Why You Need to Own Bonds

When one thinks about portfolio diversification, bonds, in addition to US and International equities should be evaluated.

An investor may be tempted to overlook bonds altogether given that investing in equities tends to lead to higher overall returns. So why include bonds in your investment portfolio? The answer lies in reducing the volatility of your portfolio, providing for short-term cash needs and helping you sleep better at night.

The purpose of allocating a portion on your portfolio to bonds is to reduce overall volatility. There is risk in allocating a large portion of your portfolio towards equities when markets are at high levels. By including bonds in your asset allocation, your overall portfolio risk is reduced given that bonds are not as highly correlated with equity returns and tend to act as a diversifier during market downturns. Additionally, by allocating a portion of your portfolio to bonds, this allow you to have funds in your portfolio available when stock prices are more attractive to increase your stock allocation.

Finally, high quality bonds offer investors something of an emotional hedge against poor behavior. Not every investor is willing or able to have their entire portfolio in the stock market. There’s no use in trying to implement a risky portfolio strategy if periods of poor performance are going to cause you to not stick with it. Bonds can help by providing stability in the event of a stock market sell-off.

Even if bonds were to fall in a down stock market, it wouldn’t be nearly as severe. In this respect, bonds can act as a source of funds for either rebalancing into stocks at lower prices or for selling for cash flow needs. Ultimately, they provide the stability investors crave […]

Fake news! Some investment research is a sham

When you read an article on an investment research website, be aware that the article may not be objective and independent.  For example, the writer may have been paid directly or indirectly by a company to promote that company’s stock.  In some cases, the writer may not disclose compensation received or may go so far as to claim falsely that compensation was not received.  Keep in mind that fraudsters may generate articles promoting a company’s stock to drive up the stock price and to profit at your expense.

Stock promotion schemes also may be conducted through social media, investment newsletters, online advertisements, email, Internet chat rooms, direct mail, newspapers, magazines, television, and radio.  Be wary if you receive communications (including new posts, tweets, text messages, or emails) promoting a stock from someone you do not know, even if the sender appears connected to someone you know.  If a company’s stock is promoted more heavily than its products or services, this may be a red flag of investment fraud.

Microcap stocks, some of which are penny stocks and/or nanocap stocks, may be particularly susceptible to stock promotion schemes and other forms of market manipulation.

Even if articles on an investment research website appear to be an unbiased source of information or provide commentary on multiple stocks, they may be part of an undisclosed paid stock promotion.  Never make an investment based solely on information published on an investment research website.  Before investing in a particular stock, research the company thoroughly and make sure you understand its business.  As with any investment decision, carefully review all of the materials available to you and if possible, verify what you are told about the investment.

Source:  Securities & Exchange Commission

7 money decisions you could regret forever

Some financial missteps — paying a bill late or splurging on an unnecessary new accessory — can be swept under the rug.

Others will haunt you.

You don’t want to get to your golden years and realize you never got to see the world. Or worse, that you don’t have enough cash in the bank to sustain your retirement.

While it’s important to tune your financial decisions to your individual goals, here are seven money mistakes that you could end up regretting for life.

Not saving for retirement

The No. 1 financial regret Americans share is not saving enough for retirement, according to a 2016 survey by Bankrate. Eighteen percent of all survey respondents said that they regret not putting money away for later, with a full 27 percent of respondents over 65 citing it as their biggest regret.

Not only will you begin to feel more pressured and unprepared the older you get, but by waiting to pad your retirement savings accounts, you’re missing out on the power of compound interest.If you aren’t already taking advantage of your employer’s 401(k) plan, sign up. Financial experts typically recommend contributing at least 10 percent of your salary, but start with however much you can.If you don’t have a retirement savings plan at work, you can contribute to other tax-advantaged accounts designed specifically for retirement, such as a traditional IRA, Roth IRA or myRA.

And if you’re already using a retirement savings plan, spend a few minutes setting it to auto-increase by a certain percentage every year. That way, you’ll eventually work your way up to 10 percent and barely notice.

Buying a house you don’t need

While buying a home can be a good investment, it’s not right for everyone. It’s a huge financial undertaking and should reflect your future plans as […]

Here’s how much the average family in their 50s has saved for retirement

By age 50, your golden years are just around the corner.

To be financially ready to retire by 67, retirement-plan provider Fidelity Investments says you should aim to have eight times your salary saved by age 60.

Are Americans on track?

According to a report from the Economic Policy Institute (EPI), many Americans have some catching up to do. The mean retirement savings of a family between 50 and 55 years old is $124,831. For families with members between 56 and 61, the mean retirement savings is $163,577.

But those numbers aren’t representative of the state of American retirement. Since so many families have zero savings and since super-savers can pull up the average, the median savings, or those at the 50th percentile, may be a better gauge than the mean.

The median for families between 50 and 55 is only $8,000. For families between 56 and 61, it’s $17,000.

Source:  CNBC

How Well Do Stocks Hold Up In Geopolitical Crises?

Headlines like the growing conflict with North Korea, a renewed Cold War with Russia and the chance that France will elect a right-wing nationalist as president have many investors on edge.

In such times, it’s worth asking: do I need to take sizable steps to protect my portfolio in the event that things truly get out of hand?

But unless your personal fear index is skyrocketing, the likely answer, based on history, is no.

When it comes to major events like war, terrorism and even presidential assassinations, stock markets have proven to be remarkably resilient, assuming of course that these events don’t led to a massive hit to the economy.

In fact, stocks have held up well even when the U.S. and many other countries were arguably in bigger trouble than they are now.

In a piece written for Bloomberg View, financial writer Ben Carlson writes that from the start of World War I in 1914 until it ended in late 1918, the Dow Jones Industrial Average was up more than 43% in total, or around 8.7 percent annually.

The Dow rose almost 10% in the first day of trading after Germany invaded Poland on Sept. 1, 1939, writes Carlson, the director of institutional research with Ritholtz Asset Management. “When the attack on the U.S. naval base at Pearl Harbor occurred in early December 1941, stocks opened up the following Monday down 2.9%, but it only took a month to regain those losses,” adds Carlson.” From the start of World War II in 1939 until it ended in late 1945, the Dow was up a total of 50%, more than 7% per year.”

He also points out that stocks gained value during the Korean War and the Vietnam War.

Most of us remember […]

An Antidote to Market Worry?

I read an interesting comment Coach Frank Martin made to his University of South Carolina basketball team after losing a couple games towards the end of the regular season. He told them, “adversity is part of the deal”. Indeed, that is so in every aspect of life. If the stock market goes down a few days in a row, that’s part of the deal. It should be expected, anticipated, and embraced. Coach Martin’s team used adversity as fuel for the most exciting postseason run in the history of Gamecock basketball. The very same lessons can be translated into your approach towards investing.
If you pay any attention to the financial media noise on a day-to-day basis, you are left with the impression that markets should only go in one direction and that it is “news” when they don’t.
Of course, that is objectively untrue and even the expectation of markets only moving higher can easily become a problem. Investors worry about the markets; they worry about their futures and the markets.
What if there was an antidote to this needless worry about the markets? In medicine, an antidote is administered to stop the harmful effects of a poison. 
Within the context of financial planning and investing, worry can lead you to react to something you heard or read in the media. Assuming that your purpose for investing is something years into the future, why should you care if the market goes down today? Plainly put, the financial media is in the business of filling space/time and sensationalizing even mundane market events. Their best interest may not be your best interest. The media can easily poison your plans and your perspective.
The antidote to worry is doing, taking action.
That is, taking […]