Investing

Stock Market Reality Check and When To Panic

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10 years invested in SP500

I’ve written a few articles recently about the start of the year stock market freak out and about not panicking when the stock market makes sudden moves. In response I’ve heard from people about if there ever is a time to panic, and if there isn’t, if there is ever a right time to sell. The problem is that there is some knowledge missing from these questions. So, here is a reality check on the current stock market situation, and some advice on when to panic and when to sell your stocks. Long-Term Diversified Portfolio Let’s start from the beginning. There are a lot of different kinds of investing. When people forget this fact, it often causes them to make incorrect decisions. Remember, every decision you make should be consistent with your investing strategy and financial plan. So, for those of you investing for the long-term, particularly for retirement, with a decade or more to go, your reactions should be very different from someone who is investing for other reasons, or for a shorter time frame. As a long-term retirement investor, your strategy should be to construct a well diversified portfolio that matches your return needs with your risk tolerance. …

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Market Volatility Continues as Beginning of 2016

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Market Volatility Continues as Beginning of 2016 1

I’ve written a few articles now about the volatility in the U.S. stock market, especially as it pertains to reacting to China’s stock market (and the time before that too). A few years ago, the trouble was Greece, if you can remember that far back. Sometimes, it seems like last month is ancient history to market watchers. I’ve also written about how overreacting to bad news isn’t wise, but, what is really going on with the stock market, and what should real investors think? America vs The World Stock Market First, it is important to notice the difference between the American stock market reacting to news about the U.S. and the American economy, and reacting to the news and stock markets of other economies. While world economies are more intertwined than ever, the circumstances in China are not the same as they are here. While the Chinese economy is stuck in a tricky place thanks to ongoing government intervention, and rising debt loads, the U.S. economy actually could probably use a bit of government help. The markets don’t like uncertainty, though, and a lot of what you are seeing in the stock market today, and other days, is nothing more than …

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Lower Investment Costs on ETFs

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There are many different ways to successfully invest for the long-term. One such strategy is indexing. The idea of index investing is that over time very few, or maybe even none, of the various mutual funds out there, nor any portfolio you make yourself, beats the returns of the index anyways, especially after expenses. Therefore, you may as well just invest in the indexes themselves. Of course, there is no way to directly invest in an index. To do so, you basically have two choices, index funds, or index-based Exchange Traded Funds, or ETFs. (Theoretically, with enough time and money, you could create your own portfolio to mimic an index, but this is often impractical.) When doing index investing, it is important to keep the expenses, or fees, of your investments as low as possible. After all, you aren’t paying for research or in-depth analysis, since the indexes already exist. Index Investing and Expenses Exchange Traded Funds, trade on the stock exchange, just like their name suggests. That means you buy them just like you do a stock, by putting in an order. For most investors, that purchase (and any subsequent sales) involves a commission, that’s part of your expenses. The …

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Square IPO Not Worth $6 Billion?

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square ipo logo

Sometimes, the “I told you so,” moments just take too long to happen. They do, eventually, but by then, either people don’t remember, or they aren’t around any longer. I still remember people refusing to sell the Qwest stock in their 401k in order to diversify because it was, “the best investment I have,” and then seeing the stomach churning drop that must have wiped out 50 percent or more of their retirement money. Then, of course, were all the people sitting smugly across from me saying that “real estate never really goes down,” as they talked about pooling money with family to buy a house in Phoenix. Square Not Worth $6 Billion in IPO? For years, people have been saying that the venture capital market and the various valuations given to technology companies before they go public are maybe a bit unrealistic. Of course, something always seems to come along and save the two Simpson children, as they say. (Well… as I say, anyway.) Tumblr was reportedly running out of money fast, but Yahoo swooped in and paid them a billion dollars anyway. Instagram got a billion from Facebook. And, so on. Today, maybe, indicates the first I told …

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Tech Earnings, The Economy and Stocks

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Well, this is an interesting week for investing and stocks. Many technology companies are releasing earnings this week. These companies are not more, nor less, important than other companies, but many of them have become both household names, and some of the most commonly owned household stocks. That makes the earnings more interesting to a lot of Main Street investors. Due up for earnings reports today was Twitter, which recently welcomed back former CEO Jack Dorsey, who is also still the CEO of his startup company, Square, presumably at least until he can finish taking it public. (Dorsey can then claim victory and a “big exit” for Square, which is a bigger thing than you might think in Silicon Valley.) Twitter stock is down 10 percent as I write this because things are just as bad as everyone thought. Google, now Alphabet, reported good earnings and its share prices have been climbing, same with Amazon. Microsoft is up, Yahoo is down. And so on. The big news today, was Apple stock which beat estimates thanks to growth in China, among other things. That will be business as usual for the markets, which is good news. There could have been a …

