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Remember the Law of Compound Returns
Tweet Share on Facebook August 18, 2011 CommentWhen the markets get turbulent as they are today, investors get emotional. We want to react. Today is a fear day, but last month there were greed days. On fear days, we react. We wonder, "How much more money can I lose? Should I be getting out?" On greed days, we get excited and after looking at what we "shoulda, woulda, coulda" done, we get anxious and may buy into a rising tide.
But what is the purpose of investing? It sounds like a stupid question, but ask 10 investors, and you'll get a surprising variety of answers. Is there an answer that allows us to conduct ourselves in a rational way that is not influenced by fear and greed?
[In Pictures: 6 Numbers Every Investor Should Follow.]
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How to Evaluate Your Risk Tolerance
Tweet Share on Facebook August 18, 2011 CommentInvesting is such a reactionary event for some people that it becomes second nature to make changes based on the latest news or story told around the water cooler. People believe that's the fastest way to make a buck.
Not that making a buck is a bad thing—quite the contrary.
[In Pictures: 6 Numbers Every Investor Should Follow.]
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How to Control Risk in a Volatile Market
Tweet Share on Facebook August 17, 2011 CommentThe stock market has provided a wild ride over the past several weeks. Fueled by the debt ceiling crisis in the United States and the subsequent downgrade by Standard & Poor's, as well as issues in Europe, volatility is back with a vengeance.
As investors, we can't control the market environment, but here's how to control risk in your portfolio:
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3 Investment Opportunities in this Crazy Market
Tweet Share on Facebook August 17, 2011 Comment (3)The Dow Jones Industrial Average closed more than 400 points away from where it opened for the fourth time in a row on last Thursday, a first-ever event that shows just how crazy this market has become. Given high unemployment and the U.S. government's huge deficit—operating with less than perfect credit, under two parties that can't seem to play nice—it's no wonder the market is falling. This doesn't include the problems in Europe and its surrounding neighbors.
But with all these issues, there are still some great opportunities for the proactive investor:
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5 Points to Remember When the Market is Volatile
Tweet Share on Facebook August 16, 2011 Comment (12)In the last few weeks, the stock market's declines have been remarkable. Fear and uncertainty have taken over, and investors haven't been placing much faith in economic fundamentals. Though no one can accurately predict the future, we're close to a bottom rather than this being the start of a bear market. Here are some things to remember when the market is going crazy:
Outside factors affect the stock market. Ultimately, economic fundamentals drive stock prices. This summer, investors have been worried about the U.S. government defaulting on its debt, along with the ongoing financial problems in the eurozone. Last summer, other events haunted the market, including the the BP oil spill and rioting in Greece.
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5 Topics to Discuss With Your Financial Adviser
Tweet Share on Facebook August 12, 2011 Comment (12)This stinks. There I said it. Feel better? Probably not.
You are probably glued to the tube thinking, "Why didn't I see this coming?" while listening to the "experts" who say, "I saw it coming and said so seven weeks ago." It's probably the same guy that predicted the 10 percent market drop in March 2009, when the market bottomed out after the 2008 meltdown.
[In Pictures: 6 Numbers Every Investor Should Follow.]
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Risk and Perspective: 2 Investing Essentials
Tweet Share on Facebook August 11, 2011 CommentThe financial markets have been on a wild roller coaster ride over the past several trading sessions, and most of the ride has been tilted to the downside.
In periods of extreme volatility, there are two essential elements to investing: The ability to assess risk and the ability to view things with perspective.
Risk assessment entails both assessing the risk of your investment portfolio, and assessing your tolerance for investment risk. In the world of investment advisers there are many measurements of risk, but let's focus on the only one that seems to really matter to investors: the risk of losing money in your investments.
[In Pictures: 6 Numbers Every Investor Should Follow.]
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How to Invest for the Long Run
Tweet Share on Facebook August 11, 2011 CommentWith investing, bright beginnings inevitably turn to tougher times that test our mettle, but success is measured in the long run.
The principled investor buys stocks based on policy-driven portfolio management, not inspiration. With cold-hearted accuracy, these investors know that as soon as they make their purchase, their investment is as likely to go down as up. They don't care. They are thinking about a five, 10-, 20-, even 30-year time horizon.
[In Pictures: 6 Numbers Every Investor Should Follow.]
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What to Do When the Market Tanks
Tweet Share on Facebook August 10, 2011 Comment (4)Wow, what a ride last week. Unfortunately, things are not going to get better any time soon. So, now is the time to have a plan. Here are three things you should do to survive a significant market correction:
Do not panic. Making decisions in the heat of the moment is always a bad idea. Think about the market after 9/11. The Dow Jones Industrial Average decreased by 2,000 points almost immediately, resulting in a significant downturn that lasted about three months. It bounced around for a short period only to return to its pre-9/11 numbers within three months. Therefore, rash decisions can be calamitous when a market is so unpredictable.
[In Pictures: 6 Numbers Every Investor Should Follow.]
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Reverse Mortgages: Not a Retirement Cure-All
Tweet Share on Facebook August 9, 2011 Comment (6)The best way to fund retirement is to start saving early and often. Unfortunately, there are millions of Americans that won't have enough savings to meet everyday expenses in retirement. One method some flock to for financial help is the reverse mortgage. Essentially, a reverse mortgage allows homeowners to turn the equity in their homes into an income stream.
Typically, this option comes with significant costs and is not something normally recommended as a first resort. However, if a reverse mortgage is your only option to make ends meet in retirement, you should be fully aware of the requirements and costs involved.
[In Pictures: 6 Numbers Every Investor Should Follow.]
