Common myths about diversification of your stock portfolio
If you’re a novice to investing, mutual funds and 401(k) accounts, you may be confused by some of the terminology. Diversification is one of the more misunderstood terms. In basic terms, diversification means investing in a variety of different assets so that if one drops, the whole portfolio won’t plummet. But it doesn’t always work that way, depending upon market forces. Here are some of the most common myths about diversification, designed to help give the neophyte investor a better understanding.
Myths about diversification No. 1 – Owning many mutual funds
When you sign up for a 401(k) plan through your employer, [...]
How not to run out of money after retirement
Living on a fixed income is never fun for a retiree, unless that fixed income is sizable. That’s why saving money in retirement is so important for most people, as well as sound financial planning throughout the life cycle. Here are some key strategies regarding how not to run out of money after retirement, because even though Dickensian debtor’s prison is no more, failure to maintain assets could result in your death, which is less than desirable.
How not to run out of money after retirement tip No. 1 – Save money first
Technically, this should go into action well before retirement. [...]
European Central Bank fears bank runs will gut the EU
Things may get worse before they get better in the European financial crisis, Reuters reports. The European Central Bank is pressuring for a joint guarantee on bank deposits across the euro zone, amid fears that bank runs will spread like wildfire as investors head for the hills. Top economic official of the European Commission Olli Rehn warned that without added fiscal discipline, Europe will descend into a financial chasm.
Spain, Greece and fear of bank runs
Worries about whether Spain’s banking system will fail and whether Greece will survive in the euro area at all have deflated the value of euro currency [...]
Facebook IPO fever may be a disease
Facebook is set to become a publicly traded company Friday. Even low and middle-earning consumers who have never risked playing the stock market before are sorely tempted to take stock in one of the most phenomenally popular web ventures of all time. It seems like a no-brainer, right? But hold on. Some experts are not so convinced.
Facebook IPO fever
It is the most-anticipated IPO in ages and could raise Facebook’s overall value to more than $100 billion. In response, the Goliath of social networking sites said Tuesday that it will be upping the price of its initial offerings to a range [...]
Is JPMorgan blunder tip of the iceberg?
In the wake of JPMorgan Chase’s admission last week of a $2 billion blunder, many analysts are saying Wall Street is taking huge risks again, gambling with stockholder money in the same way it did before the economy tanked. With so much at stake, Massachusetts Senate candidate Elizabeth Warren is calling for JPMorgan CEO Jamie Dimon’s head.
‘London Whale’
JPMorgan‘s losing trades were carried out by its chief investment office in London, which has since been dubbed the “London Whale.” The trades involved credit default swaps, essentially the same kinds of instruments that brought down AIG in 2008.
Who to be the watchdog?
Dimon [...]
The basics of an initial public offering
A stock IPO is a big step for any company, and it usually involves very large piles of cash. For most people, however, the ins and outs of an IPO are confusing.
The basic idea of an IPO
An initial public offering is when a company that has previously been privately held offers stock holdings publicly. An IPO is the day a company officially transitions from a privately held company held responsible only to the owners to a publicly owned company responsible to stockholders. An IPO also usually represents a huge amount of cash, because the company gets money for the control [...]
The basics of an index fund
There are a variety of products intended to make investing easier, though these products themselves can be as complex as any other investment. Index funds, however, are a relatively simple solution to the complex world of investing.
How index funds are built
An index fund is an investment product built based on the stock indexes. A stock index is a way to measure the performance of a stock market and usually includes a variety of indicative stocks. The S&P500 is a stock index, as is the Dow Jones Industrial Average. There are smaller indexes as well, such as the Amex Major Market [...]
Preferred Stocks: the safer way of buying stocks
Investing can be scary because it means taking a risk. One product that many beginning investors overlook, however, is a product called preferred stock.
Defining a preferred stock
Preferred stock is essentially a blend of a stock and a bond. Preferred stock is a commitment by a company to pay interest to shareholders, and generally this income is paid out first in cases where the company cannot pay out on both preferred and common stock. Preferred stock holders are second in line behind bond holders if the company runs into financial trouble. Preferred stock holders have rights to dividends, and the company [...]
Mortgage rates dip along with consumer confidence
Mortgage rates declined the week of March 26; the latest economic data available to investors continues to disappoint. Bankrate reports that the Federal Reserve went on record with its reminder that the U.S. economy is still “far from recovery.”
Benchmark fell to 4.23 percent
Benchmark 30-year fixed-rate mortgages fell down to 4.23 percent after last week’s interest rate of 4.29 percent, according to a national survey of major mortgage lenders. The most recent survey included mortgages with an average of 0.39 discount and origination points, notes Bankrate.
