Tag Archives: Investments

Vanishing Equities

A recent Wall Street Journal article, citing a study by the Center for Research in Security Prices, tells us something remarkable about the times we are investing in: the number of stocks on the U.S. market has quietly diminished by more than half over the last 20 years.  In November 1997, investors could choose from 7,355 U.S. stocks.  Today, there are fewer than 3,600.

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What Does It Mean When Your Portfolio Is Up 10%?

You receive portfolio performance reports every three months—a form of transparency that financial planning professionals introduced at a time when the typical brokerage statement was impossible to decipher.  But it might surprise you to know that most professionals think there is actually little value to any quarterly performance information, other than to reassure you that you actually do own a diversified portfolio of investments.  It’s very difficult to know if you’re staying abreast of the market, and for most of us, that’s not really relevant anyway.

Why?

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Money in Cyberspace

One of the strangest investment vehicles ever designed is something called the Bitcoin, which is at once an exciting new technology for managing online transactions and an alternative currency to national currencies like the dollar, yen and euro.  Last week, people who owned bitcoins discovered that electronic “coins” worth $1,350 were suddenly worth just under $945.  Around the same time, U.S. regulators rejected an effort to create a bitcoin exchange-traded fund (ETF).

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Investments to Avoid

morningstar

Every year, the Morningstar mutual fund tracking organization releases a list of the worst new ETF investments—and generally, these tend to be trendy new offerings that are designed to catch the eye of investors who are responding to yesterday’s  headlines rather than their long-term economic future.

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Retirement at 75?

images-19Chances are you’ve wondered about the prospects of younger Americans.  Will they enjoy the same economic conditions that their parents lived through?  Will retirement still be an option for them?

The NerdWallet organization recently issued a report which found a few differences between today’s college graduates and those of 20 to 40 years ago.  For one thing, they carry a lot more student loan debt: $35,051 on average.  That means, again on average, that the new graduates will be paying $4,239 a year for ten years before they can properly start saving.  NerdWallet estimates that these higher loan payments could potentially reduce future retirement savings by 32%—an average of $700,000.

In addition, today’s younger generation faces higher rental payments—up 11% since 2012—and having to delay home ownership to a median age 33.  This, too, reduces their ability to squirrel away money for the future.

Finally, millennial investors have apparently been powerfully impacted, psychologically, by the Great Recession.  NerdWallet found studies showing that younger savers keep an average of 40% of their saved money in checking and savings accounts or CDs.  This means they’re missing out on investment returns, which would cost them more than $300,000 in future retirement funds, on average.

Add it all up, and the NerdWallet researchers estimate that today’s college graduate won’t be able to retire at the traditional age 65.  On average, they’ll have to wait until age 75 before work (and an income) is optional.  The site notes that the graduate would have to save 15% of his/her income a year starting at age 23 to bring retirement back down to age 65—which may not be possible due to higher student loan debt and rent, and won’t be anywhere close to possible with a 40% allocation to cash.

About the Author: Bob Veres has been a commentator, author and consultant in the financial services industry for more than 20 years.  Over his 20-year career in the financial services world, Mr. Veres has worked as editor of Financial Planning magazine; as a contributing editor to the Journal of Financial Planning; as a columnist and editor-at-large of Dow Jones Investment Advisor magazine; and as editor of Morningstar’s advisor web site: MorningstarAdvisor.com.

Mr. Veres has been named one of the most influential people in the financial planning profession by Investment Advisor magazine and Financial Planning magazine, was granted the NAPFA Special Achievement Award by the National Association of Personal Financial Advisors, and most recently the Heart of Financial Planning Distinguished Service Award from the Denver-based Financial Planning Association. 

Source:

http://www.nerdwallet.com/blog/2015-grad-retirement-rep

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Forrest’s Great Investment

forrest-gump-imax-geeks-and-cleatsIf you watched the popular Forrest Gump movie, you may have noticed that moment when the perplexed young man opened his brokerage statement and noticed that a big chunk of his shrimp operation profits had been invested in (as he said) some kind of fruit company. He had opened a brokerage statement and comically misinterpreted the iconic Apple computer logo.

The movie was released on July 6, 1994, when Apple Computer stock was trading at 93 cents a share. Recently, a commentator looked at what Mr. Gump would be worth today if he’d held onto his shares through last February, when the column was written and the stock price had climbed to $128.66 a share. The stock split 2 for 1 in June 2000 and again in February 2005, and split 7 for 1 in June 2014, so every $1,000 investment would have grown to $136,894—an increase of 13,589%. A $100,000 investment, which seems more likely (by that point in the movie, Gump had become a millionaire, with his picture on the cover of Fortune) would simply add a couple of zeros to the terminal value.

This may be the most extreme example in history of a single stock rewarding its shareholders over a long holding period. Does it make you wish you had a working time machine?

Source: http://www.quora.com/What-would-1000-of-Apple-Stock-bought-at-the-release-of-the-Forrest-Gump-film-be-worth-today

About the Author: Bob Veres has been a commentator, author and consultant in the financial services industry for more than 20 years.  Over his 20-year career in the financial services world, Mr. Veres has worked as editor of Financial Planning magazine; as a contributing editor to the Journal of Financial Planning; as a columnist and editor-at-large of Dow Jones Investment Advisor magazine; and as editor of Morningstar’s advisor web site: MorningstarAdvisor.com.

Mr. Veres has been named one of the most influential people in the financial planning profession by Investment Advisor magazine and Financial Planning magazine, was granted the NAPFA Special Achievement Award by the National Association of Personal Financial Advisors, and most recently the Heart of Financial Planning Distinguished Service Award from the Denver-based Financial Planning Association. 

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