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shareasimage inheriting volatilty

 

In yesterday’s quote of the week we looked at the findings of numerous studies focusing on the average investors’ underperformance to a stated fund’s annual returns. This underperformance stems from investors trying to time the stock market, attempting to buy and sell multiple times per year in attempt to outperform the general market and chasing returns by buying yesterdays “hot” funds hoping the returns continue. Mr. McNabb, Vanguard’s chairman and CEO, calls this behavior “inheriting volatility”. In this week’s Chart(s) of the Week we are looking at exactly how much investors are hurting themselves over the long run.  [click to continue…]

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quote of the week dollar weighted returns market volatility

This week, we are looking at the effects of volatility on your portfolio. But not in the effect of just how much the value of your portfolio changes – but in how you ACT due to that volatility and how much it hurts your long term performance.

 

Last week, I was reading the annual report for a fund that I own, Vanguard Dividend Appreciation Index Fund (Ticker: VIG), and at the end of the Chairman’s (William McNabb III) letter found this quote:  [click to continue…]

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Investment fees – the bane of every individual investor. Everyone has seen the numbers on how even moderate expense ratios lead to investors losing out on tens of thousands of dollars over the course of their investments. Just yesterday we highlighted a quote from Meb Faber on how just average fees can ruin a successful investment strategy.

 

But these fees seem impossible to avoid for investors looking for any specific concentrations or active forms of management.

 

But for investors in a select number of ETFs and Mutual Funds, there is a simple way to reduce those fees to a level much closer to 0 – Here’s how: [click to continue…]

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ETF.com is out with a really good interview with Meb Faber discussing topics from his new book: Global Asset Allocation: A Survey of the World’s Top Asset Allocation Strategies Topics of the interview include Asset Allocations, the effects of taxes and fees on your investment returns and more.

But what really jumped out to me was his answer to the question:

ETF.com: Would ETFs change that equation if the best-performing portfolio were allocated primarily to low-cost ETFs?

[click to continue…]

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shareasimage - brk 1964 balance sheet

Warren Buffett’s most recent letter to shareholders (http://www.berkshirehathaway.com/letters/2014ltr.pdf) tells an amazing story of buying Berkshire Hathaway.

 

At the time Warren’s investing style, taught by Ben Graham, was to look for “cigar butt” stocks – stocks that were dirt cheap, but provided a “free puff” to investors willing to make the investment. Berkshire certainly could have filled that criteria, here is how Buffett tells the tale: [click to continue…]

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buffett-and-munger

The release of Warren Buffett’s annual letter to shareholders is always a special occasion, but this year’s is extra special. 2015 marks the 50th year that Warren Buffett has owned Berkshire Hathaway, and in celebration Buffett and his vice chairman, Charlie Munger got together to make sure this year’s letter was stuffed with nuggets for investors. So without wasting any more time, here is the best investing advice you will ever get: [click to continue…]

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Welcome 2015! A new year, which means among many other things, a new year to invest in your IRA, ROTH IRA and/or 401(k). Here are the limits for contributions to IRAs, ROTH IRAs and 401(k)s, and how much you need to be saving each month or each paycheck to reach those limits:

2015 ira_401(k) Contribution limits [click to continue…]

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IRA procrastination post image

 

This week on Begin To Invest, we are all about setting up 2015 to be the best year possible. Here’s one thing you can do tomorrow to improve your long term returns: Contribute to your IRA! (Before April of 2016)

 

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Fund Spotlight Series - Investing in Rental Property

 

The concept of owning rental property looks great on the surface. Borrow money to buy a home (or condo, or townhouse), rent out that property to someone else, and have them effectively pay your mortgage while you build up equity in the property and it (hopefully) appreciates in price.

 

Simple right?

 

Unfortunately as many rental property owners will tell you, there can be a fair amount of headaches in the process. Do you do all the work and maintenance, answer the 2 a.m. phone calls and market the property yourself? Or do you give up 10-15% of your rental income to have a property management company do the hard work?

 

Then there is the potential risks. There is a huge potential hidden liability in owning a rental house. When the roof needs work, do you have $5,000 ready to fix it? When the HVAC goes out, can you fork over another $5,000? The number of big ticket items that can break in a house is a bit scary.

 

And with the median home price at about $204,000, investing in rental property without taking out a mortgage is out of reach for most individual investors.

 

But Wall Street has made a much easier, and much less scary way of investing in rental properties. Today we look at one such exchange traded fund: iShares Residential Real Estate ETF – Ticker: REZ. – Then we show you a new, even better way to investing in rental property with Motif Investing. [click to continue…]

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content_motif-logo_newLong time readers know my usual thought on choosing a stock broker – it hardly matters.

Most are almost all the same.

