bonds http://www.wisebread.com/taxonomy/term/4414/all en-US 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-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/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-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/learn-how-to-invest-with-these-5-stock-market-games">Learn How to Invest With These 5 Stock Market Games</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-boring-investments-that-are-surprisingly-profitable">10 Boring Investments That Are Surprisingly Profitable</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 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/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/11-investment-mistakes-we-all-make">11 Investment Mistakes We All Make</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/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 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 Your 401K in 2017: Here's What's New for You http://www.wisebread.com/your-401k-in-2017-heres-whats-new-for-you <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/your-401k-in-2017-heres-whats-new-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/iStock-502449548.jpg" alt="Learning what&#039;s new for your 401K in 2017" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>There aren't many 401K rule changes to keep up with this year, but that doesn't mean you can't bring about some of your own positive changes to your retirement savings. Let's take a look at what you need to know to make the most of your 401K in 2017.</p> <h2>No Changes in the Contribution Limits</h2> <p>The amount the IRS allows you to contribute to a 401K plan this year remains as it was last year &mdash; $18,000 if you're younger than 50, or $24,000 if you're older. However, the Feds did make two changes to the retirement savings landscape, which pertain to people on either end of the income spectrum.</p> <h3>1. More May Qualify for the Saver's Credit<strong> </strong></h3> <p>Low and middle-income earners should be aware of the <a href="https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-savings-contributions-savers-credit" target="_blank">Saver's Credit</a>, a tax benefit that rewards those who save for their later years through a 401K or IRA. Depending on your income and filing status, the credit is worth 10%, 20%, or 50% of up to $2,000 of contributions per person (for married couples, that means up to $4,000 of contributions).</p> <p>Married couples filing joint returns can claim at least a 10% credit as long as their adjusted gross income (AGI) is no more than $62,000. That maximum income amount is $500 more than in 2016, so more households should qualify. However, the most generous 50% credit is allowed only for those couples making no more than $37,000 &mdash; the same threshold as in 2016.</p> <p>The credit/income limits for married couples filing jointly are:</p> <ul> <li>50% if AGI is $37,000 or less</li> <li>20% if AGI is $37,001&ndash;$40,000</li> <li>10% if AGI is $40,001&ndash;$62,000</li> </ul> <p>For singles, or married couples filing separate returns, the maximum amount you can earn and still qualify for a credit is $31,000, which is $250 higher than in 2016. In order to qualify for the maximum 50% credit, your income has to be no higher than $18,500.</p> <p>Here are the details:</p> <ul> <li>50% if AGI is $18,500 or less</li> <li>20% if AGI is $18,501&ndash;$20,000</li> <li>10% if AGI is $20,001&ndash;$31,000</li> </ul> <p>Keep in mind, a tax credit is much more valuable than a tax deduction because it is a dollar for dollar reduction of taxes.</p> <h2>2. Higher-Income Earners May Get More</h2> <p>On the other end of the income spectrum, the IRS expanded the contribution parameters pertaining to the retirement plans of well-paid workers. For example, contributions &mdash; by the employee and/or his or her employer &mdash; are limited by how much an employee is paid in total. In 2017, the amount of compensation on which contribution amounts can be based was increased by $5,000 to $270,000, and the maximum total contribution amount was bumped up by $1,000 to $54,000.</p> <h2>What Changes Will You Make?</h2> <p>Even if the two changes noted above don't pertain to you, that doesn't mean you need to &mdash; or should &mdash; stay the course with your retirement savings. The start of a new year is a good time to re-evaluate your goals and see if you're on track.</p> <p>Here are two areas to review.</p> <h3>1. How Much You Need<strong> </strong></h3> <p>Do you know how much you should have saved by the time you retire? Do you know how much that means you should be saving each month right now? If not, take a few minutes to run some numbers. If you're not saving enough, consider increasing your contributions.</p> <h3>2. How You Should Allocate</h3> <p>Do you know your optimal asset allocation? That pertains to how much of your investment portfolio should be in stocks, and how much in bonds (or stock and bond mutual funds). Vanguard offers a well-designed, free <a href="https://personal.vanguard.com/us/FundsInvQuestionnaire" target="_blank">asset allocation questionnaire</a>, so give it a try. Then try to bring your portfolio more in line with your optimal asset allocation.</p> <p>While tax credits and employer contributions are significant benefits, the most important factors that determine your investing success are the amount of money you save each month, and whether your asset allocation is appropriate for someone of your age and risk tolerance. Take the time to evaluate your individual retirement savings scenario, and see how you can make it even better for 2017.</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/your-401k-in-2017-heres-whats-new-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/5-crucial-things-you-should-know-about-bonds">5 Crucial Things You Should Know About 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/9-financial-moves-you-will-always-regret">9 Financial Moves You Will Always Regret</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/a-simple-guide-to-rolling-over-all-of-your-401ks-and-iras">A Simple Guide to Rolling Over All of Your 401Ks and IRAs</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-signs-your-retirement-is-on-track">8 Signs Your Retirement Is on Track</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-to-tell-if-your-401k-is-a-good-or-a-bad-one">How to Tell if Your 401K Is a Good or a Bad One</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Retirement 401k Adjusted Gross Income asset allocation bonds changes contribution limits employers investing saver's credit stocks Mon, 20 Feb 2017 10:00:11 +0000 Matt Bell 1892607 at http://www.wisebread.com Is There Such a Thing as a "Safe" Investment? http://www.wisebread.com/is-there-such-a-thing-as-a-safe-investment <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/is-there-such-a-thing-as-a-safe-investment" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/man_umbrella_coins_516182744_0.jpg" alt="Man learning if there&#039;s such a thing as a safe investment" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Safety. We all look for it in our investments, while also seeking out the highest return. As we get older, safety becomes more important as we get closer to retirement age.</p> <p>Is there such a thing as a truly &quot;safe&quot; investment? The short answer is that no investment is 100% safe. But there are certainly some investments that are better than others at protecting your hard-earned savings.</p> <p>Let's examine some of the most common &quot;safe&quot; investments and learn how good they actually are at shielding you from financial losses.</p> <h2>1. Cash</h2> <p>You may not be able to stomach the ups and downs of the stock market, and don't want your money tied up in bonds or other fixed-income investments. So you just hold on to large quantities of cash in a basic savings account, a money market account, or certificates of deposit.</p> <h3>Why It's Safe</h3> <p>Cash won't dive in value if the stock market crashes. You can get a predictable return from interest by keeping it in a bank account. And you can access it any time you need it.</p> <h3>Why It's Not</h3> <p>If you have a lot of cash, you can actually <em>lose </em>money in the long-term if there is inflation. But most importantly, putting too much of your investment portfolio in cash will make it hard for you to accumulate the kind of wealth you'll need for a comfortable retirement. Cash is also easy to access, which means it's too easy for you to spend.</p> <h2>2. Dividend Stocks</h2> <p>Dividend stocks are generally issued by companies that don't usually see a lot of volatility, but will pay out a healthy percentage of their income back to shareholders. Dividend stocks are often used by older investors or anyone looking to boost income without a lot of risk.</p> <h3>Why It's Safe</h3> <p>Good dividend stocks will pay out a consistent amount to shareholders each quarter, and it's usually a better return than bonds. By nature, dividend stocks won't go way up and down in price like other stocks, so they aren't as vulnerable to big market downturns.</p> <h3>Why It's Not</h3> <p>They are still stocks, and any stock is potentially vulnerable to market swings. Even dividend stocks will lose value in a down market, so it's still possible to lose money. On the flip side, dividend stocks won't rise in value like other investments when the market goes up. Moreover, dividends are never guaranteed; a company can cut its dividend at any time if its revenues drop.</p> <h2>3. Treasury Inflation-Protected Securities (TIPS)</h2> <p>TIPS are popular investments because they allow you to invest in bonds while seeing the value of the investment rise along with the rate of inflation. They are a common part of many retirement portfolios and can be helpful in diversifying holdings.</p> <h3>Why It's Safe</h3> <p>Investing in U.S. treasuries is about as safe a bet as you can get, as the U.S. government has always paid its obligations. And TIPS have the added benefit of rising in value along with consumer prices, so you're never at risk of losing your investment due to inflation. You are protected even if there is deflation, because in that case, the price at maturity will revert to the price at purchase.</p> <h3>Why It's Not</h3> <p>TIPS aren't great investments for building wealth. There are other, better investments that offer a combination of safety and growth. TIPS are also vulnerable to interest rate moves, just like most bonds.</p> <h2>4. Gold</h2> <p>We've seen gold hailed as a &quot;safe&quot; investment because it's considered a hedge against inflation and a protection against a major economic disaster. History has shown that those who held on to gold during times of crisis held onto their wealth.