $500 each month throughout the course of a year. That way, you'd buy more stocks when prices are low, and fewer stocks when they're high. (See also: <a href="http://www.wisebread.com/9-investing-questions-youre-too-embarrassed-to-ask?ref=seealso" target="_blank">9 Investing Questions You're Too Embarrassed to Ask</a>)</p> <p>The main benefit of dollar cost averaging is that it reduces your financial risk. Say you invested all that money in stocks at once. A market crash three months later would then impact all your money. But if you'd just invested, say, $1,500 before the market crashed, you'd still have $4,500 of your original $6,000 left untouched by the financial turbulence.</p> <h2>Paycheck contributions versus lump sum investing</h2> <p>If you contribute the same amount to your 401(k) every paycheck, that's equivalent to dollar cost averaging. By default, most people have the same amount deducted from their paycheck each month, so there is no choice to make. Dollar cost averaging, however, usually refers to a choice the investor makes when they've got a lump sum of money, such as an inheritance, royalty check, or bonus. If you don't have a windfall of some sort, you usually don't have to worry about whether or not to do dollar cost averaging.</p> <h2>Pros and cons</h2> <p>The main advantage of dollar cost averaging is the reduced risk of losing as much money in a market downturn. But there's another advantage, too: Dollar cost averaging makes it easier for reluctant investors to enter the market.</p> <p>If you're hesitant about investing, you might find it easier to take the jump if you are investing a smaller amount of money. And that's a good thing: Over time, the stock market has tended to increase in value. If you don't invest, you won't get the chance to take advantage of this.</p> <p>Anything that encourages you to invest &mdash; such as dollar cost averaging &mdash; is a positive.</p> <p>There is a drawback, though, to this approach: By limiting your risk, you are also limiting the potential size of your financial rewards.</p> <p>Because the stock market has historically increased in value over time, the odds are that you'll make more money if you invest a larger sum all at once. The sooner you invest the money, the more time it has to grow. By contrast, if you invest smaller bits of money over time, you will tend to see smaller returns in what has historically been an upward-trending market.</p> <p>A recent study by Vanguard illustrates this. Vanguard studied whether people would see higher returns by <a href="https://personal.vanguard.com/pdf/ISGDCA.pdf" target="_blank">investing a large sum of cash</a> all at once or in smaller doses over a six-month period into a portfolio of 60 percent stocks and 40 percent bonds. They found that investing the lump sum of cash all at once produced higher returns about two-thirds of the time. The longer the investment period, the higher the chance that the lump sum investment would outperform the dollar cost averaging strategy. (See also: <a href="http://www.wisebread.com/the-basics-of-asset-allocation?ref=seealso" target="_blank">The Basics of Asset Allocation</a>)</p> <p>You'll have to decide whether the reduced risk outweighs the potential of losing out on bigger returns.</p> <p>Of course, it's most important that you do invest your money over the long term. And if dollar cost averaging, and the reduced risk that comes with it, is what encourages you to do this, then it might be the best approach for you.</p> <h2 style="text-align: center;">Like this article? Pin it!</h2> <div align="center"><a data-pin-do="buttonPin" data-pin-count="above" data-pin-tall="true" data-pin-save="true" href="https://www.pinterest.com/pin/create/button/?url=http%3A%2F%2Fwww.wisebread.com%2Fis-dollar-cost-averaging-the-right-strategy-for-you&amp;media=http%3A%2F%2Fwww.wisebread.com%2Ffiles%2Ffruganomics%2Fu5180%2FIs%2520Dollar%2520Cost%2520Averaging%2520the%2520Right%2520Strategy%2520for%2520You-.jpg&amp;description=Is%20Dollar%20Cost%20Averaging%20the%20Right%20Strategy%20for%20You%3F"></a></p> <script async defer src="//assets.pinterest.com/js/pinit.js"></script></div> <p style="text-align: center;"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/u5180/Is%20Dollar%20Cost%20Averaging%20the%20Right%20Strategy%20for%20You-.jpg" alt="Is Dollar Cost Averaging the Right Strategy for You?" width="250" height="374" /></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/dan-rafter">Dan Rafter</a> of <a href="http://www.wisebread.com/is-dollar-cost-averaging-the-right-strategy-for-you">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/8-types-of-investors-which-one-are-you">8 Types of Investors — Which One Are You?</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/want-your-investments-to-do-better-stop-watching-the-news">Want Your Investments to Do Better? Stop Watching the News</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-too-much-investment-diversity-can-cost-you">How Too Much Investment Diversity Can Cost 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/7-reasons-millennials-should-stop-being-afraid-of-the-stock-market">7 Reasons Millennials Should Stop Being Afraid of the Stock 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/10-stocks-that-are-actually-having-a-good-year">10 Stocks That Are Actually Having a Good Year</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Investment dollar cost averaging growth inheritances lump sums returns risk stock market Mon, 24 Jul 2017 08:30:14 +0000 Dan Rafter 1986884 at http://www.wisebread.com Cash Might Make You Happier, But Investments Will Make You Richer http://www.wisebread.com/cash-might-make-you-happier-but-investments-will-make-you-richer <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/cash-might-make-you-happier-but-investments-will-make-you-richer" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/woman_glasses_piggybank_125143864.jpg" alt="Woman getting richer with investments" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Having a stash of cash feels great. Liquid wealth makes you feel more secure, because you can predict how you will handle whatever life throws your way. The feeling of satisfaction is real, but ultimately, the rewards of keeping your wealth in your checking or savings account are much less satisfying. If it's long-term wealth you're after, you need to start investing.</p> <h2>You're losing money</h2> <p>In the battle between interest and inflation, inflation wins when you keep your cash in a typical savings or checking account. You'll get very little in interest from a bank account intended for day-to-day use: typically, 0.01 percent to 0.03 percent for a checking account, and up to 1 percent for a savings account. Meanwhile, the average annual inflation rate is 3 percent. So your stash is losing value every year, as inflation climbs faster than interest grows your money.</p> <p>The numbers work out pretty grimly in that scenario. Imagine you put $100,000 in a savings account with a 1 percent interest rate, and add $500 every month. Every year, you'll gain that 1 percent interest but lose 3 percent of the value, due to inflation &mdash; meaning you come out 2 percent <em>behind </em>annually. In 10 years, you'll have $173,522 but it will only be worth $129,117.17.</p> <p>On the other hand, the return on stock and real estate investments is staying stable at 7 percent. That's the real rate of return, meaning it's adjusted for inflation. After 10 years, your $100,000 investment, with the monthly $500 addition, will have an actual value of $267,357.54.</p> <p>Why wouldn't you immediately put your money into a higher-yield investment? For most people, the hesitation comes from fear of taking a big risk with money.</p> <h2>What's the big risk?</h2> <p>Humans tend to be risk averse. This risk aversion has done a lot for us, in an evolutionary sense.</p> <p>Risk aversion is also helpful in finances in many instances. When it comes to getting high-interest return on your savings, however, risk aversion can hinder you. To maximize your savings, you need a high return that will outrun inflation and exponentially add financial value to your nest egg.</p> <p>High-return investments, unfortunately, are also higher risk investments. If you're unfamiliar with the stock market, investment portfolios, and the like, these types of high-return investments can feel terrifying. But you can overcome that fear.</p> <p>First, start a relationship with a financial investment professional. Ask for recommendations from people you know and trust, who are not struggling financially. Second, don't invest all your money in one high-yield investment. Diversify; if one investment doesn't grow as predicted, it won't topple your entire savings plan. Third, you don't have to invest all your money in what feels riskiest. You can <a href="http://www.wisebread.com/the-basics-of-cd-laddering" target="_blank">set up a CD</a>, <a href="http://www.wisebread.com/stabilize-your-portfolio-with-these-5-bond-funds" target="_blank">invest in bonds</a>, or <a href="http://www.wisebread.com/the-only-5-rules-you-need-to-know-about-investing-in-real-estate" target="_blank">invest in real estate</a>. All require some investigation to understand the risk and potential return.</p> <p>Get professional insight on the options that appeal to you and make a well-informed decision. It's never about eliminating risk; that's not quite possible. It is about minimizing risk and maximizing return. You do both by investigating, seeking <a href="http://www.wisebread.com/who-to-hire-a-financial-planner-or-a-financial-adviser" target="_blank">expert insight</a>, and diversifying the way you save your money.</p> <h2>Save yourself from hasty decisions</h2> <p>Keeping your wealth in a less-liquid state helps you financially by delaying your financial decisions. If your main funds are tied up, for example, you can't immediately invest in Cousin Jimmy's startup. Even if you really, really want to.</p> <p>Maybe Cousin Jimmy is a genius, and you do want to invest; still, it's good to have to think and compare numbers. Can an investment in a family business give the same high-interest return on investment? What's the risk, compared with the risk you're already taking? How long before you'll see a return?</p> <p>Having time to think will help you avoid hasty decisions you might regret. Whether it's investing in a family member's venture or purchasing that dilapidated house in an up-and-coming area, time is on your side.</p> <h2>But I still want to feel happy</h2> <p>A recent National Center for Biotechnology Information study shows that higher levels of happiness are linked to <a href="https://www.ncbi.nlm.nih.gov/pubmed/27064287" target="_blank">keeping cash on hand</a>. Happiness is great! We all want more of it. But you can get the happiness that cash brings while also setting yourself up for long-term financial rewards.</p> <p>Having money at the ready contributes to feeling secure. You can get that financial security by <a href="http://www.wisebread.com/6-secrets-to-mastering-the-debt-snowball" target="_blank">reducing high-interest debt</a>&nbsp;and&nbsp;setting up <a href="http://www.wisebread.com/7-easy-ways-to-automate-your-savings" target="_blank">automated savings </a>so that you can&nbsp;keep a reasonable amount of cash at the ready. Experts recommend having three to six months' worth of living expenses; but you can be smart about how you save that cash reserve, as well, by keeping it in an interest-bearing savings account or a short-term CD. When your reserve grows over your emergency-fund amount, invest it rather than hoard it.</p> <p>Remember, you'll want to feel financially secure later in life, too. Smart financial moves now contribute to your happiness in the present and the future.</p> <h2 style="text-align: center;">Like this article? Pin it!