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Investing in Municipal Bonds Now

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Is now a good time to be investing in municipal bonds? Also known as muni bonds, municipal bonds are bonds issued by state and local governments. Typically, these bonds are used to finance government operations or capital investments for various local and state government agencies. Like corporate bonds, muni bonds pay interest and return your principal at the end of the bond’s term. Should You Invest in Municipal Bonds Now? Municipal bonds are a great investment opportunity that goes largely unnoticed by most non-professional investors. Muni bonds are safer than stocks over a long period of time and can offer significant tax advantages. When investors do take advantage of investing in muni bonds, it is often via muni bond funds which offers a very different investment experience than investing directly in actual muni bonds. So, is now a good time to invest in munis? Like all bonds, the price of muni bonds moves in the opposite direction of interest rates. That is if interest rates rise, bond prices fall. The Federal Reserve’s benchmark interest rate is currently at zero, which means that the part of bond pricing that is attributable to interest rates can only go down. In essence, bond …

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Investor Types

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Often, when I write about stock market news, or other economic events, I conclude by reminding long-term investors that there is no need to overreact (or really react at all) to the current short-term events. It was brought to my attention that not everyone is a long-term investor. That’s not true, but what is true is that not everyone is solely a long-term investor. And, that being the case, perhaps it is worth me addressing other investing types and issues, here on Finance Gourmet. That sounds fair, but in order to do so, I think I need to start with the different types of investors. Different Types of Investors Long-Term Investors The most common type of investor is the long-term investor. Everyone with a 401k or an IRA falls into this category. The goal of this investor should be to construct a well diversified portfolio and then review and rebalance it regularly. The strength of this type of investor is that over time, this is a sound approach that has never failed. The weakness of this type of investor is forgetting the strength and reacting inappropriately to short-term events. This category could be broken into two sub-types, those who are only investing …

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China and the Stock Market

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China! Aggghhhh! Everyone panic. (And China panic again…) The Chinese stock marketing is crashing, and it’s making everyone nervous. As always, long-term investors with diversified portfolios need do nothing other than sit back and watch. I, for one, like following along the headlines. You know, the ones that swing violently from doom, to fine, and back again. What Is Happening In China? Once upon a time, China was a communist country without much of an economy to speak of. Then, the government decided it wanted to be a big world economy, and in China, what the government wants, the government gets. The Chinese government devoted billions and billions of dollars to building up new cities filled with factories, and then spent even more money subsidizing those endeavors until, everything was made in China. With a new power economy, China also decided to get the other “regular” economy things like banks, lending and even a stock market. Fast forward a few years, and the Chinese stock market has been roaring along. Then, earlier this summer, the Chinese stock market started to drop. The government stepped in and put a stop to it. Unfortunately, real stock markets eventually end up doing what they want …

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Windows 10 and Microsoft’s Earnings

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I don’t usually do a lot of analysis of company moves. I just don’t have the time, and often don’t have the insight. But, as a freelance technology writer, I spend a lot of time looking at technology and technology companies. Microsoft is rolling out its new operating system called Windows 10, and it has some interesting marketing and PR behind it. Free Windows 10 Upgrade The first interesting thing about Windows 10 is that it is free. Well…. kind of… and sort of. If you already own Windows 7  or Windows 8, Microsoft will allow you to upgrade to Windows 10 for free, for up to one year. That is, you have one year from now to upgrade to Windows 10 and get it for free. Free? How does this make sense for a publicly traded, profit motivated company? The first thing to understand is that most customers don’t actually upgrade their operating system when new operating systems come out. For retail customers (that is, people who have their own computers that they use and set up themselves) the process of upgrading an operating system is complicated, and unnecessary. After all, if your computer works now, why bother doing …

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Tech Earnings and Stock Market Moves

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The U.S. stock market is composed of thousands of stocks. Of course, when it comes to moving the overall market, some stocks matter more than others. The biggest stocks, those in the S&P 500, and those in the Fortune 500, have some of the biggest impacts on the overall stock indexes. However, in most cases, the news that comes out of those companies is relatively expected. The exception to this rule are the technology companies. Unlike, say oil companies, or big manufacturing companies, it isn’t always easy to use the economic information surrounding them to accurately predict what will happen, especially when it comes to earnings reports. And, with those same companies forgoing the usual “guidance” that other companies provide, what happens in tech company earnings can be a true market moving surprise. This week saw a negative report from industry titan IBM. IBM is not only a household name technology company, but it is also the second highest weighted component in the Dow Jones Industrial Average, commonly referred to as The Dow. The company itself is down over 5 percent so far today, and the Dow is down over 1 percent, or more than 150 points. (Also dragging on …

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