</p> <h3>Why It's Safe</h3> <p>Gold can protect against inflation and historically has been known to retain its value even during disastrous times. That's why gold became a popular investment during the recent debt crisis in Europe, for example.</p> <h3>Why It's Not</h3> <p>Many financial experts note that gold's reputation as a hedge against inflation is often overstated, and gold has been known to lose value. It is also no less volatile than stocks, and generally does not have the same return on investment. In other words, it's not as &quot;safe&quot; as you think, and you won't necessarily get wealthy by holding onto it.</p> <h2>5. REITs</h2> <p>A real estate investment trust (or REIT) allows individual investors to own shares of real estate without the hassle of being a landlord. REITs trade like stocks, and can also be included in mutual funds and exchange-traded funds.</p> <h3>Why It's Safe</h3> <p>REITs are generally pretty stable investments, especially if the company has many long-term leases. REITs also usually pay out a hefty dividend.</p> <h3>Why It's Not</h3> <p>Real estate can still drop in value, especially if the REIT you buy is focused on one sector of real estate. Moreover, because REITs don't have to pay corporate-level income tax, dividends from REITs are taxed at the normal income rate, not the dividend rate paid out by other stocks.</p> <h2>6. Target Date Mutual Funds</h2> <p>Most brokerages offer mutual funds that start off with an aggressive investment mix and then get more conservative as the investor ages. These are a popular &quot;hands off&quot; part of many portfolios.</p> <h3>Why It's Safe</h3> <p>These funds are designed to build value during your younger years and protect your retirement nest egg as you get older. When properly managed, you'll be able to hold onto more of your money when you are close to retirement, even during down markets.</p> <h3>Why It's Not</h3> <p>Generally speaking, targeted mutual funds come with higher fees than many other funds, and that can cut into your overall earnings over time. And while the funds are comprised of more conservative investments as you approach retirement age, they are still prone to the ups and downs of the stock market in the earlier years.</p> <h2>7. Peer-to-Peer Lending</h2> <p>In recent years, companies such as Lending Club and Prosper have allowed individual investors to profit from the debt of other regular people. These platforms match investors up with those looking to borrow money. Individuals can invest based on their own risk tolerance. (See also: <a href="http://www.wisebread.com/how-to-make-money-with-peer-to-peer-lending-service-prosper?ref=seealso">How to Make Money With Prosper</a>)</p> <h3>Why It's Safe</h3> <p>The most popular peer-to-peer lending sites report a fairly low default rate on loans. This means that those who purchase debt are likely to generate a solid return. Lending Club reports that the median adjusted net annual return is 5.1% for those who have purchased at least 100 notes.</p> <h3>Why It's Not</h3> <p>There's always a risk of loans defaulting, especially if you don't buy quality loans. Buying risky loans, or failing to diversify your loan portfolio, can lead to less-than-stellar returns.</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/is-there-such-a-thing-as-a-safe-investment">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-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/11-investment-mistakes-we-all-make">11 Investment Mistakes We All 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/the-best-ways-to-invest-50-500-or-5000">The Best Ways to Invest $50, $500, or $5000</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/the-5-best-reasons-to-start-investing-in-bonds-now">The 5 Best Reasons to Start Investing in Bonds Now</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Investment bonds cash dividend stocks mutual funds peer to peer lending REITs safe investments tips Mon, 12 Dec 2016 11:00:07 +0000 Tim Lemke 1850785 at http://www.wisebread.com Could Trump Bring Higher Interest Rates and Inflation? Consider These Money Moves http://www.wisebread.com/could-trump-bring-higher-interest-rates-and-inflation-consider-these-money-moves <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/could-trump-bring-higher-interest-rates-and-inflation-consider-these-money-moves" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/donald_trump_98978789.jpg" alt="Donald Trump could bring higher interest rates and inflation" title="" class="imagecache imagecache-250w" width="250" height="167" /></a> </div> </div> </div> <p>In a matter of weeks, America will have a new President, and people are already speculating as to what a new man in the White House will mean for the economy.</p> <p>Donald Trump outlined a series of policy proposals on the campaign trail, including some that, according to economists, may impact inflation and interest rates. This comes at a time when the Federal Reserve has been hinting at raising interest rates for a while. So if all of this happens, what should you do with your money? Here are some ideas.</p> <h2>If There's Inflation</h2> <p>Ifd the federal government opens up the fiscal spigot, inflation is sure to follow.</p> <h3>1. Take a Look at Gold</h3> <p>Gold has long been a popular investment for those seeking protection against inflation, especially during times of political and global uncertainty. Prices for gold spiked in the immediate aftermath of Trump's election, but are still quite low from a historical standpoint.</p> <p>There are several ways to purchase gold. You can buy gold bars or bullion and store it, or purchase shares of companies involved in gold mining. There are also exchange-traded funds (ETFs) that track the performance of gold or gold-related industries.</p> <h3>2. Get Into TIPS</h3> <p>The U.S. Treasury offers something called Treasury Inflation-Protected Securities, or TIPS. These are pegged to the Consumer Price Index, so when the index rises, the value of the investment rises with it. These are solid, low-risk investments that are perfect for when inflation is a possibility, and they are exempt from state and local income taxes. It's also possible to own TIPS in a retirement fund, via an ETF or mutual fund.</p> <h3>3. Invest in Commodities</h3> <p>In addition to gold, there are other commodities that can be used as a hedge against inflation. Many commodities, including oil, wheat, and even live cattle naturally rise with inflation. If you're unsure of which commodities to buy, consider looking at a fund or ETF that invests in commodities broadly. The PowerShares DB Commodity Index Tracking Fund [NYSE: <a href="http://www.google.com/finance?cid=722064">DBC</a>]) and the Fidelity Series Commodity Strategy Fund [NYSE: <a href="https://www.google.com/finance?q=FCSSX&amp;ei=4G48WJC_BdWNmAHcobLABw">FCSSX</a>] are two examples.</p> <h3>4. Get Real With Real Estate</h3> <p>Real estate is another area that often does well during an inflationary period. There are many ways to obtain real estate, either by purchasing property directly, or by buying shares of real estate investment trusts, or REITs. The caveat here is that if interest rates rise, then the cost of a mortgage to purchase real estate will also go up. So it may be smart to get in now while interest rates are still at historic lows.</p> <h2>If Interest Rates Rise</h2> <p>The Federal Reserve is expected to tick interest rates up a bit soon, while Trump's economic proposals could accelerate that process.</p> <h3>1. Invest in Banks</h3> <p>Banks generally do better when interest rates are higher than they are now. Right now, these companies have a low &quot;net interest margin&quot; &mdash; the difference between the interest they earn and the interest they pay out. Higher rates will increase this margin, thus increasing the bank's profitability.</p> <h3>2. Lock in a Fixed Rate</h3> <p>If you have a mortgage with an adjustable rate, now is the time to lock into something more stable, before interest rates rise. Convert your mortgage to a fixed-rate loan now, while interest rates are low. If you don't do this, your rate could adjust upward to a level that you may find unsustainable.</p> <h3>3. Switch to Short-Term Bonds</h3> <p>If interest rates are about to go up, you don't want your money tied up in something that's not paying a high rate. Placing your money in shorter term bonds and bond funds will allow you to remove your money earlier and then reinvest it in something with a higher return once rates rise. Long-term bonds do pay a higher rate than short-term bonds, but you lose flexibility.</p> <h3>4. Bolster Your Cash Holdings</h3> <p>With interest rates at ultralow levels, there hasn't been much incentive to hold on to a lot of cash. But if interest rates rise, you may find it's worth it to have a little more cash on hand, as it will generate some income for you. Stocks and other investments will probably still be more lucrative, but higher interest rates means there won't be as much downside to having more liquid savings, and it may give you more peace of mind.</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/could-trump-bring-higher-interest-rates-and-inflation-consider-these-money-moves">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/oh-noes-inflation">Oh noes! Inflation!</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-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-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/will-high-inflation-persist">Will high inflation persist?</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-best-money-management-tips-from-john-oliver">7 Best Money Management Tips From John Oliver</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-to-live-with-inflation">How to live with inflation</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Personal Finance Financial News bonds donald trump federal reserve gold inflation interest rates investing president Wed, 30 Nov 2016 12:00:11 +0000 Tim Lemke 1843966 at http://www.wisebread.com 7 Best Money Management Tips From John Oliver http://www.wisebread.com/7-best-money-management-tips-from-john-oliver <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/7-best-money-management-tips-from-john-oliver" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/john_oliver_12450865504_98a7a40631_z.jpg" alt="Learning money lessons from John Oliver" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>I don't often admit to it, but I have a little crush on comedian and <em>Last Week Tonight</em> host, John Oliver. I mean, what's not to like? There's his adorable British accent, his hilarious takes on the modern world, his dimples, his sound money advice&hellip;</p> <p>No, really. John Oliver is actually a pretty solid source for financial tips. Over the past few years, he has cemented his place in my heart by using his comedic platform to educate his audience on everything from credit scores to debt management and retirement savings</p> <p>If you haven't had a chance to watch all of John Oliver's money-related episodes, here are my favorite financial funnyman's seven best money management tips:</p> <h2>1. Before Taking a Payday Loan, Be Absolutely Sure There Are NO Other Options</h2> <p><iframe src="https://www.youtube.com/embed/PDylgzybWAw" width="560" height="315" frameborder="0" allowfullscreen="allowfullscreen"></iframe></p> <p>As seen on:&nbsp;<a href="https://www.youtube.com/watch?annotation_id=annotation_959988635&amp;feature=iv&amp;src_vid=aRrDsbUdY_k&amp;v=PDylgzybWAw" target="_blank">Last Week Tonight: Predatory Lending</a></p> <p>Wise Bread readers are likely very well aware of the predatory nature of payday loans. Taking a short-term loan can kick off a terrible cycle of debt with annual interest rates as high as 700%. But, as John Oliver points out in his rant, a Pew survey found that &quot;a majority of borrowers say payday loans take advantage of them, [but] a majority also say they provide relief.