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Investing 101 Archive

  • "Experience is the name everyone gives their mistakes," author and poet Oscar Wilde once wrote. And how right he was. But what if we could gain the benefit of our errors without having to pay a painful price?

    That's exactly what we are tackling in this installment of Investing 101, as we identify behavioral mistake that will will cost you money. To do so, we contacted Lou Harvey, president and CEO of Dalbar, a Boston-based financial services research firm, who has studied and written about the matter for years and has compiled this list of the five biggest behavioral blunders.

    1) Mental Accounting

    As Harvey describes it, the hallmarks of this investing mistake are erratic behavior and an ever-changing risk tolerance. If you're the type of person who takes big risks in one area but takes almost none in another, you might be suffering the effects of mental accounting. In Harvey's words, it's like conceptualizing different buckets for risk, but then putting all the buckets in the same pool.

    2) Herding, Following the Crowd

    It's often stated on Wall Street that the market rarely rewards the masses or that stocks always take the course of inflicting maximum pain. "The crowd often is mistaken," Harvey says, "and very often late, too." The problem with being a follower, he says, is that the leaders — whether going in or out of an investment — typically make all the money. "The people who come afterward miss out," he says.

    Read More »from Investing 101: The Top Five Behavioral Mistakes That Will Cost You Money
  • With the antiquated Electoral College method of electing Presidents it's easy to think your personal vote is of little consequence. Unless you live in a battleground state you're stuck in a sea of Red or Blue no matter where your personal politics lie. That's the reality for the presidential election but Eric Singer, author of Trade the Congressional Effect says your vote has more power than you may think.

    In this episode of Investing 101 Singer explains three reasons why it's not about the main event --electing a new president-- but it's the Congressional races, where your vote can really count and hold the key to your financial fortunes.

    1. Congress Controls the American Agenda

    "It's easy for the media to focus on the horse race at the top," says Singer in the attached clip. "But in fact Congress sets the agenda for the country." The executive branch is powerful but the President doesn't have the power to unilaterally dictate policy. Budgets, taxes and everything else being spoken of in the Presidential debates ultimately need to be passed by Congress.

    Mitt Romney and President Obama may speak as though they call the shots but their power is only as great as their ability to persuade your representatives to vote for their proposals.

    Read More »from Why Your Vote Matters for Your Money
  • In times of uncertain global markets and low rates on Treasuries, many investors are turning to bonds for safety. The problem is that fees and other semi-hidden expenses add up fast. Making matters worse, the "relative safety" of bonds may not be all it appears. In this edition of Investing 101, Larry Swedroe of Buckingham Asset Management gives viewers some tips and words for the wise on how to maximize their bond investments.

    1. Understand your fees

    While not begrudging a broker's right to make a fee on business transactions, Swedroe cautions investors to know exactly what they're being charged. Hint, it may be more than they think.

    "The Supreme Court has actually ruled that even fees as much as 6% are not unreasonable," says Swedroe in the attached video. They may not be unreasonable in the eyes of the court, but paying 6% for a bond yielding 3% puts investors in a severe hole. Ask your broker outright about his fees and make sure you're comfortable with them.

    2. Use Mutual Funds or ETFs

    Rather than going out and buying one bond or another Swedroe suggests using bond ETFs or mutual funds. Available ETFs range from the popular iShares Barclays 20+ Yr Treasury Bond (TLT) for longer term government securities to the SPDR Barclays Capital High Yield ETF with the appropriate ticker (JNK).

    Sure, they all have fees as well but "at least with the ETF's you get broad diversification," says Swedroe.

    Read More »from 3 Ways to Maximize Bond Returns

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ABOUT INVESTING 101

Breakout’s Investing 101 helps you gain insight on money management and trading. Whether you’re managing your own retirement account, just beginning, or an advanced investor in need of a good refresher, Investing 101 will help you learn, grow, and keep you informed of the basic steps to effectively manage your money. Expect investing tips that focus on trading strategies, asset allocation, and portfolio management.





Investing 101

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