</h2> <div align="center"><a data-pin-do="buttonPin" data-pin-count="above" data-pin-tall="true" data-pin-save="true" href="https://www.pinterest.com/pin/create/button/?url=http%3A%2F%2Fwww.wisebread.com%2Fcash-might-make-you-happier-but-investments-will-make-you-richer&amp;media=http%3A%2F%2Fwww.wisebread.com%2Ffiles%2Ffruganomics%2Fu5180%2FCash%2520Might%2520Make%2520You%2520Happier%252C%2520But%2520Investments%2520Will%2520Make%2520You%2520Richer.jpg&amp;description=Cash%20Might%20Make%20You%20Happier%2C%20But%20Investments%20Will%20Make%20You%20Richer"></a></p> <script async defer src="//assets.pinterest.com/js/pinit.js"></script></div> <p style="text-align: center;"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/u5180/Cash%20Might%20Make%20You%20Happier%2C%20But%20Investments%20Will%20Make%20You%20Richer.jpg" alt="Cash Might Make You Happier, But Investments Will Make You Richer" width="250" height="374" /></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/annie-mueller">Annie Mueller</a> of <a href="http://www.wisebread.com/cash-might-make-you-happier-but-investments-will-make-you-richer">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/8-investments-that-may-soar-during-trumps-term">8 Investments That May Soar During Trump&#039;s Term</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/4-foolproof-ways-to-protect-your-money-from-inflation">4 Foolproof Ways to Protect Your Money From Inflation</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/7-reasons-millennials-should-stop-being-afraid-of-the-stock-market">7 Reasons Millennials Should Stop Being Afraid of the Stock Market</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/7-cool-things-bonds-tell-you-about-the-economy">7 Cool Things Bonds Tell You About the Economy</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/while-waiting-for-rates-i-bonds">While Waiting for Rates: I-Bonds</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Investment cash inflation interest rates liquid savings money goals returns rich risk aversion wealth building Tue, 18 Jul 2017 08:30:17 +0000 Annie Mueller 1986108 at http://www.wisebread.com Why Warren Buffett Says You Should Invest in Index Funds http://www.wisebread.com/why-warren-buffett-says-you-should-invest-in-index-funds <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/why-warren-buffett-says-you-should-invest-in-index-funds" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/iStock-465649794.jpg" alt="Learning why Warren Buffett says you should invest in index funds" title="" class="imagecache imagecache-250w" width="250" height="142" /></a> </div> </div> </div> <p>About nine years ago, Warren Buffett <a href="http://www.usatoday.com/story/money/personalfinance/columnist/2017/03/08/buffetts-best-investment-tip-everyone-index-funds/98525306/" target="_blank">made a $500,000 bet</a>. He wagered that a simple index fund would outperform an actively managed hedge fund run by expert investors. Which would you pick?</p> <p>Before you decide, here is some additional information about the fund contenders:</p> <ul> <li>Index funds buy a mix of stocks in a proportion that represents the overall stock market or a particular market segment. Index funds are typically managed automatically by a computer algorithm, and management fees for this type of fund are usually very small &mdash; around 0.1 percent or sometimes even lower.<br /> &nbsp;</li> <li>Hedge funds put money into alternative investments that can go up if the stock market goes down. Of course, hedge funds also try to provide maximum returns and beat the stock market if possible. Hedge funds may invest in real estate, commodities, business ventures, and other opportunities that fund managers think will hedge against potential stock market losses and produce good returns. These funds are actively managed and have high management fees of around 2 percent or more.</li> </ul> <p>Buffett picked a simple S&amp;P 500 index fund for the wager. He bet against an investment manager who picked a set of five hedge fund portfolios. After letting these investments play out for nine years, Buffett announced the results of this wager in the chairman's letter in this year's annual report for the holding company he controls and runs, Berkshire Hathaway: The index fund outperformed the actively managed funds. (See also: <a href="http://www.wisebread.com/the-5-best-pieces-of-financial-wisdom-from-warren-buffett?ref=seealso" target="_blank">The 5 Best Pieces of Financial Wisdom From Warren Buffett</a>)</p> <p>Buffet's experience mimics numerous studies that have shown that index funds consistently beat the results of actively managed funds. Why does a simple and essentially automatic investment strategy (the index fund) outperform sophisticated investment funds managed by active expert investors?</p> <h2>Low fees</h2> <p>Fund fees, also known as expense ratios, are much lower for index funds than for actively managed hedge funds or mutual funds. You can find index funds with fees under 0.1 percent, while actively managed hedge funds can have fees of 2 percent or more.</p> <p>Although the wager Buffett made concerned hedge funds with high expense ratios, the same principle applies when comparing index funds to actively managed mutual funds, which can have fees as high as 1 percent. Higher fees mean that actively managed funds have to outperform the market significantly to offset them. Over the long run, actively managed funds may not consistently outperform the market by enough to make up for the higher fees.</p> <h2>Investment errors</h2> <p>Another reason actively managed funds can fall behind index funds is investment errors. In active funds, someone is making investment decisions and moving money around trying to get higher returns. Sometimes an investment manager can outperform the market and get higher returns, but this doesn't always work out. It only takes one mistake to wipe out a lot of investment gains. In an index fund, the only investment decision is to adjust the ratio of holdings to match the market segment of interest.</p> <p>Index funds accurately reflect the performance of the market they are mirroring. The investment strategy is simple, and there is no opportunity for investment error. If you invest in an index fund, you will reliably receive similar returns to the market that your index fund represents.</p> <h2>How to buy an index fund for your portfolio</h2> <p>During my research for this article, I moved around $10,000 of my own investment funds from actively managed funds into index funds with much lower fees. I figured if index funds are good enough for Warren Buffett, they are good enough for me!</p> <p>You can log in to your investment account website and view the expense ratios for your current investments and for other available funds. I found that my investment choices had expense ratios ranging from 0.02 percent to 0.83 percent &mdash; a difference of more than 40-fold. This is definitely a big enough difference to worry about.</p> <p>A good first step is to check your own investment funds and find out how high the fees are. You may be happy with what you find, or you may decide you want to move to index funds with much lower fees.</p> <p>Of course, when choosing your investment funds, you shouldn't look only at the expense ratio. You should balance your portfolio to include a strategic mix of large cap, medium cap, and small cap investments and an intentional balance of foreign and domestic stocks to meet your investment goals.</p> <p>When I moved my investment money into index funds with very low fees, I picked funds that made sense to balance my portfolio. For example, I moved some funds from a mid-cap growth fund with a 0.3 percent expense ratio into a mid-cap index fund with a 0.07 percent expense ratio &mdash; over four times lower fees. In the long run, I think this is a bet that will pay off.</p> <p>Even if you don't have $500,000 to wager, you might as well minimize what you are paying in fees by moving from actively managed funds to index funds. You'll keep more of your money working for you instead of having it go to work for someone else.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/dr-penny-pincher">Dr Penny Pincher</a> of <a href="http://www.wisebread.com/why-warren-buffett-says-you-should-invest-in-index-funds">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/bookmark-this-a-step-by-step-guide-to-choosing-401k-investments">Bookmark This: A Step-by-Step Guide to Choosing 401(k) Investments</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-3-rules-every-mediocre-investor-must-know">The 3 Rules Every Mediocre Investor Must Know</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/11-investing-tips-you-wish-you-could-tell-your-younger-self">11 Investing Tips You Wish You Could Tell Your Younger Self</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-too-much-investment-diversity-can-cost-you">How Too Much Investment Diversity Can Cost 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/what-are-income-stocks">What Are Income Stocks?</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Investment actively managed funds expense ratios fees hedge funds index funds mutual funds portfolio returns stock markets Warren Buffett Mon, 10 Apr 2017 09:00:08 +0000 Dr Penny Pincher 1922477 at http://www.wisebread.com Want Your Investments to Do Better? Stop Watching the News http://www.wisebread.com/want-your-investments-to-do-better-stop-watching-the-news <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/want-your-investments-to-do-better-stop-watching-the-news" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/iStock-510572840.jpg" alt="" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>If you pay close attention to investment news, it'll either make you laugh or it'll drive you bonkers. Within the same hour, and on the same market news website, you will often see completely contradictory articles. One says the market is headed higher; the next says the market is about to tank.</p> <p>What's a smart investor to do? Be very careful about your information diet.</p> <h2>More Information, Less Success</h2> <p>In the late 1980s, former Harvard psychologist Paul Andreassen conducted an experiment to see how the quantity of market information impacted investor behavior.</p> <p>He divided a group of mock investors into two segments &mdash; investors in companies with stable stock prices, and investors in companies with volatile stock prices. Then he further divided those investors. Half of each group received constant news updates about the companies they invested in, and half received no news.</p> <p>Those who received no news generated better portfolio returns than those who received frequent updates. The implication? The more closely you monitor news about your investments, the more likely you are to make changes to your portfolio &mdash; usually to your detriment.</p> <p>In another study, renowned human behavior researchers Daniel Kahneman, Amos Tversky, Richard Thaler, and Alan Schwartz <a href="http://faculty.chicagobooth.edu/richard.thaler/research/pdf/The%20Effect%20of%20Myopia%20and%20Loss%20Aversion%20on%20Risk%20Taking%20An%20Experimental%20Test.pdf" target="_blank">compared the stock/bond allocations</a> of investors who checked on their investments at least once a month against those who did so just once a year. Those who took in the <em>least</em> information about their portfolios made fewer investment trades and generated higher returns.</p> <h2>When Helping Hurts</h2> <p>One factor at work here is &quot;loss aversion.&quot; First quantified by Kahneman and Tversky, it's the idea that people feel the pain of loss more acutely than the pleasure of gain. The frequent monitoring of investment portfolios brings every downward market move to the attention of investors, who tend to react by moving money into less risky assets (bonds instead of stocks), thereby locking in their losses. (See also: <a href="http://www.wisebread.com/how-to-trick-yourself-into-better-credit-card-behavior?ref=seealso" target="_blank">How to Trick Yourself Into Better Credit Card Behavior</a>)</p> <h2>Misinformation Is Not Power</h2> <p>Another factor has to do with the tales told in the investment press. Each day's market performance is reported &mdash; what happened, and <em>why. </em>The first part is factual. The market either went up or down and by a certain amount. The second part is mostly opinion. No one can say with certainty exactly what moved the market. Was it fear over the growth rate of China's economy, a contraction in the oil supply, or that XYZ company missed its quarterly earnings projection by a penny? No one really knows. But that doesn't stop the explanations from flowing across the pages of investment news sites.</p> <p>Late December and early January are especially dangerous times to read market news. That's when market forecasters spin their yarns, undaunted by their previous year's miss or economist John Kenneth Galbraith's scolding that &quot;The only function of economic forecasting is to make astrology look respectable.&quot;</p> <p>We pay attention to such forecasts &mdash; and even worse, we change our portfolios because of such forecasts &mdash; at our peril.</p> <h2>Selective Listening</h2> <p>You can't control the stock market or what is said about it, but there are certain factors you <em>can</em> and <em>should</em> control, such as:</p> <ul> <li>Estimate how much you need to invest each month in order to accomplish your goals;</li> <li>Determine your <a href="http://www.wisebread.com/the-basics-of-asset-allocation?ref=internal" target="_blank">optimal asset allocation</a>;</li> <li>Choose a trustworthy <a href="http://www.wisebread.com/5-essentials-for-building-a-profitable-portfolio?ref=internal" target="_blank">investment selection process</a>;</li> <li>Add to your portfolio regularly;</li> <li>Expect market turbulence;</li> <li>Be very, very careful about what investment news you take in and how much;</li> <li>Keep moving forward.</li> </ul> <p>Of the many factors involved in successful investing, selective listening may be the most important.