Diversification is a risk management technique in that holding a wide variety of securities in a portfolio can minimize risk. For example, a portfolio that contains just one stock is risky. If the stock goes down, the whole portfolio value goes down. On the other hand, if an investor owns a variety of stocks from different sectors, the risks are minimized. The drawdown will be much smaller because a loss in one stock could be offset with gains in another.
Federal Reserve Chair Janet Yellen has confirmed what most already knew. The recovery in the U.S. jobs market is far from complete. Yellen noted that the unemployment rate has improved since the Federal Reserve initiated its last round of quantitative easing in late 2012, falling from 8.1% to 6.6%. Curiously, in 2013, the U.S. economy grew just two percent. That said, against the backdrop of a so-called improving U.S. economy, the numbers of the long-term unemployed and part-time workers are far too high. In fact, 3.6 million Americans, or 35.8% of the country’s unemployed, fall under the “long-term unemployed” umbrella—that is, those who have been out of work for more than 27 w ... Read More
Another year is soon to draw to an end. In my final commentary prior to the holiday break, I’m going to talk about something that is often not considered by investors when formulating their investment strategy. But first, let me talk about my dad. He’s in his early 80s and is the most risk-averse investor I have met. He will invest in bonds, regardless of how they are doing. In high-yielding or low-yielding periods (which we are currently in), he will invest in the safety of bonds and squeeze out any last drop of interest. Yet while his investment strategy has always been status quo, this is not the way it should be. Let me explain. Your asset port ... Read More
When it comes to investing, it’s important to diversify and spread your money around. Put all your assets in one basket and it could evaporate overnight if the markets go into correction mode. As a result, diversification is a good strategy to follow, because it can protect you from losing your entire retirement portfolio should the markets turn. Having a number of different stocks does not make a portfolio diversified. A diversified portfolio means having different kinds of investments, including stocks, bonds, cash, and so on. While we all know diversifi ... Read More
Jitters in the stock market—or any other market, for that matter—sometimes confuse investors and make them question its direction. They often ask where the market is headed next, or how the recent events will play out. Even worse, they may completely lose trust in the market and just let their life savings decline as inflation continuously takes its toll. To say the very least, these are genuine concerns, because their life savings are often at stake and a signi ... Read More
On May 7, the Dow Jones Industrial Average closed above the 15,000 level for the first time. This close marked an overall increase in the index of about 15% since the beginning of the year. Other key stock indices did the same, and at the very least, their performance was nothing shy of exuberant. It may be good news for some, but this rise in the key stock indices leads to one question: if investors missed out on these gains, should they jump into the stock market and take a risk playing the catch-up game? While this ... Read More