How do you usually approach your investing? Do you solely focus on returns without giving due consideration to risk? Or do you put some efforts to figure out your investment objectives, preferences/constraints, and risk tolerance first? Well, if you are concerned with returns only then you are at a much higher risk than you think. Why? Because you may end up with a portfolio that is “stuffed” with high-risk investments and that is not compatible with your personality and goals. A sound investment approach should start with identifying your investment goals, understanding your risk attitude, and drafting a plan. [Read more…] about A Devastating Impact of High Fees on Your Account
Despite small but steady growth for the most part of the week, Friday’s selloff pushed U.S. indices into negative territory. On the week, S&P 500 lost 1% and broke two-week winning streak. Nasdaq 100 and Russell both closed the week in a negative territory, too, losing 1.3% and 1%. Corporate reports were mostly in line with analysts expectations, however, official guidance from some companies pointed out to weaker results in the future, also causing some pressure on stocks. Greece default fears and China tightening control over short-selling and lending to small investors were two main factor that significantly weighed on investors mood on Friday, triggering the selloff. Chinese market regulator attempts to stop emerging of a stock bubble and cool down an overheated market. Macroeconomic data released during the week was mostly in line with forecasts and estimates, except for jobless claims, which rose to 294,000 compared to 280,000 forecast. Conversely, retail sales increased for the first time in three months, +0.9%, and were pretty close to what analysts expected. As for consumer prices, they also rose for the second consecutive month and were in line with analysts expectations. Regarding awaited interest rate hike, Dennis Lockhart, the Atlanta Fed Reserve President in his speech on Thursday mentioned about “notably weak” Q1 data and hinted that the interest rate hike may be postponed.
The VIX Index finished the week higher, rising 10.4% to 13.89. Remaining below 15 signals that investors continue to believe that the market still has some room to go up and the long-awaited correction may be delayed. However, treated as a contrarian indicator, the “fear index” may signal right the opposite, a potential correction in front of us.
Albert Einstein once said “Compound interest is the eighth wonder of the world. He who understands it, earns it … he who doesn’t … pays it.” There is nothing I can add here and as you will see below, it is indeed the eighth wonder of the world.
I assume you have already heard about the power of compounding and probably, not once. Your math teacher or numerous articles in different personal finance magazines have already tried to explain what it is. Yet, many people still remain confused on how it works and how exactly to use it to their advantage. [Read more…] about The Incredible Power of Compounding
What comes to your mind when you hear the name Tony Robbins? Motivational speaker? Check. Peak performance coach? Check. Philanthropist. Check again. But what about a Financial Advisor? Well, not quite yet. When Tony Robbins published his book MONEY Master the Game: 7 Simple Steps to Financial Freedom back in November 2014, I was initially very skeptical about reading it. My thoughts were like this is going to be another book on personal finance and I’ve already read a lot of books on this subject. But shortly after its release, the book started getting some buzz and making so much noise, especially among financial advisers that I simply could not ignore it. [Read more…] about Book Review: MONEY Master the Game: 7 Simple Steps to Financial Freedom
Despite low trading activity and volume, US markets finished this week higher, notching their second consecutive weekly gain. SPX index traded within tight boundaries for the most of the time, rising 1.7% and closing above 2100. The Nasdaq Composite ended the week with a slightly higher increase, 2.2%, remaining less than 1% of its 5,000 mark. On the other side, small-cap stocks as measured by Russell 2000 index lagged from its larger counterparts and closed with a 0.7% gain. Weak ISM Monday data was neutralized by better than expected Thursday Jobless claims and economic data didn’t have a significant effect on the market overall. Investors focus has shifted towards earnings seasons, which officially kicked off on Thursday. Many investor perceive it as the potential growth catalyst. However, earnings growth estimates are not expected to be very good, and this might be a limiting factor for buyers. Until investors see the Q1 results, it is likely that we won’t see equities exposure increase. Additional supportive factor towards growth was the release of the Federal Open Market Committee (FOMC) meeting minutes. Central bank leaders are divided in their consensus when to increase the rate, which will heavily depend on the economic data. NY Fed Dudley gave investors some hint and mentioned the possibility of a rate hike in June.
The VIX index settled at 12.58, at its lowest level for the year, losing 14.25% for the week and 34.5% for the year. The Fear Index at this level assumes investors are confident that there won’t be any negative surprises during the earnings period and market might go up even further. However, if treated as a contrarian indicator, current level might signalize a potential surge in volatility in the near future, as the downside is limited.
This is the third and the final part of Rebalancing series. Previously (here and here), I have checked how often one should rebalance an investment portfolio for a traditional 60% stocks and 40% bonds portfolios as well as for a multi-asset, broadly diversified portfolio. In both cases, annual rebalancing performed better than semi-annual and quarterly.
Today, I am going to analyze a predetermined threshold rebalancing method and summarize which rebalancing method works best [Read more…] about Threshold Rebalancing