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/matt-bell">Matt Bell</a> of <a href="http://www.wisebread.com/want-your-investments-to-do-better-stop-watching-the-news">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-3-rules-every-mediocre-investor-must-know">The 3 Rules Every Mediocre Investor Must Know</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-types-of-investors-which-one-are-you">8 Types of Investors — Which One Are You?</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/your-loss-aversion-is-costing-you-more-than-your-fomo">Your Loss Aversion Is Costing You More Than Your FOMO</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-too-much-investment-diversity-can-cost-you">How Too Much Investment Diversity Can Cost 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/is-dollar-cost-averaging-the-right-strategy-for-you">Is Dollar Cost Averaging the Right Strategy for You?</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Investment bonds loss aversion misinformation news psychology reactions returns risk stock market Mon, 13 Mar 2017 11:00:09 +0000 Matt Bell 1904508 at http://www.wisebread.com How to Spot Lousy Investment Advisers http://www.wisebread.com/a-field-guide-to-lousy-investment-advisers <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/a-field-guide-to-lousy-investment-advisers" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/iStock-482448336.jpg" alt="Learning about lousy investment advisers" title="" class="imagecache imagecache-250w" width="250" height="143" /></a> </div> </div> </div> <p>You can easily hire people who claim to be good investment advisers. They hardly ever are. But there are several different kinds of downright lousy investment advisers, and it's worth learning how to identify them. (See also: <a href="http://www.wisebread.com/the-surprising-truth-of-investing-mediocre-advice-is-best?ref=seealso" target="_blank">Mediocre Advice Is Best for Investing</a>)</p> <p>I group them into three categories: The delusional, the liar, and the secretly mediocre.</p> <h2>The Delusional</h2> <p>The most common sign of the delusional financial adviser is that they can tell you about all the winning trades they've made, but they don't know the average annual return of their portfolio as a whole.</p> <p>You'll find this same trait in a lot of ordinary investors, as well &mdash; they're full of stories of their investing successes. They may also have a few self-deprecating stories of investments that went wrong. But they simply don't know what their all-in return actually is.</p> <p>For the ordinary investor, this is no big deal. But for someone selling their investment expertise, not knowing whether their advice beats what you can get following mediocre advice should disqualify them completely.</p> <p>There is one important subcategory of lousy investment adviser that might not show this sign. I call them the &quot;lucky so far.&quot; They're usually young with a pretty new track record. Typically, they're people who have a strong sense that one sector of the market &mdash; financial stocks, say, or precious metals &mdash; is the right choice for long-term investing. If they happen to get into the investment advising game right when their sector gets hot, they can produce outstanding investment returns, sometimes for a long time. Eventually the market turns against them and they lose a whole lot of their clients' money.</p> <p>Of course there are a few <em>legitimately</em> superior investment advisers out there. It's really impossible to tell one of them from one of the &quot;lucky so far,&quot; except that once they establish a record of shifting from this year's hot sector into next year's hot sector for several years in a row, somebody rich will notice and pay up to get their advice. One pretty good indication is that you won't be able to afford them.</p> <h2>The Liar</h2> <p>Just like the delusional financial adviser, there are many kinds of lying financial advisers. (Note that I'm not talking about scammers or fraudsters, just ordinary financial advisers who know their advice doesn't produce superior results, but hold themselves out as superior anyway.)</p> <p>Probably the most common are the ones who used to be delusional, but eventually figured out that they weren't actually superior. Of course the honest thing to do then would be to find another career, but delusional financial advisers can make a lot of money, and that's hard to give up.</p> <p>It's pretty easy to slip gradually into lying about your performance &mdash; just talk about your successes, and don't mention your failures.</p> <p>The clearest sign of the liar is that they claim an &quot;average annual return,&quot; but can't point to the specific trades that they or their clients made that produced this return. Instead, they'll point to lists of suggested trades &mdash; but if you have access to all the suggestions, it'll turn out that some of the bad ones don't make the list.</p> <p>Another strong clue is vague advice, such as that you buy a stock &quot;on dips,&quot; without specific numbers attached. This will make it easy for them to leave out losing trades (on the grounds that the dips were never low enough for them to enter the trade). They will also suggest that you use peaks in the market to &quot;begin to lighten up&quot; your position. If the stock continues to outperform, you'll find that they still list it in their model portfolio. Once it starts to lag, you'll see that they exited their position at the last high point.</p> <p>Another common habit among the liars is to ignore trading costs &mdash; and the cost of their advice &mdash; when figuring the bottom line.</p> <h2>The Secretly Mediocre</h2> <p>When &quot;index investing&quot; first started getting big, financial magazines (and others who rated financial advisers) started comparing investment advisers' returns to the market averages. Lousy advisers often fell short, which was pretty embarrassing. A fair number reacted by shifting their advice to just the sort of mediocre advice I'm suggesting that you follow. That way, they'd at least match the market returns.</p> <p>These investment advisers are giving you perfectly good advice, they're just charging you money to achieve performance you could get for free on your own.</p> <p>You can spot the secretly mediocre advisers either by looking at their returns or by looking at their portfolio. In either case, it will end up looking a lot like the return or portfolio you could get from just following the indexes.</p> <h2>My Mediocre Advice</h2> <p>Genuinely superior advice from (extremely rare) genuinely superior investment advisers is generally so expensive it makes no sense to pay for it, unless you have a portfolio of millions of dollars.</p> <p>Since Wise Bread is all about living large on a small budget, I figure it's pretty likely that you don't have the multimillion-dollar portfolio that would let superior financial advice pay for itself. In that case, I suggest that you just follow the <a href="http://www.wisebread.com/the-3-rules-every-mediocre-investor-must-know?ref=internal" target="_blank">mediocre advice</a> I wrote about last time. Doing that, you'll get mediocre returns &mdash; which it turns out, are good enough.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/philip-brewer">Philip Brewer</a> of <a href="http://www.wisebread.com/a-field-guide-to-lousy-investment-advisers">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/the-surprising-truth-of-investing-mediocre-advice-is-best">The Surprising Truth of Investing: Mediocre Advice Is Best</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-3-rules-every-mediocre-investor-must-know">The 3 Rules Every Mediocre Investor Must Know</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/11-investing-tips-you-wish-you-could-tell-your-younger-self">11 Investing Tips You Wish You Could Tell Your Younger Self</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-essentials-for-building-a-profitable-portfolio">5 Essentials for Building a Profitable Portfolio</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/this-one-thing-could-be-the-key-to-retiring-rich">This One Thing Could Be the Key to Retiring Rich</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Investment advice delusional financial advisers liars mediocre returns success Mon, 06 Mar 2017 10:30:37 +0000 Philip Brewer 1902765 at http://www.wisebread.com The 3 Rules Every Mediocre Investor Must Know http://www.wisebread.com/the-3-rules-every-mediocre-investor-must-know <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/the-3-rules-every-mediocre-investor-must-know" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/iStock-508414008.jpg" alt="Learning three rules evert mediocre investor must know" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Mediocre financial advice can earn you mediocre investment returns &mdash; and mediocre investment returns are all you need to save for a house, send your kids to college, and fund your (potentially early) retirement. <a href="http://www.wisebread.com/why-you-should-take-investment-advice-from-a-mediocre-investor" target="_blank">Mediocre investment advice</a> is pretty straightforward. In fact, the only thing that's complicated about getting mediocre financial results is the stuff that comes before investing: Things like earning money, keeping your debt in check, finding a career, living frugally, and most crucially, building an adequate <a href="http://www.wisebread.com/a-step-by-step-guide-to-creating-your-emergency-fund" target="_blank">emergency fund</a>.</p> <p>Once you've got those things taken care of, you're ready to start investing. If you're at that point, here's my mediocre investment advice: Create a diversified portfolio of low-cost investments and rebalance it annually.</p> <h2>Diversified Portfolio</h2> <p>It's important to have diversity at several levels. Eventually you'll want diversity in investment types &mdash; not just stocks, but also bonds, real estate, precious metals, foreign currency, cash, etc. More importantly, you want finer-grained diversity especially in the earlier stages of building your portfolio. Don't let your portfolio get concentrated in just one or a few companies. (For what it's worth, don't let it get concentrated in the stock of your employer, either. That sets you up for a catastrophe, because if your employer runs into trouble, the value of your portfolio can crash at the same time your job is at risk.)</p> <p>In the medium term &mdash; after you've got a well-diversified stock selection, but before it's time to branch out into more exotic investments &mdash; you'll want to expand the diversity of types of companies. Not just big companies, but also medium-sized and small companies. Not just U.S. companies, but also foreign companies. Not just tech companies, but also industrial companies and financial companies, and so on.</p> <p>Diversity wins two ways. First, it's safer: As long as all your money isn't in just one thing, it doesn't matter so much whether it's a good year or a bad year for that thing. Second, it produces higher returns: No one can know which investment will be best, but a diversified portfolio probably has at least <em>some </em>money invested in <em>some </em>investments that will do especially well. (Of course retrospectively, there will have been one investment that does best, and risking having all your money in that would have produced the highest possible return &mdash; but that's exactly what a mediocre investor knows better than to attempt.)</p> <p>Of course, you don't want a random selection of investments, even if such a thing might be quite diverse. You want a reasonably balanced portfolio &mdash; something I'll talk about at the end of this post.</p> <h2>Low-Cost Investments</h2> <p>The less money you pay in fees and commissions, the more money you have invested in earning a return.</p> <p>Getting this right is so much easier now than it was when I started investing! In those days, you could scarcely avoid losing several percent of your money right off the top to commissions, and then lose another percent or two annually to fees. Now it's easy to make a stock trade for less than $10 in commissions, and it's easy to find mutual funds and exchange-traded funds that charge fees of only a fraction of 1%.</p> <p>Still, it's easy to screw this up. Any investment that's advertised is paying its advertising budget somehow &mdash; probably with fees from investors. Any investment that's sold by agents or brokers is paying those agents or brokers somehow &mdash; probably with commissions or fees from investors.</p> <p>All those costs come straight out of your return. Keep them to a minimum.</p> <h2>Rebalance Annually</h2> <p>Your diversified portfolio will immediately start getting less diversified: Your winning investments will become a larger fraction of your portfolio while your losers will become a smaller fraction. In the short term, that's great. Who doesn't want a portfolio loaded with winners? Pretty soon though, you start losing the advantages of diversification. Last year's winners will inevitably become losers eventually, and you don't want that to happen after they've become a huge share of your portfolio.