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Don't Fall in Love With Social Media Stocks
Tweet Share on Facebook July 29, 2011 CommentLove is an intoxicating emotion, especially in the early stages of a relationship. It's so powerful, sometimes uncontrollable, and irresistible. There's no better feeling then being smitten with that special someone!
But what if you're in love with an investment or a sector, and the excitement surrounding the emerging social media industry? Is this a remake of the fatal love attraction of the late 1990's dot-com bubble, in which investors couldn't get enough of anything with an "e" prefix or a ".com" to their name?
[In Pictures: 6 Numbers Every Investor Should Follow.]
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Americans Are More Indebted Than the U.S. Government
Tweet Share on Facebook July 28, 2011 Comment (4)You may remember J. Wellington Wimpy, more commonly known simply as Wimpy, Popeye's beloved friend from the iconic comic strip. Wimpy was soft-spoken and intelligent, but also cowardly, lazy, stingy, and gluttonous. A true scam artist, Wimpy usually finagled his favorite meal, a hamburger, from some unsuspecting patron at the local diner. Wimpy's parsimonious ways included his famous con line, "I'll gladly pay you Tuesday for a hamburger today." Decades later, this character, created in 1932 during the Great Depression, has become a symbol of fiscal irresponsibility.
Today, the United States is facing its own Wimpy-esque moment in the form of the debt ceiling. The free burgers have flowed for sometime now, but the patrons have grown wise to the scam. The pitch of pushing off today's payment until some future Tuesday has become a bit haggard and worn thin for many in America. Simply look to Greece, Portugal, Spain, and others to see what it is like to have one's hamburgers taken away—and the forced diet does not look pretty.
[In Pictures: 6 Numbers Every Investor Should Follow.]
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6 Reasons You Need an Asset Allocation Strategy
Tweet Share on Facebook July 27, 2011 Comment (2)Your asset allocation strategy represents decisions about how much of your portfolio to allocate to various investment categories, such as stocks, bonds, cash, and other alternatives. Ideally, this strategy is an outgrowth of your financial plan. Some of the advantages of an asset allocation strategy include:
Providing a disciplined approach to diversification. An asset allocation strategy is another name for diversification, an important strategy for reducing portfolio risk. Since different investments are affected differently by economic events and market factors, owning different types of investments helps reduce the chance that your portfolio will be adversely affected by a particular risk type.
[In Pictures: 6 Numbers Every Investor Should Follow.]
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How the Debt Crisis Could Help Your Financial Situation
Tweet Share on Facebook July 27, 2011 Comment (8)Everyone is upset about the debt crisis and how the government is handling it. And we all should be. But at some point, we need to stop being mad and start looking for the positives that could result from the deadlock. Here are three reasons we may soon be celebrating:
Harsh realities bring clarity. Many people understand that Social Security is in trouble and that we have issues with Medicare and Medicaid. But they did not know the severity of those issues, and the other problems the government faces. They were not aware that Social Security is about to fall off a cliff, and that all the money they put into that system could be for naught. The younger they are, the less—if any—they will get.
[In Pictures: 6 Numbers Every Investor Should Follow.]
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5 401(k) Mistakes to Avoid
Tweet Share on Facebook July 26, 2011 Comment (2)Setting up retirement plan contributions and choosing investments is the first step toward saving for your future. There are, however, mistakes that can derail the best retirement aspirations if investors are not careful. Here are five retirement investing traps to avoid:
Not knowing your personality. When it comes to investing, knowing your personality is the key to maintaining any strategy. Picking investments based solely on what friends, coworkers, or family members are using is not typically a wise idea. Those individuals may have a higher or lower tolerance for investment risk or have different investment goals.
[In Pictures: 6 Numbers Every Investor Should Follow.]
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Why This Debt Crisis Isn't Different
Tweet Share on Facebook July 26, 2011 Comment (9)There are worries in the marketplace, but many of the concerns are not new. One worry is that this time is different and the national debt is going to bankrupt the United States of America.
You've probably heard the saying: "Those who cannot remember history are doomed to repeat it." A recent Motley Fool article, written by Morgan Housel, features old quotes that sound very much like the things we're hearing now.
[In Pictures: 6 Numbers Every Investor Should Follow.]
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Investors: How to Deal With the Debt Ceiling Debacle
Tweet Share on Facebook July 22, 2011 Comment (1)Most investors are watching the debt ceiling debate with uneasy awareness of the risk to global financial stability if a compromise isn't reached in time. But, few investors have a true plan to respond to the possible outcomes of this situation.
In conceptual terms, the problem is simple: The U.S. government has been spending more money than it collects for many years, so we've accumulated a huge national debt. In an effort to control the amount of deficit spending, Congress has passed laws limiting the amount of debt the government can carry. Depending on who you ask, we are projected to exceed the current limit or "ceiling" on August 2. If an agreement to expand this debt ceiling or cut spending is not reached by that time, the government will no longer be able to meet all of its debt obligations.
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Why Most Market Forecasters Get it Wrong
Tweet Share on Facebook July 21, 2011 CommentBe it a football game, the weather, an election, or the future of Middle East uprisings, people want to know what will happen before it does. We want to know the future, and we actively seek out experts who can predict it. But facts show that in most pursuits where dynamic and multiple variables determine what will happen, experts are not good at predicting the future. And to make matters worse, those who predict are rarely held accountable for their prognostications.
Take politics, for example. Philip Tetlock, a psychology professor at the University of Pennsylvania, conducted a study that became a book called Expert Political Judgement. He tracked about 80,000 forecasts from nearly 300 political experts over 20 years regarding political events in many countries. He tracked the outcomes of their forecasts against a group of college undergraduates making subjective predictions and a group who just made random guesses. The experts did slightly better, but not much. Nevertheless, they got on TV frequently and built their names and reputations.
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Study: Most Investors Have No Financial Plan
Tweet Share on Facebook July 20, 2011 CommentRecently, I wrote about why everyone needs a financial plan. However, many Americans still need help envisioning their financial dreams. A study by the Principal Financial Group included feedback from more than 600 financial advisers concerning their client's preparedness for retirement, and indicated that many Americans are still behind when it comes to planning for their retirement.
Here are some interesting takeaways from the study:
[In Pictures: 6 Numbers Every Investor Should Follow.]
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Are ETFs Better Than Mutual Funds?
Tweet Share on Facebook July 20, 2011 Comment (2)I have been asked this question often and by many types of investors. The answer is: It depends, but usually exchange-traded funds (ETFs).
First, let's start with a comparison of mutual funds and ETFs. Mutual funds are pooled investments managed by a mutual fund company with a certain objective in mind. They can be set up to follow an index or they can be actively managed by a manager or management team. Many investors do not realize this, but mutual funds don't actually trade on the market. In other words, they cannot be bought and sold on an exchange. They are actually bought and sold from the mutual fund company directly.
[In Pictures: 6 Numbers Every Investor Should Follow.]
