A chocolate cake. Pasta. A pancake. They're all very different, but they generally involve flour, eggs, and perhaps a liquid. Depending on how much of each ingredient you use, you can get very different outcomes. The same is true of your investments. Balancing a portfolio means combining various types of investments using a recipe that's appropriate for you. Read More
Since 2003, when the top federal income tax rate on qualified dividends was reduced from a maximum of 38.6%, dividends have acquired renewed respect. Favorable tax treatment isn't the only reason, either; the ability of dividends to provide income and potentially help mitigate market volatility is also attractive to investors. As baby boomers approach retirement and begin to focus on income-producing investments, the long-term demand for high-quality, reliable dividends is likely to increase. Read More
Investing with an eye toward promoting social, political, or environmental concerns (or at least not supporting activities you feel are harmful) doesn't mean you have to forgo pursuing a return on your money. Socially responsible investing may allow you to further both your own economic interests and a greater good, in whatever way you define that term. Read More
One of the longest-standing debates in investing is over the relative merits of active portfolio management versus passive management. With an actively managed portfolio, a manager tries to beat the performance of a given benchmark index by using his or her judgment in selecting individual securities and deciding when to buy and sell them. A passively managed portfolio attempts to match that benchmark performance, and in the process, minimize expenses that can reduce an investor's net return. Each camp has strong advocates who argue that the advantages of its approach outweigh those for the opposite side. Read More
There are two fundamental ways that you can profit from owning bonds: from the interest that bonds pay, or from any increase in the bond's price. Many people who invest in bonds because they want a steady stream of income are surprised to learn that bond prices can fluctuate, just as they do with any security traded in the secondary market. Read More
Charitable giving can play an important role in many estate plans. Philanthropy cannot only give you great personal satisfaction, it can also give you a current income tax deduction, let you avoid capital gains tax, and reduce the amount of taxes your estate may owe when you die. There are many ways to give to charity. You can make gifts during your lifetime or at your death. You can make gifts outright or use a trust. You can name a charity as a beneficiary in your will, or designate a charity as a beneficiary of your retirement plan or life insurance policy. Or, if your gift is substantial, you can establish a private foundation, community foundation, or donor-advised fund. Read More
A large holding of a single stock that dominates your portfolio carries unique challenges. On the one hand, it may represent a large portion of your portfolio because it has done well in the past. On the other hand, you may feel you need more diversification. You may have new financial goals that require a shift in strategy; for example, you may hold a growth stock, but now want your assets to produce additional income. Or, your investing focus may simply have shifted from growing your net worth to protecting what you've accumulated. Read More
Figures that show an average return on an investment are only part of the story. They don't tell how that return was achieved. Is the investment a volatile one, with a lot of ups and downs in price or returns that varied dramatically? Or was its performance relatively steady, with prices and returns that were very similar month to month or year after year? Understanding volatility measures can help you evaluate whether a particular investment is suited to your own investing style. Read More
You probably already know you need to monitor your investment portfolio and update it periodically. Even if you've chosen an asset allocation, market forces may quickly begin to tweak it. For example, if stock prices go up, you may eventually find yourself with a greater percentage of stocks in your portfolio than you want. If stock prices go down, you might worry that you won't be able to reach your financial goals. Read More
On August 14, 2019, the Dow Jones Industrial Average plunged 800 points, losing 3% of its value in its biggest drop of the year. The Nasdaq Composite also lost 3%, while the S&P 500 lost 2.9%. The slide started with bad economic news from Germany and China, which triggered a flight to the relative safety of U.S. Treasury securities. High demand briefly pushed the yield on the benchmark 10-year Treasury note below the two-year note for the first time since 2007. Read More