</p> <p>The solution is to restore the original diversity. Sell some of the winners, and use the resulting cash to buy some more of the losers. It's the easiest possible way to buy low and sell high. (Maybe you don't want to buy exactly the losers &mdash; not if their poor performance leads you think there's something really wrong with them. But buy something kind of like them. Health care companies probably belong in your portfolio, even if many of them did badly this year.)</p> <p>There are costs to rebalancing &mdash; costs in time and effort (figuring out what to sell and what to buy), and actual costs in commissions and fees. Because of that, you probably wouldn't want to rebalance constantly. You could make a case for monthly or quarterly rebalancing, but even that seems like a lot of effort for a small portfolio. Annually seems to hit the sweet spot.</p> <h2>What Goes Into a Diversified Portfolio?</h2> <p>What I'm going to suggest is that you start with a balanced portfolio of stocks and bonds.</p> <p>It's not that there aren't plenty of other worthy investment options &mdash; cash, gold, silver, real estate, foreign currencies, etc. &mdash; it's just that they all have complications of one sort or another, and you can get started on earning your mediocre returns without them.</p> <p>My mediocre investment advice then is that your portfolio should be a balance of stocks (for maximum growth) and bonds (for income and stability).</p> <h3>Finding the Right Balance Comes Down to Age &mdash; Yours</h3> <p>What's the right balance? An old rule of thumb was that 100 minus your age would be a good target percentage for the stock portion of your portfolio. At the start of your career, you'd have nearly 80% of your investments in stocks, and that fraction would gradually decline to about 35% as you approached retirement. The theory was that a young person can afford to take big risks, because he or she has time to wait for an eventual market rebound (and because during the early phase of building up a portfolio, even a large percentage loss is a small dollar amount). This makes a certain amount of sense. In fact, you could argue that a stock market that collapsed and then stayed down just when you started investing would be great &mdash; it would give you decades to buy stocks cheap.</p> <p>That rule of thumb isn't bad, although with people living longer these days, it probably makes sense to keep a higher portion of stocks in your portfolio during the last years before and first years after retirement. Once you hit 50, maybe only cut your stock portfolio by 1% every two years.</p> <p>When you're just getting started, feel free to keep it very simple. Perhaps just start putting money into a broad-based stock fund (such as an S&amp;P 500 index fund). You can add a bond fund right away if you want, or wait until your annual rebalancing.</p> <p>There are mutual funds that will manage this balance for you, holding stocks and bonds with a balance that shifts over time to some target date, at which point they'll hold a portfolio suitable for someone who has retired. You don't need them. In particular, they tend to have higher expenses, violating the &quot;low cost&quot; principle. You can do it easily enough for yourself. (Of course if you find that you don't do your annual rebalancing, then maybe paying a fund to do it for you is worth the expense.)</p> <p>As an alternative to mutual funds, you can use exchange traded funds or ETFs. It doesn't matter.</p> <p>Once your portfolio of stocks is large, you probably want to move beyond a single fund. Look at the other low-cost funds offered by the same fund family that provides your S&amp;P 500 index fund. Consider adding a fund that includes foreign stocks (especially if the dollar seems strong at the time you'll be buying). Consider adding a fund that includes dividend-paying stocks (especially if interest rates are low relative to dividends).</p> <p>Follow these mediocre tips, and you'll be racking up mediocre returns in no time! And remember &mdash; mediocre returns are all you need to live well and retire well.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/philip-brewer">Philip Brewer</a> of <a href="http://www.wisebread.com/the-3-rules-every-mediocre-investor-must-know">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/are-you-choosing-the-right-fund-for-your-portfolio">Are You Choosing the Right Fund for Your Portfolio?</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-types-of-investors-which-one-are-you">8 Types of Investors — Which One Are You?</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/11-investing-tips-you-wish-you-could-tell-your-younger-self">11 Investing Tips You Wish You Could Tell Your Younger Self</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-build-an-investment-portfolio-for-under-5000">How to Build an Investment Portfolio for Under $5000</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/11-investment-mistakes-we-all-make">11 Investment Mistakes We All Make</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Investment advice balancing bonds diversification ETFs mediocre investments mutual funds portfolio returns stock market stocks Mon, 27 Feb 2017 10:30:46 +0000 Philip Brewer 1896815 at http://www.wisebread.com The Surprising Truth of Investing: Mediocre Advice Is Best http://www.wisebread.com/the-surprising-truth-of-investing-mediocre-advice-is-best <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/the-surprising-truth-of-investing-mediocre-advice-is-best" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/iStock-538027758.jpg" alt="Man learning mediocre investing advice is best" title="" class="imagecache imagecache-250w" width="250" height="141" /></a> </div> </div> </div> <p>My investing success made it possible for me to quit working a regular job 10 years ago, at age 48. Even so, I have written very little about investing compared to what I've written about other personal finance topics. There's a reason for that: I'm a mediocre investor.</p> <p>Over the course of my career as a software engineer, I saved and invested, earning a mediocre investment return. Since becoming a full-time writer, I've continued to earn investment returns &mdash; which although still mediocre, have been enough to supplement my income from writing.</p> <p>As a mediocre investor, I have hesitated to hold myself out as an investment adviser, even if my results have met my own needs in a very satisfactory way. I figured people would quite legitimately compare me to superior investment advisers, and it was a comparison that I didn't think would put me in the best light. And yet, I'm going to overcome my hesitation, because looking for superior investment advisers is probably a mistake.</p> <p>There are two big reasons why mediocre investment advice is the better choice: It's adequate, and it's cheap.</p> <h2>Mediocre Investing Advice Is Adequate</h2> <p>The purpose of your investment portfolio is to support your goals in life, and a mediocre return will do the trick. A mediocre return &mdash; just a few percentage points over inflation &mdash; will turn a modest flow of savings into a portfolio large enough to let you buy a house, send your kids to college, and fund a retirement (even an early retirement).</p> <p>Trying to get a better-than-mediocre return requires taking financial risks that put all your life goals at risk.</p> <p>If you have plenty of money available for investing, you can do both. You can cover your basic life goals with a portfolio invested for mediocre returns, and then you can direct your surplus investible funds into a portfolio that shoots for superior returns.</p> <p>It can be fun if you enjoy that sort of thing. I did some of that. Looking back, I'd probably have been better off just going for mediocre returns on the whole thing.</p> <h2>Mediocre Investing Advice Is Cheap</h2> <p>Superior investing advice tends to be expensive. It's expensive because it's worth it &mdash; but it's really only worth that much to the truly wealthy.</p> <p>Think about it. Let's say really good advice can boost your average annual return by five percentage points. On a $100,000 portfolio, that's an extra $5,000 a year. On a $1 billion portfolio, it's an extra $50 million a year. If someone can really earn that kind of extra return, they won't be working for you. They'll be working for the 1%.</p> <p>And it's not only getting superior advice that's expensive. Just following it is expensive. Following any financial advice &mdash; good or bad &mdash; costs money, but not only is getting mediocre advice cheap, following it tends to be cheap as well. And that cost savings turns out to support your investment returns better than even pretty good advice does.</p> <h2>Go With Mediocre</h2> <p>Just looking for superior financial advice is fraught. Most people who say they're providing superior investment advice are wrong. Some are simply deluded, others are flat-out lying. Either way, you really don't want to follow their financial advice &mdash; following bad financial advice can easily cost you your life savings.</p> <p>Fortunately, it's easy to tell the difference: Bad financial advice costs money, while mediocre financial advice tends to be free (or nearly so).</p> <p>Where can you get mediocre financial advice? Lots of places. You might start with two books I reviewed here on Wise Bread years ago that provide just the sort of mediocre financial advice I'm talking about:</p> <ul> <li><a href="http://www.wisebread.com/book-review-the-little-book-of-common-sense-investing" target="_blank">The Little Book of Common Sense Investing</a> by John C. Bogle: A perfect capsule of mediocre investment advice. It's also really short, because you can say about all there is to say about mediocre investing in a really short book.<br /> &nbsp;</li> <li><a href="http://www.wisebread.com/book-review-the-only-investment-guide-youll-ever-need?ref=internal" target="_blank">The Only Investment Guide You'll Ever Need</a> by Andrew Tobias: A slightly longer book that also covers basic personal finance stuff &mdash; so, not just investing your money, but also earning, spending, and insuring it.</li> </ul> <h2>How to Know It's Mediocre</h2> <p>It's easy to tell if the advice you're getting is the sort of mediocre advice you want. There are two characteristics to look for:</p> <ol> <li>It's free &mdash; or, available for no more than the cost of a book.</li> <li>It doesn't claim to be better than mediocre.</li> </ol> <p>If somebody charges money for their advice &mdash; or, more importantly, charges a commission, or a percentage of your assets for their advice &mdash; then it's probably not mediocre financial advice. (Charging a small fraction of 1% to cover the costs of running an investment fund is fine. It's charging extra on top of that for advice that's the danger sign.)</p> <p>If somebody claims that their advice is superior investment advice, or in any way better than mediocre financial advice, then it probably isn't mediocre financial advice.</p> <p>If you spot any of those warnings signs, I suggest that you avoid those advisers. It doesn't really matter whether they are people who genuinely think they're providing superior financial advice, or people who are just playing on your hopes for superior financial advice. If you follow their investment advice, I can confidently predict that your long-term investment returns &mdash; after expenses &mdash; will be crappy. And crappy returns mean a lower standard of living, less security, no chance to retire early, and maybe no retirement at all.