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Probabilities of Stock Investing

I recently saw a study that helped confirm something that I’ve known for many years but just didn’t have the data. It’s the probability that you will lose money on stocks based on holding them a certain time frame. The statistics shouldn’t be too surprising.   In the 10 years I spent in financial education I would witness these probabilities come true as people would “trade” their hard earned money away looking for the next home run. I could tell you sad story after sad story of those that just didn’t understand the importance of building a portfolio based on fundamentally sound stocks . . . stocks that you would actually want to be a business owner in . . . stocks that you may never want to sell. Warren Buffett said something as it relates to the types of stocks you want to buy . . . “when we own
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Categories: Markets and Strategy.

Early Volatility to Begin the New Year

Half way through the first month of 2015 the S&P 500 is down 2.5%. Terrorism, a European recession, bad earnings and other headlines have investors across the globe are running into safe investments like government bonds. This January move actually reminds me of what happened just a year ago in 2014. The S&P 500 finished January of 2014 down -5%. That was the low point of the year as the U.S. market rallied to finish the year up 14%. This volatility to begin the year shouldn’t cause anyone to panic. It shouldn’t cause people to worry that the six year bull market is over. Rather it should be an opportunity. Let me explain . . . There is a “fear index” in the market known as the VIX (S&P 500 volatility index). To keep it at a very, very basic level, when it spikes higher there is “fear” in the
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Categories: Markets and Strategy.

Battle of the indexes: Equal Weighted vs. Market Cap Weighted

The S&P 500 is one of the most quoted indexes in the world. It tracks the largest companies in the U.S. and has become one of the most popular indexes for not only stock market returns but also for comparing performance against (often referred to as a benchmark). It’s become so popular that people have made it a staple in a portfolios by buying an S&P 500 ETF or mutual fund. While plenty of people follow the index, few people actually understand how it’s constructed. The S&P 500 is a market capitalization weighted index. Here’s a quick definition: A type of market index whose individual components are weighted according to their market capitalization, so that larger components carry a larger percentage weighting.  So what does this really mean? It means that as companies grow larger and larger (think Apple or Exxon) they comprise more and more of the S&P 500
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Categories: Markets and Strategy.

A Recap of 2014 and a Preview to 2015

Boom! That’s how 2014 ended. The U.S. market continued its bullish streak (six plus years and counting) as the U.S. economy showed some really good signs of strength. Before we break down our stance on the global markets we need to recap the global returns from 2014. As you can see in the table below, the U.S. market completely destroyed the rest of the globe in terms of market performance. The struggles of Europe worsened the last half of the year while Russia and Brazil’s own issues slowed down the Emerging Markets. The global markets as a whole as represented by the MSCI All World Country index (which many use as the global benchmark) lagged the U.S. again this year. For the past two years the U.S. market has outpaced the rest of the global markets. Our economy, despite what you may see and hear in the press, is growing
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Categories: Markets and Strategy.

A Tale of Three Charts

“Come listen to a story about a man named Jed A poor mountaineer, barely kept his family fed, Then one day he was shootin’ at some food, And up from the ground came a bubblin’ crude. Oil that is, black gold, Texas tea.” This tune is from one of the classics of all time . . . the Beverly Hillbillies. The one thing that remains true about this story is the fact that oil has always been and will always one of the most important commodities in the world. That will never change . . . however, it doesn’t mean this commodity won’t have its ups and downs. Below are three charts that illustrate the impact of oil on the market and the ups and downs. Chart 1: The price of Light Sweet Crude   The price of oil has fallen nearly 40% from it’s June 2014 high of $104 per
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Categories: Markets.

Inflation’s Impact on Investing Returns

Whether you know it or not your investment returns are under attack. The attacker known as inflation, is silent and slow but  it’s impact can be substantial over time. Understanding inflation’s impact on returns is important as investors work towards accomplishing their financial goals. The chart below is divided into three different asset class – stocks, bonds and cash. For each asset class there are two listed compound annual returns, before inflation (on the left) and after inflation (on the right). The after inflation returns are commonly referred to as real returns. So why is this important? It’s simple. If you’re an investor striving to accomplish your financial goals without understanding their potential “real returns,” you may be investing in something that may not even allow you to accomplish your goals. It’s our opinion that people may have to invest more of their money in stocks longer than they would like
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Categories: Markets.

Market Commentary: Will we finish 2014 strong?

Coming off of one of the best bullish years in recent memory (2013), the question entering 2014 was whether we would sustain the bullish move. Well, so far the answer is wholesale nfl jerseys a resounding “YES!” The S&P 500 is currently sitting at a 9.8% return year to date. Healthcare, Technology and Consumer Staples have led the market with 22.02%, 14.55% and 10.04% returns respectively. Despite these positive returns in 2014, this . year hasn’t been without some market volatility. October saw the market pull back 10% for the first time in two years causing some to wonder whether the end to the bull-run has finally run its course. Listening to the mainstream media potentially enhanced these fears and created undue concern. It is our job as your Financial Advisors to look at the global markets and lay out the facts in an attempt to answer the question, “Will
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Categories: Markets.

The Four Most Dangerous words when investing . . .

One of my investing heroes is Sir John Templeton. The guy was ??????? the ultimate contrarian. From 1954 to 2004 his flagship fund, returned an annual average of 13.8% compared to the S&P of 11.1%. His contrarian entschieden approach often had him investing in stocks and markets that that most people wouldn’t touch with a ten foot pole! I could go on and one about his life . . . but won’t (you can watch a fantastic biography of Sir Templeton’s life by clicking here), instead I want to focus on one principle that Sir Templeton often made decisions on, they cheap nfl jerseys are the most dangerous words in investing . . . he said, “The four most dangerous words in investing are, ‘this time is different’”. With that as the backdrop we turn our heads towards market history as a way to allocate a portfolio. Historically, the six
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Categories: Markets.
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