Chasing investment returns refers to the activity of switching from a poorly performing (or average performing) investment into one that has an excellent recent return.� There are a few problems with this investment strategy: “Hot” investments don’t usually stay hot.� In fact they usually come crashing back to earth shortly after you buy them. Investments […]
January 2009
Treasury Inflation-Protected Securities (TIPS) are a type of government bond that provides protection against inflation along with twice a year interest payments. How do Treasury Inflation-Protected Securities (TIPS) work? Regular bonds pay interest on the principal amount of the bond which provides income for the bond owner.� TIPS are different in two ways: The principal […]
If you have kids then future educational expenses are something that should be planned for.� One investment tool for educational saving is called the 529 plan.� In this article we are only looking at the 529 savings account (not the pre-paid plan). 529 plans are investment accounts which have tax advantages if used for educational […]
A stock exchange is an institution where the shares of publicly traded companies listed on that� particular exchange are bought and sold between members (or brokers) belonging to the exchange. The biggest stock exchange in the world is the New York Stock Exchange (NYSE) which has a lot of the world�s largest publicly-traded companies such […]
Stock splits occur when a company decides that their stock price has risen to a level where it is getting harder for investors to buy it in small quantities.� Normally a company will replace 1 of its shares with 2 or more new ones (ie 2 for 1 split).� For example if the stock price […]
An annuity is financial contract in which an investor pays a lump sum of money to an insurance company in return for a series of future payments.� These investments also enjoy some tax-deferred benefits. Fixed Annuities This is the more traditional type of annuity – the insurance guarantees a specific interest rate that you will […]
One of the first steps to financial planning is to set financial goals.� Goals are financial targets that you would like to achieve sometime in the future.� You can still improve your finances by saving money and investing carefully without any specific targets but it is a good idea to have a least some general […]
This post is the second post on asset allocation – feel free to read the introductory post on asset allocation to brush up. Non-correlation If you own investments that all go up or down in price at the same time (ie they are correlated), then you will experience large increases and decreases in your portfolio […]