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/philip-brewer">Philip Brewer</a> of <a href="http://www.wisebread.com/the-surprising-truth-of-investing-mediocre-advice-is-best">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/a-field-guide-to-lousy-investment-advisers">How to Spot Lousy Investment Advisers</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-3-rules-every-mediocre-investor-must-know">The 3 Rules Every Mediocre Investor Must Know</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/11-investing-tips-you-wish-you-could-tell-your-younger-self">11 Investing Tips You Wish You Could Tell Your Younger Self</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-essentials-for-building-a-profitable-portfolio">5 Essentials for Building a Profitable Portfolio</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/this-one-thing-could-be-the-key-to-retiring-rich">This One Thing Could Be the Key to Retiring Rich</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Investment advice early retirement financial advisers mediocre returns success Mon, 20 Feb 2017 10:30:26 +0000 Philip Brewer 1892846 at http://www.wisebread.com How to Return Items Through Your Credit Card If the Store Refuses http://www.wisebread.com/how-to-return-items-through-your-credit-card-if-the-store-refuses <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/how-to-return-items-through-your-credit-card-if-the-store-refuses" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/iStock-527894190.jpg" alt="Return Items Through Your Credit Card if the Store Refuses " title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>One of the greatest conveniences that shoppers have is the ability to return purchases for a refund. Retailers' return policies allow you to make a purchase knowing that you can <em>always </em>take it back if it doesn't work out or you change your mind. (See also: <a href="http://www.wisebread.com/7-retailers-with-the-absolute-best-customer-service?ref=seealso" target="_blank">7 Retailers With the Absolute Best Customer Service</a>)</p> <p>But what if the deadline for a return has passed? Or the store rejects it on some other grounds? This is where your credit card may be able to help. Some cards offer return protection programs (also known as return assistance or return guarantee) that will get your money back, even when the retailer refuses. (See also: <a href="http://www.wisebread.com/4-surprising-reasons-to-always-use-your-credit-card?ref=seealso">4 Surprising Reasons to Always Use Your Credit Card for Purchases</a>)</p> <h2>How Return Protection Policies Work</h2> <p>Return protection policies are meant to be a backup plan for store returns, not your primary defense. To qualify, you have to make the purchase with your card and if you're dissatisfied with the item, you need to try to return it to the store first. Only if the place you bought it refuses your return can you then try the card's return protection policy.</p> <p>There is some fine print to keep in mind. Usually, you won't get a refund on shipping and handling costs if you made your purchase online. You may have to mail the item to the card's benefits administrator (often at your cost) in &quot;like-new&quot; and good working condition. If you've damaged it, there are other credit card policies such as <a href="http://www.wisebread.com/how-credit-cards-protect-your-purchases-from-damage-or-theft?ref=internal" target="_blank">theft and accidental damage coverage</a> that you may be able to use instead.</p> <p>Lots of purchases are excluded from return protection coverage, so read the policy carefully. Among those we found in different issuers' policies: tickets of any kind, jewelry, food, plants, animals, computer software, motor vehicle parts, items bought overseas, and customized items.</p> <p>Credit card policies typically give you 60-90 days to contact them to file a claim. Then you'll usually have another 30 days to submit the claim, along with a receipt for the item, and sometimes other documentation, such as a copy of the store's return policy. There are also limits per item ($250-$500) and per year ($1000-$2500).&nbsp;</p> <p>Here are some examples of the return protection coverage offered by major card issuers as of the writing of this article.</p> <h2>American Express<strong> </strong></h2> <p>Some <a href="http://www.wisebread.com/american-express-credit-card-offers-applications-reviews?ref=internal" target="_blank">American Express cards</a> come with return protection.</p> <ul> <li><strong>Coverage limit per item: </strong>$300</li> <li><strong>Coverage limit per year:</strong> $1,000</li> <li><strong>Extra features:</strong> Cost of shipping the item for return is reimbursed.</li> </ul> <h2>Barclaycard<strong> </strong></h2> <p><a href="http://www.wisebread.com/barclaycard-credit-card-offers-applications-reviews?ref=internal" target="_blank">Barclaycard</a> accounts that are part of the World Elite MasterCard program offer return protection.</p> <ul> <li><strong>Coverage limit per item: </strong>$500</li> <li><strong>Coverage limit per year:</strong> $1,000</li> </ul> <h2>Chase<strong> </strong></h2> <p>Several <a href="http://www.wisebread.com/chase-credit-card-offers-applications-reviews?ref=internal" target="_blank">Chase cards</a> offer a return protection policy.</p> <ul> <li><strong>Coverage limit per item: </strong>$250</li> <li><strong>Coverage limit per year:</strong> $1,000</li> <li><strong>Extra features:</strong> Items purchased with Chase rewards points are also eligible.</li> </ul> <h2>Citi<strong> </strong></h2> <p>Many <a href="http://www.wisebread.com/citi-credit-card-offers-applications-reviews?ref=internal" target="_blank">Citi cards</a> offer a return protection policy with the following features.</p> <ul> <li><strong>Coverage limit per item: </strong>$300</li> <li><strong>Coverage limit per year:</strong> $1,000</li> <li><strong>Extra features:</strong> Items purchased with Citi ThankYou points are also eligible.</li> </ul> <h2>Discover<strong> </strong></h2> <p>All <a href="http://www.wisebread.com/discover-credit-card-offers-applications-reviews?ref=internal" target="_blank">Discover cards</a> offer a return guarantee policy.</p> <ul> <li><strong>Coverage limit per item: </strong>$500</li> <li><strong>Coverage limit per year:</strong> $2,500</li> <li><strong>Extra features:</strong> Items purchased with rewards points or miles are also eligible.</li> </ul> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/jason-steele">Jason Steele</a> of <a href="http://www.wisebread.com/how-to-return-items-through-your-credit-card-if-the-store-refuses">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/4-reasons-credit-is-safer-than-debit">4 Reasons Credit Is Safer Than Debit</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/4-surprising-reasons-to-always-use-your-credit-card">4 Surprising Reasons to Always Use Your Credit Card</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/10-awesome-credit-card-perks-you-didnt-know-about">14 Awesome Credit Card Perks You Didn&#039;t Know About</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-free-extended-warranties-work-on-credit-cards">How Free Extended Warranties Work on Credit Cards</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/11-ways-your-credit-card-will-save-you-money-while-holiday-shopping">11 Ways Your Credit Card Will Save You Money While Holiday Shopping</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Credit Cards Shopping credit card perks purchase protection returns Mon, 06 Feb 2017 10:00:15 +0000 Jason Steele 1885691 at http://www.wisebread.com 7 Expensive Stocks That Are Totally Worth It http://www.wisebread.com/7-expensive-stocks-that-are-totally-worth-it <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/7-expensive-stocks-that-are-totally-worth-it" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/iStock_84113845_MEDIUM.jpg" alt="these expensive stocks are worth the cost" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>So, you want to buy shares of stock from a familiar company, but are surprised to realize that shares are selling for hundreds, perhaps thousands, of dollars. As it turns out, some of the priciest stocks may also turn out to have the best value in the long run.</p> <p>High prices may be intimidating, but there's no need to fear them. Let's take a look at some of the most expensive stocks, and outline why they may still be worth buying.</p> <h2>1. Alphabet [NASDAQ: <a href="http://www.nasdaq.com/symbol/googl">GOOGL</a>]</h2> <p>Just one share of the company formerly known as Google will set you back more than $800. But don't look away from a company that has seen shares rise 16% in the last year, and now rivals Apple for the largest company on Earth. Alphabet's price-to-earnings ratio is 30, which is on the high side, but not outlandish for a company with strong revenue growth.</p> <h2>2. Priceline [NASDAQ: <a href="http://www.nasdaq.com/symbol/pcln">PCLN</a>]</h2> <p>Years ago, Priceline shares underwent a reverse split in order to avoid being delisted from the New York Stock Exchange. Now, shares are nearly $1,500 a pop. The popular travel booking company also owns Booking.com and Kayak, among others. Shares are up 12% this year, with analysts indicating the price could top $1,700 a piece.</p> <h2>3. NVR [NYSE: <a href="https://finance.yahoo.com/q?s=NVR">NVR</a>]</h2> <p>At more than $1,500 a share, this homebuilder has one of the highest stock prices around. But shares are actually down about 10% just in the last three months, so a rebound may be in order. The consensus from analysts is that NVR could trade closer to $1,700 by year's end.</p> <h2>4. Amazon [NASDAQ: <a href="http://www.nasdaq.com/symbol/amzn">AMZN</a>]</h2> <p>The world's leading online retailer consistently gets called out for its small profits, and is often deemed overpriced by analysts who look at its eye-popping price-to-earning ratios. But these proclamations have historically been followed by significant run-ups in share price. At more than $800, a share of Amazon isn't cheap. But would you bet against Amazon entering the holiday shopping season?</p> <h2>5. Berkshire-Hathaway [NYSE: <a href="http://www.google.com/finance?cid=4376">BRK</a>]</h2> <p>Do you have $210,000 laying around that you'd like to invest? That's what a <em>single </em>one of Berkshire's Class A shares will cost you. Class B shares are available for mere mortals like us for a mere $144. Is Berkshire too expensive? Buffett has missed some bets over the years, but shares are up about 9% this year, and have averaged a more than 11% annual gain in the last decade.</p> <h2>6. Apple [NASDAQ: <a href="http://www.nasdaq.com/symbol/aapl">APPL</a>]</h2> <p>At more than $117 a share, Apple isn't cheap. And many observers do wonder about the company's path in the post-Steve Jobs era. But this is still the company that makes the most popular smartphone in the world, and no company has a larger market capitalization.</p> <h2>7. Chipotle [NYSE: <a href="https://finance.yahoo.com/quote/CMG?p=CMG">CMG</a>]</h2> <p>There has been a lot of negative press around Chipotle after e-coli and norovirus outbreaks that sickened hundreds of people. The news sent share prices reeling, but but the company is working its way back. The company is trading at about $395 per share, a relative bargain compared to a year ago, when shares were well above $700. USA Today reported in September that there was &quot;still plenty of upside left in the stock.&quot; Assuming the company has a handle on its food safety issues, there may be a profit opportunity with Chipotle.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/tim-lemke">Tim Lemke</a> of <a href="http://www.wisebread.com/7-expensive-stocks-that-are-totally-worth-it">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/6-stocks-to-buy-before-black-friday">6 Stocks to Buy Before Black Friday</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/how-to-buy-berkshire-hathaway-and-other-blue-chip-stock-for-17-off">How to Buy Berkshire Hathaway and Other Blue Chip Stock for 17% Off</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/10-stocks-every-recent-grad-should-own">10 Stocks Every Recent Grad Should Own</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-boring-investments-that-are-surprisingly-profitable">10 Boring Investments That Are Surprisingly Profitable</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-surprising-truth-of-investing-mediocre-advice-is-best">The Surprising Truth of Investing: Mediocre Advice Is Best</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Investment Amazon apple Berkshire Hathaway chipotle expensive stocks Google priceline profit returns shares value Mon, 24 Oct 2016 10:00:10 +0000 Tim Lemke 1818053 at http://www.wisebread.com 7 Reasons Millennials Should Stop Being Afraid of the Stock Market http://www.wisebread.com/7-reasons-millennials-should-stop-being-afraid-of-the-stock-market <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/7-reasons-millennials-should-stop-being-afraid-of-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/man_texting_newspaper_79438675_0.jpg" alt="Millennial man not being afraid of the stock market" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Are you a Millennial who's interested in investing? Then stop being afraid of the market. Sure, the Great Recession wiped out market fortunes during your early adulthood, but in the years since, it's roared back. Those who held steady during the market tumult made their money back &mdash; and then some. And those who were smart enough to invest when the market was at its bottom? Well let's just say we should all be a little jealous of their foresight (and earnings).</p> <p>So, don't be a slave to your stock market fears. Here are seven reasons why you should be investing in equities, too.</p> <h2>1. You Have Options When Deciding to Invest</h2> <p>There are different investment options available that match your goals and time horizon. For instance, you can invest more conservatively if you're trying to save for a down payment on a house in a few years, versus investing for retirement 30 years down the road. And with increased diversification, you can maximize your investment returns while taking smaller risks.