pile of us dollarsWhy is the US dollar so strong these days, and what is the significance? Well, unless you’ve been reading financial news, traveling, living outside of the United States, or really paying strict attention to the cost of all the imported goods you buy, perhaps you haven’t even realized that the $USD has been on a tear in forex markets. But, I’m guessing a good number of you have noticed or have an inkling at least that the currency these days has been bulking up considerably. What’s going on? Is it a new trainer? Mega amounts of egg protein and creatine? Performance-enhancing drugs? The answer lies somewhere between central bank actions and investor sentiment. Continue reading

Ranakpur Jain Marble Temple Pillars Frescoes

By Acred99 (Own work) [CC BY-SA 3.0 or GFDL], via Wikimedia Commons

You want to invest, and you figure the way to do it is to (somehow) pick the best stock out there and load up. What’s the best stock out there? Right now, some people will tell you it’s Apple, some people will tell you it’s some small company in the marijuana industry, some people will tell you it’s Berkshire Hathaway, and they’ll all have their reasons why. For the sake of our discussion, it doesn’t really matter what that one stock is, let’s just pretend that you have picked your one stock and you’re going to put your money into that stock because you believe your money will be best put to use there. After all, what’s the point of diversification if you’ve picked the best stock out there? It’ll only dampen your returns, right? Well, besides the reality that you can’t predict the future, there are a host of threats your investment continuously faces. Through diversification, you can hedge your risk of investing in that one equity high-flier. Utilizing broad-based, poorly correlated assets in a well-balanced lazy portfolio minimizes your risk to each individual stock, protecting you from the possibility of an outright loss. And rest assured, there’s an immense amount of risk out there to mitigate. Continue reading

water-balance-280810Having read about how rebalancing can help you enter the financial markets with confidence irregardless of what may be around the corner, you may be wondering as to what is meant by the term in the first place. It’s fairly simple. Ideally, you are invested in a well-balanced portfolio comprised of specific allocations to certain investment vehicles that have low intercorrelations. Over your investment time horizon, you seek to maintain those allocations in order to control risk while striving to achieve your investment objectives given your particular investment profile. Continue reading

Venn_0000_0001.svg_The US equity markets have continued to climb steadily since their abysmal lows of early 2009, so much so that it seems to be making some people nervous (then again, some folks are just perpetually nervous and others make money off creating anxiety). Posts abound voicing expectations at the very least of a correction if not a serious downturn soon. Downturn ahead or no, when it comes to investing you should ask yourself a couple of questions before you go diving down the rabbit hole one more time (or for the first time): How well do I know myself? Should I even be investing at all? Before selecting a fund, before determining your asset allocation, before putting even one cent on the table, you owe it to yourself to have a frank conversation with yourself about…well…yourself. Specifically, you owe it to yourself to assess your true risk profile. Getting a handle on this could be one of the most important activities you ever undertake as a current or would-be investor. The bottom line? Taking a risk-attitude questionnaire is not enough. Continue reading

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History & Overview

In one form or another, mutual fund companies have existed in the United States since 1924 with the advent of the Massachusetts Investors Trust managed by Massachusetts Financial Services and later the formation of State Street Investment Corporation (mutual funds as investment vehicles predate these companies). In many ways, the general idea has remained the same ever since – offer small investors, or savers, access to diversified portfolios as a low-risk means of growing financial wealth. Like other financial services vendors, these investment intermediaries match savers with borrowers and provide both parties with risk sharing, liquidity, and reduced information costs. By an Investment Company Institute estimate, mutual funds worldwide accounted for close to $27 trillion USD in investment dollars as of the end of 2012. The industry is significant, needless to say, and these investment vehicles are a lazy strategy favorite. Here we offer a primer on mutual fund companies and funds, complete with a summary of some key judgement metrics. Continue reading