Market volatility is back. Just as you started to hope that stock values only ever move in one direction (up), the pendulum swung the other way. Your probable response: anxiety. Acting on that emotion, though, can do you and your portfolio more harm than good.
Bad driving conditions often produce wrecks, but not every car on the road crashes in a snowstorm. With the exception of chronic worriers, most of us don’t ponder terrible events that could potentially happen. Such forethought, though, is precisely what risk management for your money involves – unexciting, yet vital for investing success.
We pass many lessons on to our kids, from teaching them how to ride a bike to helping them deal with pressures at school. Yet we rarely discuss one of the best bits of lifelong wisdom: the importance of investing early and often.
Do you invest in mutual fund that lost money, yet still get a 1099 tax form that says you made capital gains? And your tax preparer claims you owe taxes on those gains? What gives?
For the past three months, the Standard & Poor’s 500 has churned sideways. Is that a bad portent? Not at all. The outlook is for higher prices, if you look at three indicators: the relationship between inflation and market value (known as the Rule of 20), the S&P 500’s earnings/price yield and energetic merger activity.
The question of how we array our investments is vital to our future financial well-being. Key to this is knowing the different between asset allocation and diversification.
The link between economic freedom and prosperity is a well-documented reality. This means that, when diversifying your portfolio with foreign holdings, you should look to the world’s freest economies.
You’ve probably heard in the news that the dollar is stronger. But how much? A handy index tells you. If your business is involved in imports or exports, or if you invest in foreign securities or international mutual funds, it pays to know how to work with this index.
Market turbulence, as the January downturn shows, tempts impatient investors to do foolish things. Trouble is, too many of us are hard-wired to opt for instant gratification and forsake long-term strategies – as the famous marshmallow experiment shows.
A conventional piece of investing advice is to put most of your money into broad market index funds, like the one tracking the Standard & Poor’s 500. But few people invest solely in the S&P 500 or solely in U.S. stocks.