I typically recommend something along the lines of Vanguard or Fidelity, because of the access to commission free, low cost ETFs that those brokers provide.
I have been mostly invested with Vanguard for a few reasons: They provide a ton of lost cost mutual funds and ETFs that account holders can buy commission free, which makes small monthly investment feasible without commission taking huge chunks out. Vanguard also offers dividend reinvestment and partial share ownership for individual stocks and ETFs. Vanguard is still an excellent broker – and I will certainly continue to use them, But…

There is a new player in town which is a game changer for investors, whether you are a stock picker OR pure indexer.

And what’s best? New investors can take advantage of a special offer – up to $150 for those who create a new account today. Offer details are at the bottom of this post!

 

[click to continue…]

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Quote of the Week: Buffett on Black Monday, October 19th 1987 thumbnail

This week marks the anniversary of the 1987 stock market crash, the largest single day percentage drop in history. The Dow Jones Industrial Average dropped 508 points, more than 22% (equivalent to a 3,200 point drop today, with the Dow at about 16,400).

Just how bad was the 1987 crash? If you missed our twitter posts from early this week, here are some screenshots from a few newscasts the night of October 19th, 1987: [click to continue…]

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Weekend Reading – 10/19/14

Weekend Reading – 10/19/14 thumbnail

Here are some articles that caught my attention over the last couple of weeks. Topics include: How to spend $208 billion, why equity investors deserve a higher return, why you should have a beer tonight, and more [click to continue…]

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This week we are looking into the idea of stock market sell offs being a GOOD thing.

Earlier this week we looked at a quote from Jason Zweig from his commentary in Ben Graham’s Intelligent Investor, about a hypothetical financial news channel that would report market crashes as a good thing.

 

But why would anyone actually cheer for market sell offs? Doesn’t anyone who owns stocks want them to go up?

Here is why those of you with decades left to invest should be getting on your knees and praying for cheaper shares. [click to continue…]

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shareasimage - celebrating market crashes

The markets have been dealt a small dose of realism this past week. It turns out markets don’t go straight up all the time.

 

Small Cap Indexes like the Russell 2000 have taken the brunt of the selling and are down about 10% from their highs.

Large cap indexes like the S&P 500 are down about 3% from their record highs.

 

 

This “sell off” has already led to the fear inducing headlines from the financial media, as seen below.

But a lot of smart investors would argue that this is exactly the OPPOSITE reaction you should be having. [click to continue…]

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Recently, Facebook’s market cap has surpassed $200 billion dollars. That got me thinking….

 

What other companies could you buy for $200 billion, and how do those companies compare to Facebook?

 

First, we look at the market caps of a few companies. In other words – how much it would cost to buy the company: [click to continue…]

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Buffett Quote of the Week - Earnings consistency

 

All of a sudden it is pretty apparent that the stock market has moved a long ways from the recession of 5 years ago.

Today, OpenTable, with a net income of $33 million is being purchased by Priceline for $2.6 billion. Facebook, is now worth nearly $200 billion, twice the value of McDonalds despite having just one fourth of McDonald’s profits. And Tesla Motors is worth $33 billion – exactly half the value of Ford, despite selling just 22,400 cars in 2013. (To put that in perspective, that is how many F-150 pick up trucks ford sells in about 2 weeks, and is less than 1% of the total number of vehicles that ford sold in 2013).

 

Investors have one thing in mind when paying these exceedingly high prices – The prospects of future growth.

 

Neither of the companies mentioned above have the fundamentals to back up their sky high valuations, but that doesn’t seem to be stopping investors from dreaming.

 

The potential money to be made “finding the next google” will always blur an investor’s vision.  Dreams of money to be made are like the beer goggles of the investment world – Investors immediately begin to make assumptions and ignore obvious risks for a chance to get lucky.

 

 

But, one day these investors will wake up and ask themselves “What the hell did I invest in?” [click to continue…]

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Weekend Reading 9-7-14

Weekend Reading 9-7-14 thumbnail

A month of 80 hour weeks at my real job has made posts on here non-existent. Work remains busy, but hopefully here is to getting back on track.

 

Lots of amazing posts and research over the past month, here are some of my top reads. Topics include: Determining how long this bull market can last, Asset Allocation and solid blogs to add to your reading list. [click to continue…]

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Bankrate.com is out this afternoon with results of their monthly financial survey. One of the questions Bankrate asks is: “What is your preferred method of investing money that you don’t need for at least 10 years.” [click to continue…]

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We have heard a ton on the importance of low cost mutual funds and ETFs recently. Here is part of a speech from Jack Bogle, where he reveals exactly just how much investors pay in expense ratio fees. (His answer will surprise you) [click to continue…]

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Weekend Reading: 5 Big Retirement Concerns, Failure of the Finance Industry and a (late) Summer Reading List thumbnail

Here are some articles that caught my attention this past week. Topics include: How the finance industry is failing you, 6 books Bill Gates wants you to read and what the market’s P/E ratio wont tell you. [click to continue…]

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