&quot;</p> <p>The point is that there will be times when people need money in a hurry and feel that their choices are limited. However, most borrowers have more choices than they think they do. Prospective payday loan customers could always borrow from a family member or friend, pawn or sell an item, or even sell blood or plasma. In other words, it's a better idea to do almost <em>anything </em>else to generate some quick cash than visit a payday loan store. (Although some of the ideas suggested by Sarah Silverman, the official spokesperson for <em>doing anything else</em>, are clearly meant to be tongue-in-cheek.)</p> <p>Many payday loan borrowers end up turning to these anything else options in order to get out of the cycle of payday loan debt, so it would be better to just start there.</p> <h2>2. Start Saving for Retirement Now &mdash; And Build a Time Machine and Start Saving 10 Years Ago If Possible</h2> <p><iframe src="https://www.youtube.com/embed/gvZSpET11ZY" width="560" height="315" frameborder="0" allowfullscreen="allowfullscreen"></iframe></p> <p>As seen on:&nbsp;<a href="https://www.youtube.com/watch?time_continue=1249&amp;v=gvZSpET11ZY" target="_blank">Last Week Tonight: Retirement Plans</a></p> <p>We all need to be saving more money for retirement, and the earlier you start, the more time compound interest has to work its magic. According to a 2014 study from the Center for Retirement Research at Boston College, a 25-year-old would only need to set aside <a href="http://crr.bc.edu/wp-content/uploads/2014/07/IB_14-111.pdf">15% of her income</a> each year to adequately replace her income as of retirement at age 62 &mdash; but if she started at age 35 she would need to save 24%, and 44% if she waited until age 45.</p> <p>While I have no issue with encouraging people to save more (really &mdash; save more!), I do have a quibble with the slight whiff of shame clinging to the build-a-time-machine portion of this advice. We can't change our past financial behavior, but we can feel bad about it and let it affect our present behavior &mdash; which too many people tend to do. There's no point in offering coulda-shoulda-woulda advice when time machine technology is still a couple of thousand decades away from reality.</p> <p>However, the basis of this advice is more than sound. Don't waste your money on Elf School in Reykjavik. Put it in your retirement account where it can do you some real good.</p> <h2>3. Check Your Credit Report Every Year</h2> <p><iframe src="https://www.youtube.com/embed/aRrDsbUdY_k" width="560" height="315" frameborder="0" allowfullscreen="allowfullscreen"></iframe></p> <p>As seen on:&nbsp;<a href="https://www.youtube.com/watch?v=aRrDsbUdY_k" target="_blank">Last Week Tonight: Credit Reports</a></p> <p>Your credit history can affect everything from whether you qualify to make large purchases, to your ability to land a job or rent an apartment. Unfortunately, credit reports are not always accurate, even if you have been a boy scout when it comes to your responsible credit usage.</p> <p>As John Oliver reports, the credit reporting bureaus make major mistakes in one out of every 20 credit histories. That may be a 95% accuracy rate, but it does leave 10 million consumers to deal with critical mistakes on their credit reports.</p> <p>The only thing we can do to fight mistakes (and identity theft, which <em>Last Week Tonight</em> did not even get into) is to regularly check our credit reports. We are legally allowed free access to a credit report from each of the major reporting agencies &mdash; TransUnion, Experian, and Equifax &mdash; once per year. You can access that information at annualcreditreport.com.</p> <p>If you're particularly organized, you can keep an eye on your credit on a rolling basis by checking one of the three agencies every four months.</p> <h2>4. Invest in Low Cost Index Funds</h2> <p>As seen on: <a href="https://www.youtube.com/watch?v=gvZSpET11ZY" target="_blank">Last Week Tonight: Retirement Plans</a></p> <p>Seeing this particular piece of advice had me standing up and cheering in front of my laptop. The financial industry likes to tout the superiority of actively managed funds since there is an individual making decisions for your investments &mdash; which has got to be better than doing nothing.</p> <p>Except the active managers who are tinkering with investments have a couple of big detractions. First, they are human, which means they are subject to emotional reactions to market volatility. It is very hard to stick to a plan when ego, panic, or greed is driving the train. According to research by Nobel laureate William Sharpe, you would have to be correct about timing the market (that is consistently buying low and selling high) 82% of the time in order to match the returns you will get with a buy-and-hold strategy. To put that in perspective, Warren Buffett aims for accurate market timing about 2/3 of the time.</p> <p>In addition to the difficulty of market timing, an actively managed fund will have higher transaction costs because of all the active buying and selling (each of which generates a fee) going on. Even if you have the world's most accurate active manager, a great deal of your returns will be eaten up by your transaction costs.</p> <p>Low cost index funds, on other hand, keep their costs low by having fewer managers to pay, and they tend to outperform actively managed funds because they are simply set to mimic a certain index. The majority of consumers will not beat low cost index funds for satisfactory retirement investment growth.</p> <h2>5. If You Have a Financial Adviser, Ask if They're a Fiduciary</h2> <p>As seen on: <a href="https://www.youtube.com/watch?v=gvZSpET11ZY" target="_blank">Last Week Tonight: Retirement Plans</a></p> <p>A financial adviser is a fiduciary if he or she is legally required to put your economic interests ahead of their own. This is an important distinction because the terms financial adviser, financial planner, financial analyst, financial consultant, wealth manager, and investment consultant are unregulated &mdash; which means someone introducing himself by any of these titles might not have the expertise to back it up.</p> <p>But even if your financial adviser does have the credentials necessary to help you manage your money, she might be paid via commission, which could mean she recommends products to you that help her bottom line more than your retirement.</p> <p>Since a fiduciary is legally obligated to put your interests above their own, you are more likely to get objective advice from them.</p> <p>While John Oliver recommends running the other direction if you find that your financial adviser is not a fiduciary, that may not be necessary as long as you understand how your adviser is paid and you are willing to commit to due diligence in double-checking your adviser's recommendations.</p> <h2>6. Gradually Shift From Stocks to Bonds As You Get Older</h2> <p><iframe src="https://www.youtube.com/embed/gvZSpET11ZY" width="560" height="315" frameborder="0" allowfullscreen="allowfullscreen"></iframe></p> <p>As seen on <a href="https://www.youtube.com/watch?v=gvZSpET11ZY">Last Week Tonight: Retirement Plans</a></p> <p>This advice is part of target-date retirement planning. The thinking behind it is that you need to be invested in riskier (and therefore higher-earning) investments like stocks when you are young, because you have the time to ride out the volatility and reap the returns. But as you age, you need to be sure your principal is protected, which means gradually shifting more of your investments into bonds, which are more stable but have lower returns.</p> <p>This is pretty good general advice, and I love the show's take on when to remind yourself to shift more to bonds &mdash; whenever a new James Bond actor is chosen. (I'm team Gillian Anderson!)</p> <p>The only nuance I would like to add to this piece of advice is to remind investors that retirement does not mark the end of your investing days &mdash; and you should not be entirely invested in bonds by then. Theoretically, you still have 25 to 40 years ahead of you as of the day you retire, and you will still need to be partially invested in aggressive assets like stocks in order to make sure your money keeps growing.</p> <h2>7. Keep Your Fees, Like Your Milk, Under 1%</h2> <p>As seen on <a href="https://www.youtube.com/watch?v=gvZSpET11ZY" target="_blank">Last Week Tonight: Retirement Plans</a></p> <p>Except for the fact that skim milk is a watery horror I would not wish on my worst enemy's morning Wheaties, this is probably my favorite of John Oliver's money tips.</p> <p>Fees on your investments work a lot like interest &mdash; in that they compound quickly. <em>Last Week Tonight</em> showed a clip from the 2013 PBS documentary The<a href="http://www.pbs.org/wgbh/frontline/film/retirement-gamble/"> Retirement Gamble</a>, which illustrated how compounding interest would eat up 2/3 of your investment growth over 50 years, assuming a 7% annual return and a 2% annual fee.</p> <p>The only way to combat such termite-like destruction of your investment growth is to keep your fees low &mdash; under 1%. And the lower you can get your fees under 1%, the better you are. As John Oliver's segment points out, &quot;Even 1/10 of 1% can really [bleep] you.&quot;</p> <h2>Money With a Side of Funny</h2> <p>The majority of financial information is not exactly fun to read through. That's why it's so important for a satirist and comedian to take on these vitally important issues and make them entertaining. I'm thankful that John Oliver has decided to make money one of the issues he illuminates for his audience.</p> <p><em>Are you a regular watcher of Last Week Tonight? What valuable advice have you gleaned?