There is one possible exception to my index fund policy: Berkshire Hathaway (NYSE: BRK.B). While the stock market, measured by the SPDR S&P 500 Trust ETF (NYSEARCA: SPY), has gone up this year, shares of Berkshire Hathaway are down. Now could be a good time to establish a position or add shares to an existing position in Warren Buffett's investment company. Berkshire Hathaway has consistently outperformed the market for decades and is likely to continue outperforming in the future.
Sunday, June 7, 2015
Saturday, May 30, 2015
Monday, April 20, 2015
One of the arguments against index investing is that it doesn't work in inefficient markets. In less efficient markets, there is more room for active managers to add value, according to critics of index investing. This argument makes intuitive sense. Less efficient markets don't have as much publicly available information for investors to make decisions about stock prices. However, there is evidence that, even in inefficient markets, index funds outperform due to (1) lower costs and (2) the sheer difficulty of stock picking.
Wednesday, April 8, 2015
Friday, March 20, 2015
Instead of trying to beat the market, index funds attempt to be the market. Index funds track household names, such as the Dow Jones Industrial Index and the S&P 500 Index. Creating and operating a passively managed index fund is far less expensive than a traditional, actively managed fund run by a highly compensated fund manager. Index funds don't have active fund managers.
Tuesday, February 3, 2015
Monday, January 19, 2015
" ...there's no reason to expect reward for just bearing risk. Otherwise, you'd make a lot of money in Las Vegas. If there's a reward, it's got to be special."
– Professor William Sharpe, Stanford University
Wednesday, December 10, 2014
Crude oil prices have fallen to their lowest level since the financial crisis. Increased oil supplies along with weak demand, due to international economic woes, help to explain what's driving the decrease. Oil stocks have been clobbered in the financial markets. But cost savings from lower oil prices could boost the global economy and the rest of the stock market, outside the energy sector.
Friday, November 7, 2014
The ruble has lost over 23% of its value relative to the U.S. dollar over the past 12 months. Western sanctions in response to Russia's conflict with Ukraine, falling oil prices, and uncertainty over the ability of Russia's central bank to stop the run on the ruble have escalated the situation into a full-blown currency crisis.
Thursday, October 30, 2014
After years of determined effort, the Federal Reserve has phased out its bond-buying stimulus program, often referred to as quantitative easing. In deciding to terminate the stimulus initiative, the Fed stated that, "there has been a substantial improvement in the outlook for the labor market since the inception of its current asset purchase program." Today's unemployment rate stands at 5.9%, down from 10% at the height of the financial crisis.
Friday, October 24, 2014
Since Russia annexed the Crimean peninsula, western governments have responded with highly restrictive sanctions. These sanctions are taking a toll on the Russian economy. In addition, Russia has been negatively affected by falling oil prices. Energy makes up a disproportionate share of the Russian economy.
Tuesday, October 21, 2014
Wednesday, October 15, 2014
The U.S. stock market has soared to new highs since the financial crisis. It seemed that investors were beginning to forget about risk. But global economic woes and a series of mini flash crashes have rattled the markets in the last few days.
Thursday, October 9, 2014
In the financial markets, the month of October often brings darkness. The U.S. stock market tumbled downwards by about 2% today, spooked by signs of global economic weakness. While the U.S. and Great Britain have growing economies and reason for hope going forward, the rest of the world has gloomy economic prospects. Even Germany is experiencing weakness, along with France, China, Japan, and others.
Friday, October 3, 2014
The headline unemployment rate has dropped below 6%, according to the latest report from the U.S. Department of Labor. Standing at 5.9%, the official unemployment rate is now at its lowest point since July of 2008. Nonetheless, the Federal Reserve continues to fret about weakness or "slack" in the labor market.