TIPS – Treasury Inflation-Protected Securities

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 […]

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529 College Savings Plans

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 […]

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Stock Exchanges

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 […]

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Stock Splits

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 […]

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Annuities – Fixed and Variable

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 […]

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Setting Financial Planning Goals

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 […]

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Asset Allocation II – Reasons For Owning Different Asset Classes

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 […]

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Dollar Cost Averaging (DCA)

Dollar cost averaging refers to making investment purchases at regular intervals of time.� The purpose is to average out the price (cost) of the investment by buying investment shares at different prices over time.� This strategy reduces the risk of making a large lump sum investment and then watching the market fall shortly after, which […]

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Index Funds vs ETFs

One question that often comes up when deciding on how to invest is the choice of investment vehicles.� If you want to buy low cost investments then index funds and exchange traded funds (ETFs) are the best choices. Most investors are better off with index funds for a number of reasons – however it really […]

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Management Expense Ratio (or MER)

If you own a mutual fund, index fund or exchange traded fund (ETF) then you pay a fee called the management expense ratio (MER) or “expense ratio”.� This money goes to pay for the cost of running the fund.� It’s important to note that this fee is not directly charged to the investor but rather […]

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Portfolio Rebalancing

An important part of investing is to occasionally rebalance your investment portfolio.� In a previous post we talked about portfolio asset allocation.� Your portfolio will be made up of different asset classes such as stocks, bonds, cash etc and the amount of each is your asset allocation. Portfolio rebalancing is accomplished by occasionally resetting the […]

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Dividends – Cash or Reinvest?

Many investments can pay dividends – stocks, mutual funds, index funds, exchange traded funds to name a few.� Owners of these investments have to make a choice as to what will happen to the dividends.� Dividends can be taken in cash or reinvested. Cash dividend option Dividends can be taken in cash which leads to […]

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Market Capitalization

Does a �market cap� sound like fashion wear to you?� If so, then make sure you read this post to the very end! Market capitalization or �Market cap� refers to the total market value of all the publicly traded shares of that company.� Basically you take the number of shares available for a company, multiply […]

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Exchange Traded Funds (ETFs)

An exchange traded fund or ETF is an investment that contains the same stocks of a stock market index, in the same proportion as the stock index. If you are thinking this sounds a lot like index funds, you would be correct! How ETFs are priced The price of an ETF is determined by the […]

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Interest

Interest payments occur when you lend someone money and they pay back more than they borrowed.� For example, when you deposit money into a high interest savings account, then the bank will give you interest payments for lending them the money.� (Note: interest payments also occur when you borrow money, but then you pay interest […]

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Index Funds

An index fund is a mutual fund that invests in the same stocks that are contained in a stock market index, in the same proportion as the stock index. Imagine a stock index – let’s call it the ABC index – that contains 2 stocks:- American Express and Kraft.� Let’s say that the ABC index […]

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