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/emily-guy-birken">Emily Guy Birken</a> of <a href="http://www.wisebread.com/7-best-money-management-tips-from-john-oliver">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/10-ways-to-increase-your-net-worth-this-year">10 Ways to Increase Your Net Worth This Year</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-financial-moves-you-will-always-regret">9 Financial Moves You Will Always Regret</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/could-trump-bring-higher-interest-rates-and-inflation-consider-these-money-moves">Could Trump Bring Higher Interest Rates and Inflation? Consider These Money Moves</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/is-paying-off-your-mortgage-early-costing-you-money">Is Paying Off Your Mortgage Early Costing You Money?</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-frugal-colonizers-guide-to-getting-to-mars">The Frugal Colonizer&#039;s Guide to Getting to Mars</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Personal Finance Entertainment bonds credit reports fees index funds investing john oliver money advice payday loans retirement stock market Mon, 08 Aug 2016 10:30:07 +0000 Emily Guy Birken 1766934 at http://www.wisebread.com Are You Choosing the Right Fund for Your Portfolio? http://www.wisebread.com/are-you-choosing-the-right-fund-for-your-portfolio <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/are-you-choosing-the-right-fund-for-your-portfolio" 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_75921495.jpg" alt="Learning if mutual funds are better than ETFs" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>With a market of over $30 trillion, mutual funds are some of the most popular investments. But the $3 trillion ETF (<a href="http://www.wisebread.com/the-10-weirdest-etfs-you-can-buy" target="_blank">Exchange Traded Fund</a>) market is catching up quickly. So, what <em>are </em>ETFs? How do they differ from mutual funds? And are they right for you? Here's what you need to know:</p> <h2>Mutual Funds 101</h2> <p>When you invest in an individual stock, the success of your investment is completely dependent upon the success of that one company. But when you invest in a mutual fund, your money is diversified. It's pooled with many other investors' money and then invested in many companies, based on the design of the fund or the decisions of the fund manager.</p> <p>It's the same with bonds and bond funds, or real estate and real estate funds.</p> <p>Think of an exchange-traded fund as a close cousin of a mutual fund. It, too, manages a pool of money from many investors, spreading it among many investments. But there are some very important differences between ETFs and mutual funds.</p> <h3>ETFs Are Priced Throughout the Day</h3> <p>When you enter an order to purchase a mutual fund, the order will fill at the end of the day, after the value of all of its underlying assets are tallied.</p> <p>ETFs, on the other hand, can be bought and sold throughout the day like stocks. When you enter an order to purchase an ETF, your order will typically be filled very soon after entering the order at a price very close to the price you saw when you placed the order.</p> <p>That's one of the main reasons why ETFs were created. On October 19, 1987, a day now known as &quot;Black Monday,&quot; the U.S. stock market fell by nearly 23%. Mutual fund investors who wanted to sell their shares couldn't until all the damage had been done. Three years later, the first ETF was launched, giving investors all of the diversifying benefits of a mutual fund but the flexibility to buy or sell throughout the trading day.</p> <h3>ETFs Have Lower Expenses</h3> <p>Exchange-traded funds tend to have lower operating expenses than mutual funds, and that lower cost structure is passed along to investors in the form of lower expense ratios. For example, Vanguard's S&amp;P 500 index <em>mutual fund</em> (ticker symbol VFINX) has an expense ratio of .16%. If you invest $1,000 in the fund, $1.60 will go toward fund expenses. That's already very low. However, if you invest in Vanguard's S&amp;P 500 <em>exchange-traded fund</em> (ticker symbol VOO), you'll pay an even lower expense ratio of .05% &mdash; or 50 cents per $1,000 invested.</p> <h3>ETFs Have Lower Minimums</h3> <p>Many mutual funds have minimum initial investment amount requirements. Common amounts range from $250 to $3,000, but some funds require as much as $10,000.</p> <p>With ETFs, the minimum investment amount required is the cost of one share. If you wanted to invest in Vanguard's VFINX mutual fund, you'd need to come up with at least $3,000 for your initial investment. However, getting started with what, in essence, is the ETF version of the same fund, VOO, would cost only about $190 &mdash; the price of one share when this article was written.</p> <h2>Which Is Better?</h2> <p>There are three main factors that can help you decide whether to go with a mutual fund or an exchange-traded fund.</p> <h3>Availability</h3> <p>You may not have a choice. Some 401K plans don't yet include ETFs in the investment options they make available to participants. If that's true with your workplace plan, you'll have to go with one or more of the available mutual funds.</p> <h3>Strategy</h3> <p>While the ETF universe is growing rapidly, there are still many more mutual funds. So, it could be that the investment strategy you're following calls for the use of a particular mutual fund and there are no suitable ETF substitutes.</p> <h3>Cost</h3> <p>If you're following an investment strategy that calls for the use of a particular fund that's available as a mutual fund or an ETF, check on each one's expense ratio. It's very likely that the ETF will cost less, making it the better choice.</p> <h2>One Last Consideration</h2> <p>Some critics say ETFs can get investors in trouble by encouraging more trading. They argue that because the funds can be bought and sold throughout the day, they'll tempt otherwise conservative investors to take undue risk and turn them into roll-the-dice day-traders.</p> <p>But that's like arguing that because <em>some </em>people get into car accidents, <em>no one </em>should be allowed to drive. If you follow the rules of the road for wise investing &mdash; if you're a long-term investor, not a short-term trader &mdash; ETFs can be a very efficient, cost-effective investment vehicle.</p> <p><em>So, which is it for you? Mutual fund or ETF?</em></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/are-you-choosing-the-right-fund-for-your-portfolio">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-9"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-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/the-10-weirdest-etfs-you-can-buy">The 10 Weirdest ETFs You Can Buy</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/8-things-everyone-should-know-about-the-commodities-markets">8 Things Everyone Should Know About the Commodities Markets</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/11-investment-mistakes-we-all-make">11 Investment Mistakes We All Make</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-to-build-an-investment-portfolio-for-under-5000">How to Build an Investment Portfolio for Under $5000</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Investment bonds commodities comparisons ETFs exchange traded funds mutual funds portfolio stock market Wed, 27 Jul 2016 09:30:36 +0000 Matt Bell 1757851 at http://www.wisebread.com 7 Cool Things Bonds Tell You About the Economy http://www.wisebread.com/7-cool-things-bonds-tell-you-about-the-economy <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/7-cool-things-bonds-tell-you-about-the-economy" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/kid_investing_happy_000065886749.jpg" alt="Learning cool things bonds teach us about the economy" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Bonds are often cast as the boring stepchild of investments, but they can actually offer some great insights into the machinations of our economy. Their yields and interest rates that are affected by overall economic conditions, so you can learn a lot by owning them. And they may even predict how certain aspects of the economy will evolve. (See also:&nbsp;<a href="http://www.wisebread.com/5-crucial-things-you-should-know-about-bonds?ref=seealso" target="_blank">5 Crucial Things You Should Know About Bonds</a>)</p> <p>Here are seven things that bonds can tell us.</p> <h2>1. They Can Tell You If the Economy Is Healthy (or Not)</h2> <p>Some bonds perform well when the overall economy is in good shape. Others perform better when times are tough. High-yield bonds, emerging market bonds, and corporate bonds with low ratings tend to perform best when the economy is strong. But U.S. Treasuries &mdash; which are seen as less risky &mdash; don't perform as well when the economy is doing well.</p> <p>So, if you want to get a general sense of how the national or world economy is doing, pay attention to the types of bonds people are investing in. Generally speaking, a rush to riskier bonds means things are going well. But when times are tough, Treasuries are often the place investors flock to. Here's a <a href="http://bonds.about.com/od/bonds101/a/The-Economy-And-Bonds.htm">helpful chart</a> that shows how different bonds perform in various economic conditions.</p> <h2>2. They Can Predict a Recession</h2> <p>In the 1980s, economists began to realize that they could predict economic activity by looking at something called the bond &quot;yield curve.&quot; In simple terms, this is the difference in the interest rates between three-month and 10-year Treasury notes. If the interest rates on 10-year notes are higher than the shorter-term rates, then the <a href="https://www.clevelandfed.org/our-research/indicators-and-data/yield-curve-and-gdp-growth.aspx">chances of a recession</a> in the next 18 months are not very high, according to information published by the Federal Reserve. When the yield curve is inverted &mdash; meaning long-term interest rates are lower &mdash; then look out. This was the case in 2006, and America was in a recession within two years.</p> <h2>3. They Can Predict If You'll Pay More for Stuff</h2> <p>One of the downsides to investing in Treasury bonds is that they can lose value due to inflation. That's why the government introduced something called Treasury Inflation Protected Securities (TIPS). These are like bonds, in that they have a fixed-rate yield and regular interest payments, but the principal is adjusted according to the Consumer Price Index.</p> <p>Generally speaking, you can determine the possible rate of future inflation by examining the spread between the yield in a bond and a TIPS with a similar maturity date. So for instance, if a three-year Treasury note has a yield of 4% and a three-year TIPS note has a yield of 2%, then the expected rate of inflation over the next two years is 2%. This is not an exact science, however, as there are a multitude of factors that can drive inflation.