How to Manage Risk Now

Many investors have skewed ideas about risk. Even after 2013’s stock market run-up, they fear losing money more than they wish to make more. That could be a mistake. What’s the best way to handle risk?

Investment advisors and financial planners are getting more and more statements of this ilk: “I would like to invest to make more money but I don’t want to take a risk.” Or: “I want an investment more rewarding than a bank account but I want it to be safe.”

Bonds and Higher Rates

So where is the big, long-anticipated yield hike in the benchmark 10-year Treasury? It has yet to materialize. The outlook for bonds is that huge swings in their value are unlikely, regardless of what happens to interest rates.

How Smart Is Smart Beta?

New alternatives to conventional exchange-traded funds and mutual funds, which are weighted by their market value, have gotten a lot of attention lately. But are these so-called smart beta products any better? Maybe, maybe not. Here are a few caveats.

ETF Price Wars: A Good Thing?

The ETF price wars are heating up. This is good for investors in that it acts to keep fees down for exchange-traded funds. But simply because an ETF has a very low cost is not a sufficient reason for you to buy it.

Fidelity late last month fired the latest salvo in the ongoing price wars with the introduction of a number low cost sector ETFs. Charles Schwab, TD Ameritrade, Blackrock, Vanguard and others also participate in this price war in one form or another over the past couple of years.

Invest Actively or Passively?

One investing style seems all on-the-edge flash. The other is slow and steady. Both can win the stock market race, but history shows one wins a lot more often than the other. Here are ways to decide which is right for you.

Picture two cars driving down a three-lane highway. A red sports car darts between all three lanes trying to find the fastest possible way ahead. A gray sedan in the right lane steadily goes the speed limit. Suddenly a train whistle sounds and in the distance the barrier arm of the railroad crossing comes down.

The Case for ETFs

Exchange-traded funds (ETFs) are increasingly popular. Aside from their generally low costs and liquidity – these baskets of securities trade on exchanges throughout the day – ETFs typically have the advantage of specialization: They allow you to target particular segments of investing.

Stock Picking vs. Diversification

At the beginning of every season, sportscasters often forecast who will triumph. They usually are wrong. Stock pickers are no better. With stocks, though, you can back a whole bunch of teams at once. That’s called diversification, and it has a pretty good record.

The professional talking heads on radio and television base their team predictions on evidence, but they are ultimately just guesses.  Their often-misguided guesses do not cost them anything. Rarely is a sportscaster fired for a false World Series prophecy.

5 Downsides to ETFs

Exchange-traded funds are the hot investment choice nowadays. But before you buy, know that these vehicles have downsides, too.

Mutual Funds or ETFs?

A lot of people use the terms mutual fund and exchange-traded fund interchangeably. While similar in many respects, these two investment vehicles have key differences. Mutual funds, particular those low costs ones following indexes, tend to be ideally suited for long-term, “evidenced-based”, asset allocation oriented investors. ETFs, on the other hand, are able to be traded intra-day, tend to be cheaper than active mutual funds and have the potential to be more tax-efficient if utilized in an active management context.

5 Lessons at Mid-Year

The first half of 2013 is in the books, so now is a good time to review your portfolio.  Keep these five investing lessons learned (and relearned) from the first half in mind.

It’s been a good year in terms of the domestic stock market; other areas of the markets were mixed.  The second quarter saw declines in most fixed-income categories, real estate and in many international stock segments, including emerging markets.  Commodities and precious metals also suffered setbacks of late. 


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