Key takeaways: There are four broad groups of asset classes that an investor can consider when developing an investment strategy The four asset classes are: equities (i.e., stocks), fixed-income (e.g., bonds, treasury notes), physical assets (e.g., real estate), and cash These four asset classes have different risk and reward profiles to consider. Think of an…
Category: Investing
Investing learnings and strategies.
What are bubbles? Protect yourself. There’s one brewing.
Takeaway: Bubbles form when the underlying asset’s prices increase significantly above its intrinsic value, usually due to irrational factors. Diversifying your portfolio and doing deep research when making bets are ways to protect against bubbles. Housing bubbles have preceded recessions historically. There may be a housing bubble forming today. Stay cautious. What are bubbles? In…
Treasury Inflation-Protected Securities to Deal with Inflation
Key Takeaways: Treasury Inflation-Protected Securities (TIPS) protect against inflation Principal amount increase and decrease with inflation Because the interest rate does not change, interest payment rises as principal increases due to inflation Inflation results in increases in both principal and interest payments, providing investors some protection What are TIPS? Treasury Inflation-Protected Securities (TIPS) are US…
Inflation is Here. What to do?
Per the dictionary, inflation is “a rise in the general level of prices resulting in the loss of value of the currency.” In other words, inflation decreases the real value of our financial holding. Extreme inflation is destructive. To quickly illustrate the impact, let’s say gas was $4 per gallon on average a year ago,…
Insurance Overview
Key Takeaways: Insurance coverage is a way to protect assets from loss. Insurance policies can be long and complicated, but it’s critical to understand in detail. Typical insurance policies to have in your portfolio include life, disability, health, auto, and house insurances. The amount of coverage is a personal choice and depends on the amount…
Volatility is Inevitable
Key Takeaways: Market volatility, or fluctuations as simply defined, is inevitable. Diversification across investments and time is a crucial mitigant against market volatility. Volatility may also create opportunities that investors can capitalize on after thorough research. Fluctuations, or volatility, in investment portfolio prices can be very uncomfortable. Most of us will remember the drastic dips…
Asset Allocation
Key Takeaways: The two inputs to determine suitable asset allocations are time horizon and risk tolerance. Both of these inputs are personal decisions. There are free, readily available resources that anyone can use to determine the starting asset allocation. Asset allocation is the strategic decision to determine what proportion of your money to put into…
Modern Portfolio Theory
Key Takeaways: Modern Portfolio Theory (MPT) is a popular, fundamental investing theory. MPT advocates for a diversified investment portfolio to achieve an efficient risk-return profile. This is a strategy an average investor can use starting now. There are limitations to MPT. There are alternatives and other refined theories. MPT is a starting point. At the…
Understanding Asset Sub-classes
Key Takeaways: Subclasses are buckets of stocks, bonds, and assets underneath the primary asset classes that share further similarities Examples of subclasses include region, market capitalization, industry/sector/themes, and growth vs. value These subclasses are critical factors in developing an investment strategy because of diversification considerations Now that you are familiar with the primary asset classes…