</p> <h2>4. They Can Tell You If Stock Investors Are Skittish</h2> <p>When investors flock to bonds, it's often because they are feeling less confident about riskier investments, such as stocks. Bonds are popular investments among those close to retirement, but when all investors are drawn to bonds, it could be a sign that the stock market has taken a dive or is underperforming. Conversely, less interest in bonds could be a sign that the stock market is doing well.</p> <h2>5. They Can Tell You If Companies Are Investing in Themselves</h2> <p>Corporate bonds can give you a glimpse of what companies are doing with their money, especially whether they are looking to expand. Even large companies with a lot of cash will issue bonds in order to make big capital improvements, fund an acquisition, or invest in research and development. (Even Apple, which reported $55 billion in cash in the last quarter, also reported $10 billion in bond debt.)</p> <p>Be careful, however, as many companies go into debt simply to stay afloat. Pay attention to the ratings on corporate bonds to get a better understanding of how companies may be using debt. A company with a strong credit rating is more likely to be raising funds for investment or expansion rather than to simply fund operations.</p> <h2>6. They Can Impact What You Might Pay for Your House</h2> <p>The government does not set mortgage rates. Banks do that. But banks will often keep mortgage rates in line with those of long-term Treasury notes. That's because Treasuries and mortgages are offered for similar terms, usually in the 10- to 30-year time frame. So when Treasury notes rise, mortgage rates usually rise, as well.</p> <h2>7. They Can Let You Know if Your City Is in Trouble</h2> <p>Municipal bonds can offer insight into the economies of cities and states. Municipalities will sell bonds in order to raise money for capital projects. The size and quality of these bonds are clues into whether a city is investing properly or has too much debt. Bonds with high interest rates may come from cities with less-than-stellar credit &mdash; a sign of a city that has been struggling. (For an example, take a look at Atlantic City, which is struggling to make debt payments after years of declining tax revenue.) Moreover, bonds will tell you whether a municipality is selling bonds just to fund normal operations, or for investments in things like infrastructure that will benefit the city's financial health over the long term.</p> <p><em>Still bored by bonds?</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/7-cool-things-bonds-tell-you-about-the-economy">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-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/could-trump-bring-higher-interest-rates-and-inflation-consider-these-money-moves">Could Trump Bring Higher Interest Rates and Inflation? Consider These Money Moves</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/while-waiting-for-rates-i-bonds">While Waiting for Rates: I-Bonds</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/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-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/laddering-for-higher-more-stable-returns">Laddering for higher, more stable returns</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Investment bonds Economy inflation interest rates predictions recessions Thu, 12 May 2016 09:00:05 +0000 Tim Lemke 1705414 at http://www.wisebread.com 8 Assets You Can Count on During Tough Times http://www.wisebread.com/8-assets-you-can-count-on-during-tough-times <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/8-assets-you-can-count-on-during-tough-times" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/man_working_000060906050.jpg" alt="Man counting on assets during tough times" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>We've all gone through periods where money is tight. Perhaps we've had a job loss, or dealt with a major unexpected expense. Or maybe the economy has been chaotic, creating sharp market downturns.</p> <p>It's times like these when it's nice to have things to count on. If you look around, you'll realize you have assets at your disposal to get you through. Some can generate extra income. Others will give you stability.</p> <h2>1. Dividend Stocks</h2> <p>It's always good to have at least <em>some </em>income-producing stocks in your portfolio. There are many stocks that reward investors with quarterly payments, often with yields that are far higher than the interest offered on bank accounts. You often will sacrifice growth for the income, but that's okay when you're having some financial troubles. Look for companies labeled as &quot;Dividend Aristocrats,&quot; for having increased their dividends every year for the last 25 years. This list includes solid companies like Procter &amp; Gamble, Coca-Cola, Johnson &amp; Johnson, and ExxonMobil.</p> <h2>2. Your Home</h2> <p>As long as you're not behind on your mortgage payments and have some equity built up, your house can help you through a challenging period. Your house is not a liquid asset, so it's not as useful as some other things you may have at your disposal. But it may be possible to get a home equity loan or line of credit to give you extra cash. If you're really in a pinch, you could always move into a less expensive location and rent out your home, pocketing any difference.</p> <h2>3. Bonds</h2> <p>Depending on your age, you may not want to own a lot of bonds yet, but it's nonetheless nice to have some. They're great for generating some income during hard periods, and can serve as a nice stabilizing force in your portfolio. And the income is often tax-free. Rather than researching individual bonds, look for well-performing bond funds such as the Vanguard Long Term Tax Exempt Fund (VWLTX) or the Fidelity Municipal Income Fund (FHIGX).</p> <h2>4. Your Emergency Fund</h2> <p>Hiding a million dollars under a mattress isn't the best financial move, but you do want to maintain a good quantity of liquid cash at your disposal. Financial advisors recommend having at least three months of living expenses in a savings account, money market account, or CD to get you through. If you anticipate a job loss, a medical procedure, or a period of financial strain, consider bolstering this account with extra cash, if you can. Cash doesn't make you a lot of money these days, but it's nice to have a lot of it during challenging times. (See also: <a href="http://www.wisebread.com/6-emergency-fund-myths-you-should-stop-believing">6 Emergency Fund Myths You Should Stop Believing</a>)</p> <h2>5. A Roth IRA</h2> <p>In general, you should try to avoid withdrawing money from retirement accounts before age 59 &frac12;, because there are taxes associated with doing so. But one of the nice things about a Roth IRA is that you can withdraw your <em>contributions</em> at any time without penalty. That's why some financial advisors say it's okay to think of your Roth IRA as part of your emergency fund. Be careful, though. You don't want to withdraw more than you've contributed, and you should come up with a plan to replenish those funds so you're not costing yourself future dollars in retirement.</p> <h2>6. Precious Metals</h2> <p>Gold and silver have always been investments of choice during times of trouble. Metals have lost a lot of value in recent years in the low interest rate environment, but they've ticked up recently as interest rates have risen and the stock market has lagged. Precious metals are useful when banks are unstable, when there is major political uncertainty, or when inflation is out of control.</p> <h2>7. Your &quot;Stuff&quot;</h2> <p>Look around your house. You probably have a lot of items that you could probably part with if finances get tight. Old books. Clothes. That mountain bike you rarely ride. Check eBay, Craigslist, or other resources for places to sell your items. It just might help you get through a tough stretch.</p> <h2>8. Your Talents</h2> <p>You're good at something. Ceramics. Singing. Graphic design. Writing. Whatever it is, see if you can leverage it for extra income. Look for freelance work, or sell your wares on sites like Etsy or Shopify. Who knows? Maybe it could bring you not only temporary income, but a whole new lucrative career.</p> <p><em>Do you have these assets to rely on when things get tough?</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/8-assets-you-can-count-on-during-tough-times">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/why-invest-in-the-stock-market">Why invest in the stock market?</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-best-ways-to-invest-50-500-or-5000">The Best Ways to Invest $50, $500, or $5000</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/11-investment-mistakes-we-all-make">11 Investment Mistakes We All Make</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/your-401-k-is-not-an-investment">Your 401(k) is not an investment</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Investment assets bonds emergencies stocks tough times Tue, 23 Feb 2016 10:30:25 +0000 Tim Lemke 1658863 at http://www.wisebread.com Stabilize Your Portfolio With These 5 Bond Funds http://www.wisebread.com/stabilize-your-portfolio-with-these-5-bond-funds <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/stabilize-your-portfolio-with-these-5-bond-funds" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/woman_investment_000058699958.jpg" alt="Woman stabilizing her portfolio with bond funds" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Bonds are low-risk investments that can be used to stabilize your portfolio. You may already be familiar with them. Local cities, states, and the federal government are the biggest issuers of bonds, but corporations will also create bond certificates when they're seeking capital. And although they generally carry lower risk than stocks, as an investor you will still need to decide where your comfort level lies. Do you feel secure with corporate bonds, or do you prefer the assuredness that municipal and treasury bonds have to offer?</p> <p>Fortunately, there are a variety of bond funds that allow you to tailor your investment to your risk tolerance and overall needs. Here are six well-performing bond funds to help stabilize your portfolio. (See also: <a href="http://www.wisebread.com/the-most-important-thing-youre-probably-not-doing-with-your-portfolio?ref=seealso">The Most Important Thing You're Probably Not Doing With Your Portfolio</a>)</p> <h2>1. iShares TIPS Bond ETF [<a href="https://www.ishares.com/us/products/239450/ishares-05-year-tips-bond-etf">STIP</a>]</h2> <p>STIP offers exposure to short-term 0-5 years U.S. TIPS, which are government bonds whose value typically rises with inflation. The fund has some growth potential and low volatility. Use it as a short-term hedge against inflation.