emotionalOver the last couple of years, volatility has really become the norm. And it’s gut-check time, it’s a shakeup, it’s an opportunity to check your emotions at the door and change the way you invest. If you’ve been feeling emotional lately (and you’re not alone), it’s an opportunity to drop it. If a swing of a few hundred points in a day is getting to you, then consider doing and thinking about things differently. If you’ve lost your perspective, or perhaps you never even had one, it’s an opportunity to regain it, or formulate one now, finally. And be honest in doing so, above all. Where are your one-sided stock picks and investment choices today? Where are your risky bets on marijuana stocks sitting right now? You have an opportunity right now to stop gambling and embrace passive investing.Continue reading

gold pendulumGold is often touted as a must-have investment for the most intense of risk-mitigation situations, a “when all else fails” hedging instrument. Indeed, pick an ailment: Inflation? Hedge with gold. Economic and political crises? Hedge with gold. Collapse of modern society? Say it with me, folks, “Hedge with gold”. With the global economy as shaky as it is, multiple countries in one crisis or another, and plenty of uncertainty as to what the future holds to go around, gold continues to make the rounds as a necessary holding despite the fact that its value in US dollar terms has been steadily declining over the last four years after reaching a peak in 2011 of almost $1,900 an ounce. In the wake of the Fed’s recent decision to stand pat on interest rates and gold’s subsequent jump today, here are 3 reasons to avoid gold, both as a physical or paper holding, apart from a very small percentage of a well-balanced and diversified passive or lazy investment portfolio:

  • It’s a highly emotional and psychological asset
  • There’s no historical evidence that it hedges well against any risk
  • It has very little practical use

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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

man-96868To many, the markets look expensive right now. If you’ve done a thorough job understanding and describing your investment objectives and your capacity to invest and bear risk, and you have money at the ready, you might be sitting on the sidelines wondering what to do right about now, especially as the markets see-saw. How to make a market entry? Do you wait for a big correction before you purchase anything or do you plow forward? It’s natural to feel hesitant. Nobody enjoys buying into something only to see it decrease in value in short order. It’s a sure way to feel like a sucker. Then again, if you wait for the markets to go down and they don’t, you’ve just shot yourself in the foot and missed out on returns. Instead of attempting to predict or time the markets, enter them with confidence and then rebalance your portfolio as necessary to deal with what comes next, including any potential corrections. Continue reading