Monday, April 20, 2015

Even In Inefficient Markets, Index Funds Outperform

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

Quote ... Unquote

"If you have trouble imagining a 20% loss in the stock market, you shouldn’t be in stocks." 
– John Bogle, Founder of the Vanguard Group 

Friday, March 20, 2015

Why Index Funds Outperform

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

Why Gold Should Be In Your Portfolio

The SPDR Gold Trust ETF (NYSEARCA:GLD) has trounced the stock market over the past 10 years. Recently, however, the price of gold has fallen and the stock market has recovered. This relative performance is consistent with economic theory, which holds that adding gold could help diversify portfolio risk.

Monday, January 19, 2015

Quote ... Unquote

" ...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, January 14, 2015

IBM: Patient Investors Could Be Rewarded

Some are calling for the break up of International Business Machines (NYSE: IBM). However, it is the behemoth company's integrated portfolio of products and services that help create IBM's competitive advantage. IBM offers enterprise hardware, software, and services.

Wednesday, December 10, 2014

American Shale: Falling Oil Prices Boosting Global Growth Prospects

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

Currency Crisis Deepens in Russia

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

Fed Terminates Historic Bond-Buying Stimulus Program

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

Russia's Economy Weighed Down by Geopolitics

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

Quote ... Unquote

"Buying shares with borrowed money is always speculative."

– Benjamin Graham

Wednesday, October 15, 2014

Fear Strikes Back Against U.S. Bull Market

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

Global Economic Woes Could Keep Rates Down Longer

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

What Are the Underlying Weaknesses of Today's Labor Market

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.

Friday, September 26, 2014

Why the U.S. Dollar Is Gaining Strength

Political operatives from the left and right debate how much credit, if any, President Barack Obama should get for an improving economy. The political debate will continue no matter what happens. In the financial markets, however, foreign currency traders appear to be voting in favor of President Obama's policies.

Thursday, September 18, 2014

Waiting for the Federal Reserve to Push Rates Up

Federal Reserve watchers expect that the U.S. central bank will move to push rates up at some point. However, the Fed remains cautious about providing a specific timetable for higher rates.

Thursday, September 11, 2014

Why the U.S. Budget Deficit Is Getting Smaller

The latest figures from the U.S. Government indicate that the budget deficit is shrinking. For the first 11 months of the fiscal year, which runs from October 1 through September 30, the government's budget deficit fell to $589 billion.

By the end of August, the deficit was 22% lower than it was this time last year. In addition, the deficit is now at its lowest point since 2008.