</p> <ul> <li>Risk: Low</li> <li>Goal: Track index of inflation protected U.S Treasury bonds of less than five years</li> <li>Expense Ratio: .10%</li> <li>Money Manager: BlackRock</li> </ul> <h2>2. iShares National Muni Bond ETF [<a href="https://www.ishares.com/us/products/239766/ishares-national-amtfree-muni-bond-etf">MUB</a>]</h2> <p>Municipalities nationwide fund capital projects with bonds; MUB iShares provides exposure to more than 2,000 U.S. municipal bonds with its top holdings in California and New York, representing 42.97% of its assets. The fund offers tax efficiency for investors in higher tax brackets.</p> <ul> <li>Risk: Moderate</li> <li>Goal: Track index of investment grade U.S. municipal bonds</li> <li>Expense Ratio: .25%</li> <li>Money Manager: BlackRock</li> </ul> <h2>3. Vanguard California Long-Term Tax-Exempt Fund Investor Shares [<a href="https://personal.vanguard.com/us/funds/snapshot?FundId=0075&amp;FundIntExt=INT">VCITX</a>]</h2> <p>This fund aims to create federal and state tax-exempt income and appeals to investors in high tax brackets, particularly those residing within the state of California. This is an intermediate-term bond and more susceptible to inflation.</p> <ul> <li>Risk: Moderate</li> <li>Goal: Long-term tax-free income</li> <li>Expense Ratio: .20%</li> <li>Money Manager: Vanguard</li> </ul> <h2>4. Vanguard Total Bond Market ETF [<a href="https://personal.vanguard.com/us/funds/snapshot?FundId=0928&amp;FundIntExt=INT">BND</a>]</h2> <p>The BND invests in more than 3,000 broad U.S. investment-grade bonds. The fund has relatively high potential for investment income with some volatility. It is appropriate for mid to long-term investors seeking a reliable income stream. Use it to diversify and balance the risks of stocks.</p> <ul> <li>Risk: Low to moderate</li> <li>Goal: Track U.S. bond market returns</li> <li>Expense Ratio: .09%</li> <li>Money Manager: Vanguard</li> </ul> <h2>5. Vanguard Total International Bond ETF [<a href="https://personal.vanguard.com/us/funds/snapshot?FundId=3711&amp;FundIntExt=INT">BNDX</a>]</h2> <p>With its eyes on the world's bond markets, BNDX employs hedging strategies to protect against uncertainty in exchange rates. The fund offers broad exposure to non-US dollar denominated investment grade bonds. Use it to hedge against inflation.</p> <ul> <li>Risk: Low to moderate</li> <li>Goal: Track Barclays Global Aggregate ex-USD Float Adjusted RIC Capped Index</li> <li>Expense Ratio: .20%</li> <li>Money Manager: Vanguard</li> </ul> <p><em>Do you have any bond funds 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/qiana-chavaia">Qiana Chavaia</a> of <a href="http://www.wisebread.com/stabilize-your-portfolio-with-these-5-bond-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-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-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/why-invest-in-the-stock-market">Why invest in the stock market?</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-ways-to-spring-clean-your-investment-portfolio">4 Ways to Spring-Clean Your Investment Portfolio</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-best-ways-to-invest-50-500-or-5000">The Best Ways to Invest $50, $500, or $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 balancing portfolio bonds ETF municipal bonds risk tolerance stocks Fri, 05 Feb 2016 14:00:04 +0000 Qiana Chavaia 1650901 at http://www.wisebread.com 4 Ways to Reduce Your Tax Bill With Bonds http://www.wisebread.com/4-ways-to-reduce-your-tax-bill-with-bonds <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/4-ways-to-reduce-your-tax-bill-with-bonds" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/father_daughter_computer_000082622141.jpg" alt="Man finding ways to reduce his tax bills with bonds" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Financial advisors recommend bonds to investors for portfolio diversification, as a fixed income investment strategy, and to hedge against inflation. Even better, some major bond classes can help you reduce your tax bill, too.</p> <p>What's more, they are low-risk investments. Here's how you can reduce your tax bill with bonds. (See also:&nbsp;<a href="http://www.wisebread.com/9-tax-friendly-ways-to-save-beyond-your-retirement-fund">9 Tax-Friendly Ways to Save Beyond Your Retirement Fund</a>)</p> <h2>1. Invest in Municipal Bonds</h2> <p>Municipal bonds have long garnered the attention of high-earners seeking to minimize their tax obligations. Muni bonds are tax-exempt at the federal level and, in some cases, local and state tax exempt as well, especially if the investor resides in the issuing state or municipality.</p> <p>Though munis faced some scrutiny during the financial crisis, many &mdash; if not most &mdash; munis deserve a second look now that local government finances are on much more stable footing.</p> <h2>2. Buy U.S. Treasury Bonds</h2> <p>U.S. Treasury bonds pay interest income once every six months. That income is exempt from state, local, and the alternative minimum tax. Some treasury bonds can also <a href="https://www.fidelity.com/fixed-income-bonds/individual-bonds/us-treasury-bonds">reduce your tax bill</a>, even if investing outside of a retirement account.</p> <h2>3. Purchase Zero Coupon Bonds</h2> <p>Zero coupon bonds are exempt from state and local tax. As their name suggests, these government bonds pay no interest, but often offer higher yields. Investors beware, however: Zero coupon bonds come with higher risks than their traditional counterparts, so consider the risk-reward trade-offs before investing in this asset class.</p> <h2>4. Put Bonds Inside Tax-Free and Tax-Deferred Accounts</h2> <p>Investors can defer any taxes owed on interest income by delaying distributions and holding these investments in a tax-deferred retirement account, such as an IRA or 401K. Once the money is withdrawn at retirement age, it'll be taxed based on the individual's tax bracket. Using the same strategy, if they are kept in a tax-free account, such as a Roth IRA or Roth 401K, distributions taken at retirement are tax-free.</p> <p><em>Are bonds 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/qiana-chavaia">Qiana Chavaia</a> of <a href="http://www.wisebread.com/4-ways-to-reduce-your-tax-bill-with-bonds">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/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/should-you-choose-a-roth-401k-or-a-regular-401k">Should You Choose a Roth 401k or a Regular 401k?</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/3-ways-more-money-in-retirement-might-cost-you">3 Ways More Money in Retirement Might 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/why-tax-day-is-april-15-and-other-weird-financial-deadlines">Why Tax Day Is April 15 and Other Weird Financial Deadlines</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/did-your-parents-give-you-a-whole-life-insurance-policy-heres-what-to-do-with-it">Did Your Parents Give You a Whole Life Insurance Policy? Here&#039;s What to Do With It.</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Investment Taxes 401 k bonds IRA municipal tax-deferred treasury Tue, 02 Feb 2016 22:00:06 +0000 Qiana Chavaia 1649194 at http://www.wisebread.com The Best Ways to Invest $50, $500, or $5000 http://www.wisebread.com/the-best-ways-to-invest-50-500-or-5000 <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/the-best-ways-to-invest-50-500-or-5000" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/woman_holding_cash_000076050947.jpg" alt="Woman finding best ways to invest $50, $500, or $5000" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Investing isn't just for your dad and the super rich folks down the block. Anyone can &mdash; and should &mdash; put a portion of those hard-earned dollars to work. The prospect of reaping additional profits by committing capital to stocks, bonds, mutual funds, real estate, and more might seem sort of scary. But it's an exercise everyone can benefit from &mdash; people with slim pockets included. It's all about weighing potential gains with potential risk, and then zeroing in on an investment vehicle that caters to you.</p> <p>Read on for our <a href="http://www.wisebread.com/11-investment-mistakes-we-all-make">investment guide for the newbies</a> and dabblers. Whether you've got $50, $500, or $5,000 to spare, there's a wealth-growing opportunity waiting for you.</p> <h2>1. $50</h2> <p>Fifty smackers won't make you rich. But that doesn't mean you can't transform a $50 bill into an opportunity to build up your wealth. Often the key to growing small sums is getting creative, so now's the time to channel your inner artist.</p> <p>Why not flip furniture on Craigslist? Think about it: There's a deluge of couches, end tables, stools, and vintage tea carts on the buy-and-sell site. Often, when it comes to furniture listings, one of four things is the case: The seller doesn't know what the item is worth; the seller is moving and just needs to get rid of things quickly; the seller can't take a good photo of a coffee table for the life of him; or the furniture piece needs just a little TLC to realize its potential worth. Here's where you swoop in to remedy the situation.</p> <p>If the seller undersold you a sofa, it's not your duty to inform him that he could have made an arm and a leg rather than $25. Seize this as an opportunity to resell the item you got a steal for at a better price. If the seller has a nice wooden chair, but posted a dim-lit, fuzzy photo of it positioned in the middle of a messy living room overrun with cats, you've just scored yourself a chance to buy the chair and market it in a way that reflects its true worth.</p> <p>Another option for folks with $50 to invest: Build up your savings account. It's not sexy. But if you're able to sock away $50 every once in a blue moon, you'll eventually have a nice little safety net. What's more, you'll be on your way to building up enough money to do some more progressive investing (think bonds and stocks). After all, you've got to have a little to make a little. But you certainly don't need a lot to grow your pot.</p> <h2>2. $500</h2> <p>A $500 investment gives you a little bit more flexibility. While it's hard to grow that amount quickly and substantially &mdash; ahem, unless you've perfected your poker face &mdash; there are lots of ways to make $500 work for you without risking big losses on the betting machines.</p> <p>In fact, you won't wager <em>any</em> losses if you invest in a certificate of deposit. Popularly known as a CD, this special type of deposit account offers a higher rate of interest than a standard savings account. The catch is that you can only deposit money into it for a specified length of time. During that time &mdash; six months, 18 months, two years, etc. &mdash; your fixed investment generates interest, which you can cash out, along with your original $500, when your CD reaches maturity.