</p> <p>&quot;The more risk you take, the longer you should be willing to wait before it pays off, but you can match your investment objectives with your time horizon,&quot; says Ryan McGuiness, founder of the wealth management firm CTR Financial. &quot;I invest my clients in a diverse portfolio of 12 different index funds to provide maximum diversification at the lowest cost, and match their risks to their goals, time horizon, and risk tolerance. You can try to learn what to do on your own or work with an adviser, but there are plenty of options out there.&quot;</p> <h2>2. Market Volatility Is Normal</h2> <p>Hands down, everyone's biggest fear in investing in the stock market is that it's going to crash and you'll lose your life savings. While that scenario <em>can</em> happen, a crash is not as likely as you think. In fact, it's uncommon. And even when markets crash, they inevitably come back. So, if you invest for the long term, this volatility should be much less of a concern.</p> <p>Of course, Millennials are more on edge about this particular setback than other generations, because they may have experienced the financial crisis firsthand in the late 2000s with parents losing their jobs or &mdash; even worse &mdash; their homes due to the global meltdown. As a result, you probably equate the stock market with extremely high risk, but that isn't usually the case.</p> <p>Lori Pinkowski, co-founder of the Pinkowski-Allen Financial Group, explains.</p> <p>&quot;A 2008-type crash occurs very infrequently; however, a 10% market correction happens on average once a year, so stock volatility is normal,&quot; she says. &quot;Market volatility also creates opportunity to purchase good companies at a lower price. With an active management strategy, their investment portfolios shouldn't simply rise and fall with the market like they do with a buy and hold management style. It's important to raise cash and get defensive at times but then be ready to deploy that cash once risk levels improve.&quot;</p> <h2>3. Investing Has Never Been Less Expensive</h2> <p>You don't have to be rich to invest &mdash; all you need is a little bit of disposable income. Many online brokers offer low-cost or even free trades, a prospect that was unimaginable just a few years ago. You also don't have to go broke by hiring a financial adviser to navigate you through the process, which is recommended. While the cost prospect of the latter is a deterrent for some Millennials, investment adviser Jeremy Torgerson details an inexpensive &mdash; and automated &mdash; solution:</p> <p>&quot;While many investors still want the assistance of a human financial adviser to help them figure out what to invest in and when to hold their hand during market corrections, it's no longer necessary to use and pay for a human adviser,&quot; he explains. &quot;The technology is incredible, and the robo-adviser is on duty, 24 hours a day. Or if you want a human adviser, the ability to shop for exactly the right one, in terms of service, expertise, and cost, has never been easier.&quot;</p> <h2>4. Investing Protects Your Money From Inflation</h2> <p>Think about this sobering fact for a second: The money you're earning and saving today will be worth less in the future if you keep it in a bank &mdash; guaranteed. The amount may not change, but over time, thanks to inflation, the value of your money will go down if it's left sitting in a bank account. As Pinkowski puts its, &quot;Inflation is approximately 2% and your bank savings account generates less than inflation, which means you have actually negative real growth. If you want healthy growth above inflation over time, stocks are the best choice.&quot;</p> <h2>5. Relying on Yourself Is a Better Bet Than Relying on the Government</h2> <p>The simple reality of our current fiscal situation includes underfunded promises to Medicare, Medicaid, Social Security, and prescription drug benefits to the tune of $121 trillion and counting.</p> <p>&quot;Millennials will, in many ways, be 'stuck with the check' in later years for all the spending that's already happened, which will mean a later retirement age for Social Security, higher tax rates and inflation in the future, and, likely, reduced benefits from these entitlement programs,&quot; Torgerson says.</p> <p>Considering this potential, you owe it to yourself to prepare for a government that's less able to provide for you in retirement. Of course you should be contributing to a 401K, and taking advantage of matching contributions from your employer if they offer it. But investing separately in the stock market also can fortify your ability to retire at a decent age, if not sooner.</p> <h2>6. Reinvested Growth Can Pay Off in the Long Run</h2> <p>Many stocks pay dividends, and reinvesting those dividends as well as any capital gains will benefit you over the long run. For example, if you're 25 today and invest $10,000, earning on average 6% annually, you will see your investment grow to just over $100,000 by the time you reach 65 &mdash; and that's only with a $10,000 investment today. Consider that the S&amp;P 500 has averaged 9.6% annual returns over the last 25 years, which includes the tech bubble and 2008 credit crisis, and the growth you could enjoy might be even higher.</p> <h2>7. Time Is on Your Side</h2> <p>Of course, let's not forget that you're young, Millennials, and you have a several decades of saving and investing ahead of you &mdash; and that's a benefit that older investors don't have which can be used to your advantage.</p> <p>&quot;If Millennials are saving for retirement, their time horizon is much greater than someone older,&quot; says Pinkowski. &quot;They have time to wait out blips in the stock market and can focus on the long term. They also won't need to withdraw any income, thus allowing the investments to grow over many years. The power of compounding can be astonishing. Albert Einstein once said, 'Compound interest is the eighth wonder of the world. He who understands it, earns it. He who doesn't, pays it.' Give your money a job and make it work for you!&quot;</p> <p><em>Are you afraid of the stock market?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/mikey-rox">Mikey Rox</a> of <a href="http://www.wisebread.com/7-reasons-millennials-should-stop-being-afraid-of-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-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/what-are-income-stocks">What Are Income Stocks?</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/how-millennial-investors-can-get-past-the-great-recession">How Millennial Investors Can Get Past the Great Recession</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/is-dollar-cost-averaging-the-right-strategy-for-you">Is Dollar Cost Averaging the Right Strategy for 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/are-you-making-the-biggest-investment-risk-of-all">Are You Making the Biggest Investment Risk of All?</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/10-stocks-that-are-actually-having-a-good-year">10 Stocks That Are Actually Having a Good Year</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Investment compound interest fear growth inflation millennials retirement returns stock market volatility young investors Thu, 08 Sep 2016 09:00:10 +0000 Mikey Rox 1787551 at http://www.wisebread.com 4 Foolproof Ways to Protect Your Money From Inflation http://www.wisebread.com/4-foolproof-ways-to-protect-your-money-from-inflation <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/4-foolproof-ways-to-protect-your-money-from-inflation" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/woman_clock_money_94923537.jpg" alt="Woman finding ways to protect her money from inflation" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Back in January 1980, when Jimmy Carter was President and Michael Jackson led the music charts with &quot;Rock with You,&quot; Americans were experiencing one of the periods of highest inflation in modern history. In January 1980, inflation was over 13.9% per year and peaked in April 1980 at 14.76%.</p> <p>With the consumer price index (CPI) at <a href="http://www.bls.gov/news.release/cpi.nr0.htm">0.8% in July 2016</a>, many Americans have never experienced the dramatic increase in prices that other generations have. But even though inflation is low these days, it still eats away at your savings and investments. Let's review four (nearly) foolproof strategies and investments that will reduce the hit.</p> <h2>1. Invest in an S&amp;P 500 Index Fund</h2> <p>The average annual inflation rate since the U.S. government began tracking it in 1913 is <a href="http://inflationdata.com/Inflation/Inflation_Rate/Long_Term_Inflation.asp">about 3%</a>. To combat inflation's effect on your money, you need investments that provide greater average returns than the inflation rate.</p> <p>Since its inception in 1928, the S&amp;P 500 has provided an <a href="http://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/histretSP.html">average annual return of 11.25%</a> until 2015, making this stock market index a leading choice to protect yourself from inflation. For the greatest ease and cost-efficiency, invest in a mutual fund or exchange-traded fund that mirrors the S&amp;P 500's performance.</p> <p>Not only are the average returns of passively-managed S&amp;P 500 index funds higher than those of actively managed funds, but also the expense ratios of S&amp;P 500 index funds are lower than those of actively managed funds. For example, the Vanguard 500 Index Investor Shares fund [Nasdaq: <a href="https://finance.yahoo.com/quote/VFINX?p=VFINX">VFINX</a>] has an annual expense ratio of 0.16%, which is 84% lower than the average expense ratio of funds with similar holdings.</p> <p>Of course, this approach isn't actually foolproof, since both the rate of inflation and market returns vary from year to year. But when considering long-term averages, it's a fairly safe bet.</p> <h2>2. Increase Annual Contributions to Saving Accounts</h2> <p>Even when you leverage <a href="http://www.wisebread.com/5-best-online-savings-accounts?ref=internal">high-yield online savings accounts</a>, you'll only make between 0.75% and 1.05% per year, according to data from August 2016. With a July 2016 CPI of 0.8%, you're actually losing 0.05% and gaining only 0.25% per year. (See also: <a href="http://www.wisebread.com/capital-one-360-review?ref=seealso">Capital One 360: A Competitive Banking Option</a>)</p> <p>Setting up automatic transfers from your paycheck or main checking account to your investment and saving accounts is a smart idea, but adjusting those contributions for inflation is an even better one. A good practice is to make an adjustment for inflation once a year. Check with your financial institution to find out if it offers the option of automatic adjustments for inflation to your contributions.</p> <h2>3. Seek Real Estate Income</h2> <p>While gold has a great reputation as an investment hedge against inflation, real estate income has proved to be a better hedge tool. A study from financial company Fidelity back-tested the performance of several assets against inflation on an annual basis during a 40-year period and found that gold and real estate income beat inflation 54% and 71% of the time, respectively. &quot;Real estate is regarded consistently as a <a href="https://www.reit.com/news/videos/wharton-professor-discusses-reits-inflation-hedging-benefits">good inflation hedge</a>, and it is&quot;, asserts Susan Wachter, professor at the University of Pennsylvania Wharton School of Business. (See also: <a href="http://www.wisebread.com/4-reasons-millenials-should-invest-in-a-home?ref=seealso">4 Reasons Millennials Should Invest in a Home</a>)</p> <p>While most individual investors can only afford to buy their own home, all individual investors can gain exposure to real estate income from a wide variety of properties through real estate investment trusts (REITS). Some advantages of REITs are their requirement to maintain a dividend payout ratio of at least 90% and their liquidity because they trade on major stock exchanges.</p> <p>For example, the 10-year annual average return of the Vanguard REIT Index Fund Investor Shares [Nasdaq: <a href="http://finance.yahoo.com/quote/VGSIX?ltr=1">VGSIX</a>] is 7.46%, as of June 30, 2016. In comparison, the 10-year annual average return of the S&amp;P 500 was 7.42% for the same period.</p> <p>Adding REITs provides you access to assets with inflation resistance and helps you protect against the negative of higher inflation. Still, REITs should only be a part of a well-diversified portfolio. Depending on your tolerance to risk, financial advisers suggest allocating from 5% up to 20% of your investment in portfolio in REITs. And of course, past performance is no guarantee of future success.