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Thinking About All Our Risks

Sep 22 2008

The financial markets seem to be taking a breather after last week’s roller-coaster rides. We’re all digesting the latest news of short-selling restrictions and a $700 Billion stabilization plan for mortgage-related debt. But now is also a good time to step back and think more broadly.

Ron Lieber, who writes the New York Times “Your Money” column, was a busy man last week, writing columns and recording video clips to help readers understand what was going on. In Saturday’s edition, he wrote a nice article on “Minimizing Your Own Exposure to Risks.” He noted that now is a …

Should You Buy Shares in a Master Limited Partnership?

Sep 03 2008

Master Limited Partnerships are complicated investments in which you share in the profits from an income-generating business. Most often these partnerships make their money in energy-related businesses. They’re publicly traded and offer certain income tax benefits. They aren’t for everyone, however.

I wasn’t planning to write about Master Limited Partnerships (MLPs) anytime soon, but I feel compelled to comment on a piece written by Michael Brush on MLPs at msn.com today. Brush is a talented and prolific journalist and I admire his work. However, I think that this article could use a bit more nuance (or maybe he wrote it …

Are Your Investments Insured?

Aug 29 2008

Generally speaking, investments held in brokerage accounts are insured by an agency called the Securities Investor Protection Corporation (SIPC). The SIPC is a quasi-governmental body under the oversight of the SEC. The SIPC is definitely not the brokerage version of the FDIC.

Although the SIPC does not have the regulatory power of the FDIC, it does have one similar function: it insures assets held at all SEC-registered brokerages. When a broker-dealer fails, the SIPC manages the distribution of investors’ assets. If any assets are missing, the SIPC replaces insured securities up to the insurance limits.

There are many kinds …

Using Exchange Traded Funds – Part 2

Aug 06 2008

Today’s post continues Part 1 with a further explanation of this rapidly-growing alternative to the mutual fund. In my initial post I explained that ETFs

are created by financial institutions in large blocks that can be freely converted into underlying securities
are transparent, meaning that the underlying securities are publicly disclosed on a continuous basis
trade continuously on financial exchanges at prices that generally move closely with the underlying securities
are generally liquid, reflecting the liquidity of the underlying securities
are usually (but not necessarily) linked to a securities index
tend to have low management costs

These are generalizations, and …

Using Exchange Traded Funds – Part 1

Jul 29 2008

In the last four years or so, there has been explosion of newly created exchange traded funds (ETFs) in the financial marketplace. What are these investment products, and how are they different from the more familiar mutual funds?

Figure 1 shows the growth in both the number of exchange traded funds available and the amount of money invested in them. Although the ETF world is still dwarfed by the $11 trillion mutual fund industry, ETFs have clearly taken off on a growth spurt. Exchange traded funds were originally introduced to provide an investment vehicle with certain advantages over mutual funds.…

Category - Investing