</p> <p>A CD is a safe investment &mdash; an ideal option for folks amenable to slow growth and low risk. Unlike a savings account, a CD can help prevent you from burning through your hard-earned dollars (but if you're in a jam, you can easily access it for a small penalty). And unlike stocks and many other forms of investment, CDs come with federal deposit insurance, so there's zero risk of losing your money. National rates for a one-year CD currently hover around 1.25% at the moment. Not great, but be sure to shop around.</p> <p>Another great option is hooking up with an online financial advisor. They're truly all the rage. You can open an account with <a href="http://track.flexlinks.com/a.ashx?foid=1029882.1538723&amp;fot=9999&amp;foc=1">Betterment</a>, for example, even if you have no money. (The company recommends a monthly deposit of $100, which is just enough to waive the $3 fee per month for accounts less than $10,000). Dubbed &quot;the easiest investment site you'll ever use&quot; by Slate, Betterment is just one of <a href="http://www.wisebread.com/should-you-trust-your-money-with-these-4-popular-financial-robo-advisers">several robo-advisors</a> offering services that were at one time a privilege of the uber-rich. (Thanks, Internet.) Some of these companies will even make the trades for you, suggest ways to minimize your taxes, and rebalance your accounts. There's more risk involved in investing with an online financial advisor, but there's also more opportunity for gains.</p> <h2>3. $5000</h2> <p>One of the biggest misconceptions about investing is that you need a lot of money to jump in the game. Not so. By sinking $5,000, a relatively modest sum, into a quality mutual fund, you'll gain access to a stock portfolio that's diversified and professionally managed. Another benefit: Investors in mutual funds can cash in their shares at any time, giving you more flexibility should you endure some sort of financial emergency.</p> <p>Sure, there's risk involved. Some of the investments in your portfolio will falter. But others are bound to flourish. Some years will be losers. During others, your earnings might grow by 8%. Bottom line: If you choose a mutual fund that's high-performing, there's ample opportunity to grow your investment into a bigger sum. You've just got to come to terms with that fact that every year won't be a good one. And so, notably, the $5,000 you invest shouldn't be money that you're hoping to spend next year. Rather, view this investment as your pot of gold for sometime down the road.</p> <p>If you're wary of risk, consider investing, say, $3,000 in mutual funds. Then pour the remainder into bonds. Bonds won't bring home the big returns, but they'll give you reliable ones, providing you with a solid footing on which to weather the uncertainty of an investment in stocks.</p> <p>Rome wasn't built in a day, and neither were most sizeable portfolios. Even a modest start is a good start &mdash; and a big step forward toward financial security.</p> <p><em>How have you invested a windfall?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/brittany-lyte">Brittany Lyte</a> of <a href="http://www.wisebread.com/the-best-ways-to-invest-50-500-or-5000">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-5"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/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-investment-mistakes-we-all-make">11 Investment Mistakes We All 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/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-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-easy-ways-to-start-green-investing">5 Easy Ways to Start Green Investing</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-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> </ul> </div> </div> </div> </div><br/></br> Investment bonds earnings mutual funds profits stocks windfalls Mon, 04 Jan 2016 14:00:02 +0000 Brittany Lyte 1630352 at http://www.wisebread.com 10 Stocks and Bonds That Will Profit From the Fed Rate Hike http://www.wisebread.com/10-stocks-and-bonds-that-will-profit-from-the-fed-rate-hike <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/10-stocks-and-bonds-that-will-profit-from-the-fed-rate-hike" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/interest_rate_increase_000020286301.jpg" alt="Finding stocks and bonds that will profit from the fed rate hike" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>The Federal Reserve finally did what it's been hinting at for some time, and raised the target on its benchmark rate by a quarter of a percentage point. It's the first interest rate hike after spending much of the last decade with interest rates near zero.</p> <p>Interest rates are still going to be historically quite low, but some investments may decline in value in the short term. After all, it's the low interest rate environment that has <em>partly </em>fueled the rise in stock prices in recent years.</p> <p>That said, it's still very possible to profit even as interest rates go up. There are some market sectors that love higher rates, and in general, a rise in rates is a signal from the Fed that the nation's economy is healthy. (See also:&nbsp;<a href="http://www.wisebread.com/this-is-how-much-the-feds-interest-rate-hike-might-cost-you">This Is How Much the Fed's Interest Rate Hike Might Cost You</a>)</p> <p>Here are ten investments that might respond well as interest rates go up.</p> <h2>1. SPDR S&amp;P Regional Bank ETF [<a href="http://finance.yahoo.com/q?s=KRE">NYSE: KRE</a>]</h2> <p>When interest rates rise, small banks do quite well because more people are willing to increase their cash holdings. This ETF counts many strong small banks in its portfolio, including Bank of the Ozarks and Great Western Bancorp. This ETF has seen a return of more than 13% over the last year, suggesting that the anticipation of higher rates may already be baked into the price. But it's still worth buying.</p> <h2>2. Wells Fargo [<a href="http://finance.yahoo.com/q?s=WFC">NYSE: WFC</a>]</h2> <p>If smaller banks aren't your thing, then take a look at some big banks. Billionaire investor Warren Buffett owns more shares of Wells Fargo than any other company. New loans made by the bank will benefit from the higher rates, as will any existing variable rate loans. Other big banks worth a look include US Bancorp and BNY Mellon.</p> <h2>3. Schwab Short-Term U.S. Treasury ETF [<a href="http://finance.yahoo.com/q?s=SCHO">NYSE: SCHO</a>]</h2> <p>The conventional wisdom is that a hike in interest rates make long-term bonds less attractive, but short-term bonds perform well. Consider that the yield on a two-year treasury note hit a year high recently. Charles Schwab reported that during the three periods when the Fed rose rates since 1990, short-term bonds were the only sector that saw increases each time. This ETF from Schwab has some of the lowests fees on the market, so it's likely a good buy if you're interested in fixed income investments. The iShares Short Treasury Bond ETF is also well regarded.</p> <h2>4. Apple [<a href="http://finance.yahoo.com/q?s=AAPL">NYSE: APPL</a>]</h2> <p>It's the biggest company in the world. It has a very healthy balance sheet. In a time of raising rates and general uncertainty, it's good to hang with companies that have solid margins, lots of cash, and low volatility. Any blue chip stock with a long track record of steady growth is a good buy in this environment.</p> <h2>5. Alphabet [<a href="http://finance.yahoo.com/q?s=GOOGL">NYSE: GOOGL</a>]</h2> <p>Another one of the largest and most stable companies in the world, most likely unaffected by a rise in interest rates. Investing in Google's parent company can help keep you insulated from any market uncertainty over the next few months.</p> <h2>6. MetLife [<a href="http://www.google.com/finance?cid=664378">NYSE: MET</a>]</h2> <p>There are few sectors clamoring for an interest rate hike more than life insurers. These companies rely on interest income to boost their margins, so they generally have not been fans of the low interest rate environment. MetLife is the a largest company in this sector. Prudential and New York Life are also worth a look.</p> <h2>7. Accushares VIX Index ETF [<a href="http://finance.yahoo.com/q?s=VXUP">NYSE: VXUP</a>]</h2> <p>It's not entirely clear how the markets will react to the news of the interest rate bump, but most observers predict some amount of volatility in the short term. You can capitalize on that volatility by buying shares of this ETF that is based on the most common volatility index. It's an esoteric product, and I wouldn't invest my life savings into it, but it may be one way to capitalize on investor uncertainty.</p> <h2>8. Starbucks [<a href="http://finance.yahoo.com/q?s=SBUX">NYSE: SBUX</a>]</h2> <p>If the Fed is raising interest rates, it's sending a signal that it believes the economy is in good shape. And a strong economy means people are doing well enough to afford discretionary items, including that morning cup of coffee. Starbucks is a leader in the restaurant/food area, and should benefit from a strong economy overall.</p> <h2>9. Mastercard [<a href="http://www.google.com/finance?cid=299286">NYSE: MA</a>]</h2> <p>Goldman Sachs put this credit card company on its list of &quot;quality&quot; stocks worth buying in advance of a rate hike, and its reasoning is sound. If the economy is strong in the Fed's eyes, then it's strong enough for people to be buying more goods and services. Companies like Mastercard do better when people go shopping.</p> <h2>10. Chipotle Mexican Grill [<a href="http://finance.yahoo.com/q?s=CMG">NYSE: CMG</a>]</h2> <p>Shares of this burrito eatery have tumbled in the last few months, in part due the company being linked to cases of <em>e.coli</em> around the country. But assuming that the cases aren't indicative of a larger problem with the restaurant, this is a well-regarded company with a solid balance sheet. Chipotle shares should be poised for a rebound with the Fed showing confidence in the nation's economy.</p> <p><em>Will your portfolio be helped or hurt by the Fed's recent rate increase?