</p> <h2>4. Negotiate Your Salary</h2> <p>If your salary were to consistently go up every year, you would not to worry about inflation to begin with! However, <a href="http://time.com/money/3657524/odds-of-getting-raise/">less than half of working Americans</a> ever even ask for a raise, and about 30% of them are uncomfortable negotiating salary.</p> <p>Start your career on the right foot by successfully negotiating the salary offer of your very first job. Three out of four U.S. employers typically have room to increase their first salary offers by 5% to 10% during negotiations, but only 38% of applicants negotiate those first salary offers. Let's imagine that your first salary offer was $38,000, that would mean that you have the potential of increasing that offer from $39,900 to $41,800. Given the historical inflation average of 3% per year, you have the potential of covering inflation for 40 months just by negotiating your first salary offer.</p> <p>And things only get better after that.</p> <p>By bumping up your salary from the start, you're increasing your chances of future raises. As your salary grows over time, so does your probability of getting a raise. For example, people making $40,000 to $50,000 have about a 40% chance of receiving that raise they requested and people making $60,000 to $70,000 have about a 50% chance.</p> <p>While there are other factors that may influence pay raises, the main one is the decision to request better compensation. From U.S. workers asking for a raise, 75% of them get something: 44% of them get what they asked for and 31% of them receive a smaller amount. Getting at least a small raise is a very smart strategy to protect yourself from inflation because inflation erodes the value of your dollars year after year.</p> <p><em>What are other ways to protect yourself from inflation?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/damian-davila">Damian Davila</a> of <a href="http://www.wisebread.com/4-foolproof-ways-to-protect-your-money-from-inflation">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/a-simple-guide-to-series-i-savings-bonds-i-bonds">A Simple Guide to Series I Savings Bonds (I-Bonds)</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/this-post-really-suk-kuks-examining-islamic-finance">This Post Really Suk-kuks: Examining Islamic Finance</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/why-invest-in-the-stock-market">Why invest in the stock market?</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/the-3-rules-every-mediocre-investor-must-know">The 3 Rules Every Mediocre Investor Must Know</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/8-types-of-investors-which-one-are-you">8 Types of Investors — Which One Are You?</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Personal Finance Banking Investment consumer price index Economy hedging inflation negotiating real estate REITs returns s&p 500 salary savings stocks Fri, 02 Sep 2016 09:00:14 +0000 Damian Davila 1784422 at http://www.wisebread.com 9 Great Stocks for Back-to-School Time http://www.wisebread.com/9-great-stocks-for-back-to-school-time <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/9-great-stocks-for-back-to-school-time" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/colored_pencils_5143796.jpg" alt="Finding great stocks for back-to-school" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>The kids are heading back to school, which means there's plenty of money being spent on notebooks, computers, and three-ring binders.</p> <p>The National Retail Federation reported that it expects $75.8 billion in back-to-school sales, up from $68 billion last year. That means many companies should see good revenue and share price performance this fall as a result of the back-to-school season, and there are several other companies that seem to have a knack for great returns in the fall.</p> <p>Want to make a little bit of money as the weather cools? Here are some good back-to-school stocks for investors looking to cash in this autumn:</p> <h2>1. Wal-Mart [NYSE: <a href="http://finance.yahoo.com/q?s=WMT">WMT</a>]</h2> <p>Rest assured that millions of families will head to the massive retailer for cheap prices on spiral notebooks, pens, and whatever else kids need in the classroom. The NRF projects that the average family will spend $673, up from $630 last year. Moreover, some analysts think that Walmart is due to get a boost from its big investments in employee training and e-commerce.</p> <h2>2. Target [NYSE: <a href="https://finance.yahoo.com/q?s=tgt">TGT</a>]</h2> <p>With nearly 1,800 retail locations, you can bet that when it comes to back-to-school sales, Target will get a good chunk of whatever Walmart fails to grab. Shares of Target fell sharply over the spring after disappointing earnings results, and from a loss of revenue following the sale of its pharmacy to CVS. But all that means is that there is potential for share growth if the company rebounds with a strong back-to-school season.</p> <h2>3. Staples [NASDAQ: <a href="http://finance.yahoo.com/q?s=SPLS">SPLS</a>]</h2> <p>There was a lot of buzz around Staples earlier in the year after it sought to buy Office Depot/OfficeMax, but the merger got shot down by regulators. Still, the retailer intends to be a major player at back-to-school time. Staples is the third-largest online retailer, so it will land its share of e-commerce sales, but it also has physical stores that Amazon can't boast. Staples, which began its back-to-school marketing before summer vacation even got underway, is trading at just above $9, close to its 52-week low, so investors may find a bargain here.</p> <h2>4. Seagate Technology [NYSE: <a href="http://finance.yahoo.com/q?s=STX">STX</a>]</h2> <p>This maker of hard drives and other data storage products has been one of the market's best performers during the fall in recent years. While 2015 saw a down autumn, the previous five fall seasons saw 25% share growth, on average. While overall sales of external hard drives have been on the decline due to the growth of cloud-based solutions, Seagate still has about a 40% market share. Portable hard drives remain necessary back-to-school tools for college students.</p> <h2>5. Gannett [NYSE: <a href="https://finance.yahoo.com/q?s=gci">GCI</a> ]</h2> <p>It's not so much back-to-school sales that will help Gannett, but the race to decide the next U.S. President. As Hillary Clinton and Donald Trump enter the home stretch toward the November election, they'll be spending money on advertising. And companies like Gannett, which operates more than 100 newspapers and other media properties, stand to benefit from that. Between 2009 and 2013, Gannett saw an average share price increase of 24% in the fall. Shares are trading near a 52-week low, so you may get a bargain. To be clear, Gannett may not make a great long-term investment, as newspapers have really taken a beating in recent years. But for a short-term play, this is not a bad bet.</p> <h2>6. Amazon [NASDAQ: <a href="http://www.nasdaq.com/symbol/amzn">AMZN</a>]</h2> <p>Those who want to avoid the brick-and-mortar world at back-to-school time will likely head to the world's top online retailer. Customer Growth Partners reported that e-commerce sales between July and September will rise 11% this year, so expect Amazon to get a significant chunk of that. Amazon shares are not cheap, but it seems like every time analysts predict a fall, they go even higher.</p> <h2>7. TJX Companies [NYSE: <a href="http://finance.yahoo.com/q?s=TJX">TJX</a>]</h2> <p>The NRF reports that 61% of families will do their back-to-school shopping at a discount retailer. This bodes will for companies like TJX, the owner of TJ Maxx and Marshalls stores. TJX has had a strong year, with 7% year-over-year sales growth in the most recent quarter, and investors will also benefit from a recent increase in the company's dividend.</p> <h2>8. VF Corp. [NYSE: <a href="https://finance.yahoo.com/quote/VFC?p=VFC">VFC</a>]</h2> <p>This company owns some of the most recognizable retail brands, including Vans, North Face and Wrangler. You can expect a strong quarter from VF, but more importantly, it's a steady stock to own anytime, as it's consistently paid and increased its dividend each year for more than four decades. VF's current price-to-earnings ratio suggests it's a better deal than many of its competitors.</p> <h2>9. Under Armour [NYSE: <a href="http://finance.yahoo.com/q?s=UA">UA</a>]</h2> <p>Under Armour got some great exposure during coverage of the 2016 Summer Olympics, as it was the designer of several team uniforms and boasted a number of high-profile brand ambassadors, including swimmer Michael Phelps. Under Armour has been one of the market's biggest growth stories in recent years, with 25 straight quarters of 20% revenue growth. High-schoolers and college kids love Under Armour gear, and will buy it as they head back to class.</p> <p><em>Are you adding any fall performers to your stock-pile?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/tim-lemke">Tim Lemke</a> of <a href="http://www.wisebread.com/9-great-stocks-for-back-to-school-time">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/the-3-rules-every-mediocre-investor-must-know">The 3 Rules Every Mediocre Investor Must Know</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/11-investing-tips-you-wish-you-could-tell-your-younger-self">11 Investing Tips You Wish You Could Tell Your Younger Self</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/4-foolproof-ways-to-protect-your-money-from-inflation">4 Foolproof Ways to Protect Your Money From Inflation</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/8-types-of-investors-which-one-are-you">8 Types of Investors — Which One Are 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/7-reasons-to-invest-in-stocks-past-age-50">7 Reasons to Invest in Stocks Past Age 50</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Investment autumn back-to-school election fall returns revenue school supplies stocks Wed, 31 Aug 2016 09:00:08 +0000 Tim Lemke 1782884 at http://www.wisebread.com How Too Much Investment Diversity Can Cost You http://www.wisebread.com/how-too-much-investment-diversity-can-cost-you <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/how-too-much-investment-diversity-can-cost-you" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/man_suit_thinking_53925384.jpg" alt="Man wondering if too much investment diversity can cost him" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Financial experts agree that you shouldn't to put all your eggs in one basket. But just like with everything else in life, moderation is essential to truly reap the benefits of diversification. Spread out your investment funds into too many funds and you'll end up with a subpar portfolio bogged down with excessive charges and, even worse, potentially more risk than you're willing to bear. Here are four warning signs that you may have your investments in too many baskets &mdash; and how to fix it.</p> <h2>1. Paying Too Much in Investment Fees</h2> <p>The more that you branch out of plain vanilla investments, the more likely that you'll end up paying more investment charges and fees. Take, for example, the portfolio that Warren Buffett has <a href="http://www.berkshirehathaway.com/letters/2013ltr.pdf">laid out in his will</a>: &quot;Put 10% of the cash in short-term government bonds and 90% in a very low-cost S&amp;P 500 index fund.&quot;</p> <p>Let's take a look at the potential investment fees of such a portfolio.</p> <p>Since the Oracle of Omaha prefers Vanguard and chases low fees, let's assume that both investments are in index funds. It's safe to assume that he meets the $10,000 minimum investment required for the Vanguard Admiral index funds. So, he allocates 90% of his portfolio to the Vanguard 500 Index Fund Admiral Shares [Nasdaq: <a href="http://finance.yahoo.com/quote/VFIAX/?p=VFIAX">VFIAX</a>], which has a 0.05% expense ratio, and 10% of his portfolio into the Vanguard Short-Term Government Bond Index Fund Admiral Shares [Nasdaq: <a href="http://finance.yahoo.com/quote/VSBSX?p=VSBSX">VSBSX</a>], which has a 0.10% expense ratio. For a $10,000 portfolio, Buffett would pay $55 in investment fees.</p> <p>If Buffett were to start diversifying into other types of investments, he would very likely run into higher expense ratios. For example, the Vanguard New York Long-Term Tax-Exempt Fund Admiral Shares [Nasdaq: <a href="http://finance.yahoo.com/quote/VNYUX/?p=VNYUX">VNYUX</a>] has a 0.12% expense ratio (despite its $50,000 minimum investment requirement!) and the Vanguard Interm-Tm Corp Bd Index Admiral [Nasdaq:&nbsp;<a href="http://finance.yahoo.com/quote/VICSX/?p=VICSX">VICSX</a>] has a 0.25% purchase fee on top of its 0.10% expense ratio. Assuming that he were to allocate 50%, 30%, 10%, and 10% to the New York muni bond fund, S&amp;P 500 index fund, short-term government bond index fund, and the intermediate-term corporate index fund, respectively, Buffet would pay $220 on investment fees!