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4 Easy Ways to Build Profitable Portfolios
Tweet Share on Facebook May 6, 2008 Comment (1)Morningstar's guide to building a simple, low-stress portfolio aims to calm anxious investors who seem steps away from overhauling their entire portfolio in reaction to the market's recent swings. (Making dramatic adjustments based on short-term news is never a good idea.)
But Morningstar's suggested portfolios work for starting-out investors, too. Analyst Andrew Gunter assumes investors have time horizons at least 10 years out and are willing to ride out the ups and downs of the stock market. For the sake of picking bond funds, he also assumes investors are holding their portfolio in a tax-deferred account, such as an IRA or 401(k).
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5 Ways to Invest That Stimulus Check
Tweet Share on Facebook May 5, 2008 Comment (2)Still wondering what to do with your $600 windfall? If you've already got a nice savings cushion going, consider kick-starting a portfolio (or adding to an existing one). Here are five mutual funds that require small initial investments:
Pax World Balanced ($250 minimum): Pax, the granddaddy of socially screened mutual funds, avoids companies that derive significant revenue from weapons, gambling, or tobacco and favors those with good track records on issues such as the environment. In one dose, Pax World Balanced offers a diversified portfolio that contains stocks (both foreign and domestic), bonds, and a little cash. The fund, which has gained an average of 7 percent per year over the past decade, charges 0.96 percent in annual fees.
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What-If Investments
Tweet Share on Facebook May 5, 2008 CommentNew York magazine asks, "What if you'd had $100,000 to spend in 1998?" According to the magazine, if you'd bought 3,298 shares of Apple stock in 1998 (at $30.32 per share, an investment of $99,995), it would now be worth just shy of $2 million.
Sounds great, huh? Now consider this: If you had bought 1,500 shares of an early social-networking site, theglobe.com, in 1998—which, at $63.50 per share means a $95,250 investment, it would be worth just $30 today.
This is a fun game. New York also applies it to gold (you would have been disappointed for a while, but eventually your $100,000 would have tripled), the domain name consumers.com (it would now be worth $250,000, according to SwiftAppraisal.com), and cases of 1998 Dom Pérignon (64 cases at $1,559 a case would now be worth $115,136).
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Must-Read Books for Novice Investors
Tweet Share on Facebook May 5, 2008 Comment (18)As part of our recent package on 20-somethings and personal finance, I wrote a guide to building a portfolio on the cheap. One of the story's subjects—Jason Barnette, who began investing in stocks after he graduated from college in 2004—told me his investing philosophy was shaped by Peter Lynch's book One Up on Wall Street: How to Use What You Already Know to Make Money in the Market.
Which got me thinking: What are the best books for starting-out investors? Morningstar recently posted a "Beginning Investor's Reading List," which included the following:
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Future Fortune 500 Bigwigs
Tweet Share on Facebook May 5, 2008 CommentCheck out Fortune magazine's "Faces of the Future," a list of 20-something up-and-comers working for Fortune 500 companies. They include Suzanne Murphy, a 25-year-old Chevron engineer working on an offshore drill in the Gulf of Mexico, and Zaheen Mir, who—at 26 years old—is a vice president in structured credit at JPMorgan Investment Bank! Here are excerpts from my recent interview with another up-and-comer: 29-year-old fund manager Connor Browne.
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Why Stocks Are Up When the Economy Is Down
Tweet Share on Facebook May 5, 2008 CommentHome sales are down, economists' forecasts are pessimistic, and consumer confidence is the lowest since 1982. So why are stocks going up?
Strange as it may sound, says Kevin Depew of Minyanville, "the economy and the stock market are two different things. That's why it is important to consider long-term economic issues within the context of short-term movements in supply and demand."
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A Quarter of Adults Dip Into Retirement Funds
Tweet Share on Facebook May 5, 2008 Comment (1)According to this study, one quarter of adults have prematurely withdrawn money from their retirement fund—such as a 401(k) or individual retirement account. What's more, 45 percent of those surveyed say they either can't pay back the money or have not begun to do so.
The survey results show that most people don't start dipping into retirement savings until age 35, and the most common reasons given were a down payment for a home and either the respondent or a family member losing a job. Not surprisingly, the majority of respondents making early withdrawals earn less than $50,000. Among those under 35, a home down payment was the top reason for making a withdrawal. Other reasons included credit card payments, losing a job, education expenses, mortgage payments, overspending, and paying for an event, such as a wedding.
According to this Wall Street Journal story, the number of workers prematurely tapping their 401(k)'s is growing. It's a dicey idea, and here's why. The basic idea is that if you take the money out now, it can't work its tax-free compounding magic. Check out this calculator for a better idea of how much you stand to lose.