</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-stocks-and-bonds-that-will-profit-from-the-fed-rate-hike">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/5-crucial-things-you-should-know-about-bonds">5 Crucial Things You Should Know About 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/laddering-for-higher-more-stable-returns">Laddering for higher, more stable returns</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-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-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/could-trump-bring-higher-interest-rates-and-inflation-consider-these-money-moves">Could Trump Bring Higher Interest Rates and Inflation? Consider These Money Moves</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/your-401k-in-2017-heres-whats-new-for-you">Your 401K in 2017: Here&#039;s What&#039;s New for You</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Investment bonds borrowing Fed interest rates investing stocks Thu, 17 Dec 2015 12:00:08 +0000 Tim Lemke 1622171 at http://www.wisebread.com 8 Ways to Prepare for a Stock Market Dive http://www.wisebread.com/8-ways-to-prepare-for-a-stock-market-dive <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/8-ways-to-prepare-for-a-stock-market-dive" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/bronze_piggybank_coins_000017285252.jpg" alt="Learning how to prepare for the next market downturn" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>If the stock market downturn in August freaked you out, you may find it helpful to be more prepared for the next time <a href="http://www.wisebread.com/10-signs-a-stock-is-about-to-tank">stocks take a dive</a>. While there's little value in panicking and assuming the markets will tumble, there are certain things investors can do to ease their minds and protect their assets.</p> <p>Consider these eight ways to get ready for the next market downturn.</p> <h2>1. Assess What Money You May Need Soon</h2> <p>If you are investing with some short-term goals in mind, it's worth taking stock of how much money you may need in the near future. For instance, if you have some investments set aside to pay for your child's college and he or she is graduating high school in a few months, it might make sense to withdraw in advance of a drop.</p> <h2>2. Save Up for Some Deals!</h2> <p>There's nothing worse than having great stocks available on the cheap, but not having the cash to buy them. Now's the time to save up so you can pounce when the values are good.</p> <h2>3. Get More Conservative</h2> <p>Anyone approaching retirement age should think about shifting investments from stocks to more stable investments, such as bonds or cash. Hopefully, this is something you've been doing anyway as you've gotten older, but if you believe the market is on the cusp of a dive, it's worth evaluating whether you should accelerate this transition.</p> <h2>4. Take a Look at Gold</h2> <p>Since the dawn of time, gold has been used as protection against disaster. It can be a good investment if interest rates rise, as many people have historically flocked to it during times of geopolitical uncertainty. Gold is cheap right now, so adding some to your portfolio could be a helpful antidote to a market downturn.</p> <h2>5. Prepare a Tax Loss Harvesting Strategy</h2> <p>If you sold investments earlier in the year and are on the hook for capital gains taxes, you may be able to offset those taxes by reporting losses from elsewhere in your portfolio. This is called tax loss harvesting. Now is the time to assess which stocks have dropped in value since you bought them, and which may be poised for a drop. A thoughtful tax loss harvesting strategy will help you avoid capital gains taxes and may even reduce your taxes from earned income.</p> <h2>6. Read Up</h2> <p>A stock market downturn can be a scary thing, in part because it's sometimes hard to discern whether the dip is a result of bad company financials or broader macroeconomic effects at work. This is when it's helpful to study earnings reports and balance sheets to get a good read on a company's health. Armed with knowledge, you'll be able to get a better handle on a stock's true worth.</p> <h2>7. Give Yourself a History Lesson</h2> <p>For many people, the thought of a stock market dive can make them sick to their stomach and keep them up at night. It helps to know that historically, the market always rebounds after decline, often quickly to new heights. Consider that since the end of World War II, the S&amp;P 500 has had a losing year just 15 times, and only three times has there been a decline in consecutive years.</p> <h2>8. Do Nothing</h2> <p>Stock markets go up. They go down. If you are investing with a long time horizon, your investment strategy should remain simple and consistent, and should not change because the market hits a rough patch.</p> <p><em>Are you ready for the next stock market downturn?</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/8-ways-to-prepare-for-a-stock-market-dive">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/why-invest-in-the-stock-market">Why invest in the stock market?</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/10-times-you-shouldnt-invest-in-stocks">10 Times You Shouldn&#039;t Invest in Stocks</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <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-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-best-ways-to-invest-50-500-or-5000">The Best Ways to Invest $50, $500, or $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 bonds crashes gold market downturn protecting assets saving stocks Wed, 30 Sep 2015 13:00:50 +0000 Tim Lemke 1570336 at http://www.wisebread.com 11 Investment Mistakes We All Make http://www.wisebread.com/11-investment-mistakes-we-all-make <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/11-investment-mistakes-we-all-make" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/buy_sell_dice_000034067732.jpg" alt="People making investment mistakes we all make" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Anyone who has ever made money by investing has probably also made their share of blunders. In fact, it's the blunders along the way that have probably led to some great lessons learned.</p> <p>If you've made <a href="http://www.wisebread.com/9-crazy-investments-of-the-rich-and-famous">mistakes with your investments</a>, you are not alone. Here are some of the most common investing mistakes we all make from time to time.</p> <h2>1. We Have No Plan</h2> <p>We start buying stocks and mutual funds without any real idea of our goals, timeline, or risk tolerance. We trade on a whim, with no sense of how each investment fits with our overall portfolio. Eventually, we'll become more organized and we'll be able to invest with purpose, simplicity, and success.</p> <h2>2. We Buy and Sell at a Bad Time</h2> <p>We've all seen the market go down and have panicked. We unload quality stocks that later rise back up to new heights. We also buy popular stocks at inflated prices, only to see them come back to earth. Over time, we learn that selling high and buying low is a much more profitable approach.</p> <h2>3. We Don't Invest Enough</h2> <p>When we start investing, we are cautious and too conservative. Perhaps we're young and not too thrifty and fail to put enough aside. We don't understand the power of compounding returns over time. We'll kick ourselves when we're 55 because we wish we'd have saved more when we were 25.</p> <h2>4. We're Too Aggressive</h2> <p>We're overloaded on tech stocks and hot biopharmaceutical companies. We go after wacky investments like leveraged ETFs and embrace volatility. We might make money quick, but we're just as likely to lose it fast. We will learn the hard way that slow and steady growth is a more reasonable goal.</p> <h2>5. We're Too Conservative</h2> <p>We're terrified of losing money, so we invest in bonds and cash, even though we're 35 years from retirement. We get giddy over a 2% return from a CD. Over time we will learn that it's impossible to get rich without taking some calculated risks.</p> <h2>6. We Don't Pay Attention to Fees</h2> <p>We buy a mutual fund or ETF because we think it's in line with our investment goals, but fail to notice that we're losing a full percent or more from expenses. There are management fees, account fees, transaction fees and a variety of other costs that are passed onto us, eating into our investment returns. Eventually, we'll learn to find those solid, well-performing funds and ETFs with super-low expense ratios.</p> <h2>7. We Don't Pay Attention to Taxes</h2> <p>We're ignorant of the advantages of Roth IRAs, which allow us to see investments grow tax free, and 401(k) plans, which let us defer taxes on investments and reduce our taxable income now. We're oblivious to the impact of capital gains taxes, buying and selling frequently in taxable accounts. Eventually, we'll become more tax savvy and our investments will rise in value faster.</p> <h2>8. We Don't Pay Attention to Commissions</h2> <p>We buy and sell shares of stock frequently, unaware that we may be paying big bucks to a stock broker when we could trade online for less than $10 a trade. But even when we do discover a discount broker, we buy and sell so often and just a few shares at a time, so even small commissions make a dent in our portfolio. We will learn over time to buy and sell with more money so that commissions don't have the same impact &mdash; or to find investments that trade commission-free.</p> <h2>9. We Watch Too Much TV</h2> <p>We are initially mesmerized by the financial pundits on CNBC and other financial news networks. We act on every stock tip from Jim Cramer and every piece of speculation about what the Fed will do. Soon, we'll learn to separate the sound analysis from the noise, and have confidence in our own ability to execute a long-term investment strategy.</p> <h2>10. We Check Our Investments Too Often</h2> <p>We watch the day-to-day performance of the markets, and allow the ups and downs impact our emotions. We see a stock dip 2% in a day and feel like punching a wall. We see it rise 3% and want to throw a party. We will conclude that this is no way to live, and will instead feel content checking in once a week, or so.</p> <h2>11. We Forget to Rebalance</h2> <p>We think we have a great investment plan, with a solid mix of stocks in various sectors and asset classes. It's all set up for optimal returns, except that we fail to pay attention as the investment mix goes off kilter. Now we're too heavily invested in one sector and don't have enough exposure in another. This offers the lesson that just because our contributions are invested a certain way, doesn't mean they'll end up that way. Rebalancing our portfolio at least once a year will help us stay on track.</p> <p><em>What are you doing to correct your investing mistakes?</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/11-investment-mistakes-we-all-make">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-6"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-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-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-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-best-ways-to-invest-50-500-or-5000">The Best Ways to Invest $50, $500, or $5000</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-ways-to-invest-in-biotech-without-getting-burned">7 Ways to Invest in Biotech Without Getting Burned</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-easy-ways-to-start-green-investing">5 Easy Ways to Start Green Investing</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Investment bonds ETFs investing mistakes mutual funds stocks Wed, 23 Sep 2015 13:00:22 +0000 Tim Lemke 1561525 at http://www.wisebread.com