</p> <p><strong>How to Fix It: </strong>Calculate your current total of investment fees across all your holdings. If the total is above what you're willing to pay (a useful rule of thumb is that anything beyond 1% of your total investment is too much), then it's time to focus your investments in lower-cost options.</p> <h2>2. Rebalancing Portfolio More Often</h2> <p>Speaking of fees, there is a higher chance that you'll run into more of them when you hold lots of investment categories. In the 90%-stocks-and-10%-bonds portfolio example, you only need to keep track of two funds. This means that figuring out when your portfolio is no longer meeting your target asset allocations is straightforward &mdash; and you may not need to do it as often. For example, you could set a target to rebalance when 80% of your portfolio is in stocks and 20% in bonds.</p> <p>On the other hand, spreading your money out too thin can complicate keeping track of asset allocations and make you trade more often. Here's an example: Assuming a target 3.5% allocation in an emerging markets index fund, big market swings could force you to buy or sell many times throughout the year, triggering many charges. From front-end loads to back-end loads, there are plenty of investments to keep an eye on. And yes this even applies to 401K accounts! (See also: <a href="http://www.wisebread.com/watch-out-for-these-5-sneaky-401k-fees?ref=seealso">Watch Out for These 5 Sneaky 401K Fees</a>)</p> <p><strong>How to Fix It: </strong>Tabulate how much you're incurring in fees on top of the regular annual expense ratios of your portfolio holdings. If that percentage is too high, or consistently increasing throughout the years, you need to consolidate your portfolio into fewer holdings.</p> <h2>3. Experiencing Diminishing Returns</h2> <p>Of course, you might be thinking that the extra returns of a very diversified portfolio may more than compensate for those additional fees and charges.</p> <p>Let's bust that investment myth.</p> <p>In a joint-study by The Wall Street Journal and Morningstar, the portfolio that generated the highest return over a 20-year period was a 70-30 mix of U.S. stocks and bonds, yielding a <a href="http://www.wsj.com/articles/is-your-portfolio-too-diversified-1408032582">9.1% annualized return</a>. A portfolio with 40% in U.S. stocks, 20% in U.S. bonds, 10% in foreign developing market stocks, 10% in international bonds, and the rest in a mix of investments, including emerging market stocks, commodities, and hedge funds, yielded only an 8.8% annualized return.</p> <p><strong>How to Fix It: </strong>Measure each of your funds against its respective benchmark. If an investment has been missing the benchmark for too many quarters or years, it may be time to cut that fund loose.</p> <h2>4. Owning Too Much of the Same or Wrong Type of Investments</h2> <p>Another issue with putting many eggs in many baskets is that you can unintentionally end up with more eggs than you thought in a particular basket or, worse, a wrong basket.</p> <p>Let's assume that you hold an index fund tracking the S&amp;P 500. As of August 8, 2016, that means that your portfolio would hold about 3.08% on Apple Inc, 2.40% on Microsoft Corporation, and 1.53% on Facebook Inc. Class A shares. If you were to also hold an index fund on the technology sector, you'll probably end up increasing your holding on each one of those investments. For example, the Vanguard Information Technology Index Fund Admiral Shares [Nasdaq: <a href="http://finance.yahoo.com/quote/VITAX/?p=VITAX">VITAX</a>] has those same three stocks among its top four largest holdings.</p> <p>Additionally, if you're open to throwing more money around investments, you could end up buying some investments that fail to meet your investment objectives. Remember the late 1990s dot-com bubble? How about 2008's housing bubble? During those times, too many individual and institutional investors were buying financial instruments that they shouldn't have been purchasing. If you force yourself to allocate 5% &quot;somewhere,&quot; then you could end up with the wrong type of investment.</p> <p><strong>How to Fix It: </strong>First, read the prospectuses of your mutual funds and other accounts and understand their actual holdings. Using this information, you can spot whether or not you hold too much of the same investment. Second, review your investment objective (ie; income vs growth) and evaluate whether or not your current investment funds qualify for that objective.</p> <h2>The Bottom Line</h2> <p>Holding all of your money in a single stock is definitely not a good idea because it would have a 49.2% average standard deviation (a measure of risk). At 20 stocks, your portfolio risk is reduced to 20%. However, every additional stock added to your portfolio will only further decrease your portfolio risk by about 0.8%.</p> <p>The evidence suggests that due to greater returns, very marginal risk reductions, and lower fees over time, you would be better off with simpler diversification on stocks and bonds. Some financial advisers suggest that when you have more than <a href="http://money.usnews.com/money/personal-finance/mutual-funds/articles/2011/02/17/diversification-can-you-have-too-much-of-a-good-thing">20 stocks or mutual funds</a>, you're actually minimizing returns instead of maximizing them. So, before adding that extra holding, keep in mind that an index fund tracking the S&amp;P 500 is already splitting your investment into 500 baskets!</p> <p><em>How many different types of investments is too many?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/damian-davila">Damian Davila</a> of <a href="http://www.wisebread.com/how-too-much-investment-diversity-can-cost-you">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/8-types-of-investors-which-one-are-you">8 Types of Investors — Which One Are You?</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/9-costly-mistakes-diy-investors-make">9 Costly Mistakes DIY Investors Make</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/bookmark-this-a-step-by-step-guide-to-choosing-401k-investments">Bookmark This: A Step-by-Step Guide to Choosing 401(k) 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/the-3-rules-every-mediocre-investor-must-know">The 3 Rules Every Mediocre Investor Must Know</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-warren-buffett-says-you-should-invest-in-index-funds">Why Warren Buffett Says You Should Invest in Index Funds</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Investment fees portfolio rebalancing returns risk stock market too diverse warning signs Thu, 25 Aug 2016 10:30:14 +0000 Damian Davila 1778732 at http://www.wisebread.com 10 Boring Investments That Are Surprisingly Profitable http://www.wisebread.com/10-boring-investments-that-are-surprisingly-profitable <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/10-boring-investments-that-are-surprisingly-profitable" 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_newspaper_000076745113.jpg" alt="Man buying boring investments that are surprisingly profitable" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>It may seem fun to invest in companies that excite you. But there are few things more exciting than seeing share prices rise, even if the companies themselves are a real bore.</p> <p>If you want to make money in investing, it helps to forget about the sizzle factor. Because some of the weirdest or most boring investments are often the most profitable. Consider these 10 investments that aren't too exciting, but have shown great returns over time, or have recent good results worth watching. (See also:&nbsp;<a href="http://www.wisebread.com/4-ways-boring-investments-make-life-exciting?ref=seealso">4 Ways &quot;Boring&quot; Investments Make Life Exciting</a>)</p> <h2>1. Office Buildings</h2> <p>Is there anything less exciting than large square buildings or shopping centers? Think of the big malls or huge office parks that you'll often drive past in the suburbs. Boring, right? Well, if you invest in this type of real estate, you'll do okay &mdash; or better. There are many real estate investment trusts (REITs) that allow investors to buy shares, and they often pay some of the highest dividends on the market. Consider stocks like Federal Realty Investment Trust, now trading near its 52-week high and with a five-year return of nearly 90%.</p> <h2>2. Gambling Stocks</h2> <p>For a few years, casino stocks were getting crushed, in part due to problems with the gaming industry in China. But there is evidence that the industry has bottomed out and may be on the verge of rebounding. New resorts are planned in Las Vegas, Macau, and elsewhere that are expected to boost revenues for companies like Wynn [NASDAQ: WYNN], Las Vegas Sands [NYSE: LVS] and MGM Resorts [NYSE: MGM]. So if you don't have a moral objection to investing in these stocks, now may be the time to get in on the action.</p> <h2>3. Baking Soda and Condoms</h2> <p>Church &amp; Dwight [NYSE: CHD] may not be the sexiest investment out there. Or maybe it is. After all, it owns Trojan, which makes more condoms than anyone else. And it makes First Response, the popular pregnancy test (in case you forgot to use the Trojans). Church and Dwight also makes a lot of household products that Americans use every day, including Arm &amp; Hammer baking soda and OxiClean. Church &amp; Dwight reported record sales and profits in 2015. Shares are trading near a 52-week high and are up 10% in 2016.</p> <h2>4. An Old Newspaper</h2> <p>What? Investing in a newspaper? Okay, let's be clear. No one is getting rich quick by investing in the New York Times [NYSE: NYT]. But perhaps no news organization has done a better job of shifting its business model from print to digital, and its revenues show the results. The company reported $444 million in revenue during its most recent financial quarter, with a 48% increase in profit.</p> <h2>5. Botox and Viagra</h2> <p>Hey, it's easy to get rich on older people trying to stay young. Pfizer, the maker of Viagra, said last year it would merge with Allergan, the maker of Botox, to form the world's largest pharmaceutical firm. The merger has yet to be approved and has some critics, but the combined company could see a boost from efficiencies and a lower corporate tax rate (it would be based in Ireland).</p> <h2>6. Cigarettes</h2> <p>It's hard to believe that people still smoke, but Altria [NYSE: MO], the owner of Philip Morris and other tobacco-related companies, has offered strong returns to investors even as people became more aware of their product's risks. Altria has been a leader in developing e-cigarettes and other new products, and has reported growing sales and profits of more than $11 billion last year. Shares of the company are trading near a 52-week high.</p> <h2>7. Dollar Tree</h2> <p>How can you make huge profits, one dollar at a time? This company knows how. Dollar Tree [NYSE: DLTR] splurged and bought competitor Family Dollar last year, so it now owns nearly 14,000 stores in North America and is predicting more than $20 billion in sales in 2016. Investors were initially skeptical about the merger, but the company's stock price is now about $80, and some analysts think it will go above $90 by year's end as the benefits of the merger take shape.</p> <h2>8. Boxes and Packages</h2> <p>When was the last time you thought about the package an item comes in? Maybe never, right? Bemis Company has quietly served as one of the world leaders in packaging for food, electronics, and pharmaceuticals throughout North America, Central America, and Asia. It reported sales of more than $4 billion last year. Shares are up 17% to date and are trading near a 52-week high.</p> <h2>9. Paint</h2> <p>Investing in paint may seem as exciting as watching paint dry. But shares of companies that produce paint are actually quite profitable. Consider Valspar [NYSE: VAL] which just hit its highest price in a year and has been one of the stock market's most consistent performers for decades. Or Axalta, which recently got a $500 million investment from Warren Buffett's Berkshire Hathaway. (Berkshire also owns Benjamin Moore paints.) Meanwhile, Sherwin Williams shares are up nearly 30% since last fall.</p> <h2>10. Environmental Testing Equipment and... Dental Technology</h2> <p>You will never hear much about what Danaher Corp. [NYSE: DHR] does, except generate good returns for investors. The company produces a wide array of industrial products including testing instruments, technology solutions for dentists, and even laser marking for product packaging. Despite a product line that won't make headlines, Danaher has been a consistently solid performer &mdash; $1,000 invested in Danaher stock 20 years ago would be worth $21,000 today.</p> <p><em>Are any of these dull, but winning, stocks in your portfolio? </em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/tim-lemke">Tim Lemke</a> of <a href="http://www.wisebread.com/10-boring-investments-that-are-surprisingly-profitable">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. 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