Fifteen-year fixed-rate mortgages were also down from 3.48 percent to 3.44 percent. The benchmark 5/1 adjustable-rate [...]
How to save money on investing fees
When you invest money in corporate stock, commodities, futures and other venues, the expectation is that you will enjoy reasonable return on your money, perhaps even high returns. However, investment fees can creep in and eat away at the gains. Pay attention, and you can learn how to save money on investing fees.
Investing fees deserve your scrutiny
Ram Subramaniam, investing expert and head of products at online stock brokerage TD Ameritrade of Omaha, Neb., points out that investors are erring on the side of caution. Considering the lower returns of the current market, most do not believe that they can afford [...]
Jeremy Lin translates into Madison Square Garden share price boom
In much the same way that Denver Broncos quarterback Tim Tebow’s success brought renewed interest and increased business to his team and the NFL, New York Knicks point guard Jeremy Lin’s recent success has translated into wins and serious coinage for his team and the NBA. As Seeking Alpha reports, shares of Madison Square Garden Co. (MSG) where the Knicks play their home games have reached an all-time high since Feb. 4, the date of Lin’s breakthrough game.
There’s money in Linsanity
The play of Jeremy Lin as a scorer and distributor have brought renewed life to the flagging New York Knicks [...]
Congress drags feet on Volcker Rule, Wall Street reform
As a provision of 2010′s Dodd-Frank Act, the Volcker Rule separates retail banking and investment banking into separate businesses. Many experts believe this is important to Wall Street reform, but Congress has dragged its feet, claiming that enacting Volcker will damage liquidity and increase transaction costs for consumers.
Free market deregulation or regulated capitalism
Today is the last day for public comment on the Volcker Rule. This specific part of the Dodd-Frank Wall Street Reform and Consumer Protection Act, which was proposed by former U.S. Federal Reserve Chair Paul Volcker, would restrict U.S. banks from making speculative investments that do not benefit [...]
Picking stocks is better left to the indexes
We all like to believe that we are capable, intelligent individuals that know the best for our situation. Statistics, however, have shown that when it comes to investing, letting the market be our guide is the smartest decision.
Historical investor performance
Dalbar, which is a financial services market research firm, compared data for the two decades that spanned between 1991 and 2010. The stock fund and stock market investment information was compared to average investor performance. The S&P 500 market investment group got an average 9.14 percent return each year over the 20 years. The average stock fund investor, on the other [...]
Structured CDs offer greater yield potential, risk and complexity
While not as popular as conventional certificates of deposit, structured CDs (aka index CDs) are medium-term investments that grant the investor a fixed rate of return that is higher than that of standard CDs. Banks and credit unions offer these Federal Deposit Insurance Corporation-insured investment products, and soon, Goldman Sachs will begin offering four different types of structured CDs to its clientele by the end of the month, reports Bankrate.
Short-term lenders provide diverse options, such as military loans.
Structured CDs can provide 24 percent return
Preliminary sales documents note that one of Goldman Sachs’ four structured CD options will be linked to [...]
Baby boomers could kill the stock market for 20 years
The U.S. stock market will be depressed for the next 20 years, thanks to the baby boomers (born between 1946 and 1964) who retire and sell off their stocks, reports Bloomberg. The need to sell their investments in order to fund a retirement without adequate Social Security compensation will lead to a collapse, according to research data compiled by the Federal Reserve Bank of San Francisco.
US stock market still reeling from financial crisis
Considering that the recession still has the U.S. stock market on relatively precarious ground, the retirement of waves of baby boomers couldn’t come at a worse time for [...]
SEC to investigate S&P for insider trading
Despite a makeshift agreement regarding the debt ceiling, the U.S. credit rating took a hit because of Standard & Poor’s credit downgrade from AAA to AA+. The series of events leading up to the credit rating penalty has set the Securities and Exchange Commission into action, reports the Financial Times. An S&P investigation is under way to determine whether the financial analysis agency participated in insider trading, a violation of state and federal law.
The rules of the game
Any insider trading detected on the part of Standard & Poor’s – betting on the failure of the U.S. economy for personal gain [...]
US faces uncertainty about debt downgrade effects
Credit rating bureau Standard & Poor’s made an unprecedented decision on Friday to lower the nation’s once-impeccable AAA rating down to AA+. A tone of disappointment and unease is guiding Wall Street — a tone that all U.S. consumers may soon be feeling. Some experts are saying it will not leave a lasting mark, but other are less optimistic.
Interest rates may rise
A downgrade could force the nation to pay higher interest to entice investors into buying its debt. Those higher interest rates would then be reflected by certain types of loans — such as mortgages, personal credit lines and student [...]
Recent Conversations