Modern investment theory supports the idea of asset allocation in building a winning portfolio. Most investors, however, still have a common question: what is asset allocation?
Asset allocation is a careful study of picking investments based on their risk-profile. By combining many different investments into one, all-inclusive allocation strategy, an investor can reduce risks, increase returns, and generate a better annual return relative to the total risk.
Asset Allocation Strategies
So you have some money in the bank and you’re ready to get started in the world of investing? Good for you.
Most people will tell you that their number one regrets were that they didn’t “start early” when it came to saving, investing, and planning for their financial future. This is truer today than ever. As record low interest rates push down investment performance for retirees, many wonder why they didn’t start early.
4 tips for Young Investors
Investing, Mutual Funds, Stocks
We hear plenty about shareholder value. CEOs are tasked to create it, and last week we talked about how activist investors seek to realize it. But what exactly is shareholder value?
Is it just some abstract definition of corporate success?
Is shareholder value just another buzzword for us to digest?
Shareholder Value is a bird in the hand
Much like Mint.com transformed personal finance from boring budgets to beautiful charts and graphs, Bettermint is hoping to make investing exciting again. Using exchange traded funds, the site allows investors to select asset allocation models that fit their retirement and savings goals.
Net interest margin is one of the most basic concepts in all of finance, but it is easily one of the most important. The calculation for net interest margin is, put simply, the earnings on capital minus the cost of the same amount of debt.
When banks go to make a loan of any type—mortgage loans, credit cards, student loans, etc.—banks want to know how much money they’ll make on the loan. They look for their “net interest margin.”
Why Net Interest Margin Matters
Medallion Financial Corp. (TAXI) might not have an exciting name, at least, not until you find out what exactly the Medallion is all about. Medallion Financial Corp (TAXI) makes loans to taxi drivers in metropolitan areas to secure a permit from the local government to operate a taxi service.
In a lot of places, New York especially, the cost of starting a taxi service is as high as $1 million. Yes, just for the right to drive people around the city for money, you’ve got to pony up $1 million. The car, on the other hand, might set you back only $15,000.
Retail stocks are traditionally highly-levered to the general economy; when the consumer is weak, real estate gets pummeled, but when the consumer comes on strong, retail stocks experience a revival.
This past week, one unlikely company reported smashing success.
Even though retail spending has been weaker, especially on the higher-end luxury and mid-to-high priced clothing category, Dilliards reported year-over-year growth in profits of 57%.
Dillard’s Secret to Success
Wall street runs counter-intuitive to everything we’ve ever known. There isn’t much wisdom on Wall Street, save for the fact that Wall Street knows nothing, even when it knows everything.
That’s the difficulty with the modern Wall Street, in the short-term it is as much of a casino as it is a sound investment, but in the long-term, things usually clear up. We don’t know the fair value of a stock, bond, or commodity until well after we have invested, or until news is priced into the market.
When everyone believes it, it stops becoming true
While few investors can pick stocks that beat the market, almost everyone can beat the risk-free returns. In this day and age, with computers scouring the markets with electronic eyes faster than that of humans, it makes a lot of sense to start targeting an ideal asset allocation instead of market-beating returns.
What Asset Allocation Theory Knows
As investors tire of the same old stocks, the same old bonds, and those boring ol’ mutual funds, peer-to-peer lending sites are finding that investors are willing to “get social” when it comes to investing, too. It isn’t all about the dollars and cents—some find that lending to others helps other people and themselves by providing attractive returns on their investment dollars.
Strategies for Peer to Peer Lending Success
In a recent post we uncovered the effects of high gas prices on economic growth, but it is also important to understand everything that the market has priced into oil. We’ll dissect oil’s pricetag, and seek to find what makes investors so bullish on higher prices for oil now and in the future.
The time value of oil
Futures and Commodities
Every day it seems I see a new headline about medical marijuana and the on-going political discussion going on in the United States. While last decade’s battleground was the West Coast, particularly California, the new battleground is right in the center of the country: Colorado. But I want to know how I can get in on this new goldmine with Medical Marijuana stocks.
How the Business Works
The Dow Jones is not a benchmark, though the media and others like to use it as such. The weird thing about this particular average is that you couldn’t easily replicate its returns with a simple buy and hold strategy. Sure, you could buy an exchange-traded fund like the DIA etf, but you cannot recreate the performance of the DJIA like you could the S&P—by purchasing the stocks in equal weights.
What is Price Weighting?
As the world exits from recession and the United States considers remedies to a growing Federal deficit, we’re sure to hear plenty of references to the yield curve for both monetary policy decisions, as well as fiscal policy from the US House and Senate. Now might be a good time to know what the yield curve is; we’ll explain below.
What is the Yield Curve?