As we covered in our last piece, indexes have their uses. If you’ve got an investment strategy that’s designed to capture that market, you can see how your strategy is doing in comparison … again, roughly. You can also invest in an index fund that tracks an index that tracks that market. This may help explain why everyone seems to be forever watching, analyzing and talking about the most popular indexes and their every move. But you may still have questions about what they are and how they really work.
Since nearly every media outlet on the planet reported the news, you probably already know that the Dow Jones Industrial Average topped 20,000 for the first time on January 25, 2017. But when a popular index like the Dow is on a tear, up or down, what does it really mean to you and your investments?
By themselves, new all-time highs in equity markets have historically not been useful predictors of future returns. While positive realized returns are never guaranteed, equity investments have positive expected returns regardless of index levels or prior short-term market returns.
In the recent period following the US presidential election, US small company stocks experienced higher returns than US large company stocks. This column looks at these returns relative the historical small cap premium and discusses the importance maintaining constant exposure to the dimensions of higher expected returns.
A sound retirement income plan takes into account several financial risks, including the potential for the retiree to outlive his or her assets, the effects of inflation on future income, rising health care costs, and the uncertain future of the Social Security system. The overall objective of planning should be to create a sustainable stream of income that also has the potential to increase over time.
So much of investing is beyond our control (picking stock prices, timing market movements and so on), it’s nice to know that there are still a number of “power tools” we can employ to potentially enhance your bottom line. Tax-loss harvesting is one such instrument … although the analogy holds true in a couple of other ways: It’s best used skillfully, and only when it is the right tool for the task.
Wall Street’s product pushers have figured out a way to swipe the name from this traditional household workhorse and turn it into a monster money-maker … for themselves, that is. We’re talking about “structured” or “market-linked” CDs. The name may seem familiar, but the rules of engagement are quite a bit different.
With school back in session in most of the country, many parents are likely thinking about how best to prepare for their children’s future college expenses. Now is a good time to sharpen one’s pencil for a few important lessons before heading back into the investing classroom to tackle the issue.
It’s no surprise that this year’s U.S. presidential race has become a subject of conversation around the globe. So go ahead and talk politics all you please – and if you are an American, be sure to vote. But when it comes to your investments, it’s best to ignore any intense emotions and the dire or ebullient predictions that spring from them, as dangerous distractions to your financial resolve.