Quick, do you know how much your investments earned last year? Are you certain? Well, if you relied on traditional methods to calculate your returns, you could be off, way off. The method most people use to calculate portfolio returns, regardless of the investment type, is by dividing the end value by the initial value; this method is also known as the Holding Period Return (HPR). If you deposited a lump sum, earned interest and/or dividends, and made no additional contributions or withdrawals, then using HPR is appropriate. However, if you are like most people, you make regular contributions to …Read More
Have you ever found money in the pocket of an old pair of jeans you had completely forgotten about? It’s always a nice feeling to find “lost” money, but there is a much bigger pocket full of money that you may be overlooking – your state’s unclaimed property list. Anytime a company owes you money and cannot contact you for whatever reason, the company cannot legally keep your money and is required to turn it over (also known as escheat) to the state as unclaimed. Laws vary by state, but the general rule is that companies must escheat assets inactive …Read More
Articles abound with the claim that – if you save $100 a month, earning 10 percent per year, you will have a given sum of money in 30 years. These simplistic future-value exercises (also known as deterministic calculations) are helpful in explaining the potent effect of compound interest and encouraging investors to start saving early; after all, it was Einstein who once said, “the most powerful force in the universe is compound interest.”
The problem with such deterministic calculations is that they assume the average annual earnings will remain constant throughout the investment period – in other words, investments will …Read More
Have you ever bought an investment, only to see it slowly decline in value? Or do you currently own an asset worth half the price you paid for it? If you answered yes to either of these questions, don’t worry, you’re not alone. You see, our personal experiences, emotions, and attitudes impact our investment decisions much more than we realize. Our unwillingness to sell that losing stock is not because of flawed investment analysis, but rather as human beings, we have a difficult time separating our emotions from personal investment decisions. This is something economists call behavioral finance.
Sit …Read More
If you’ve ever heard someone say “how did the market do today,” chances are they are referring to the Dow Jones Industrial Average (“Dow”), one of the oldest indexes used in the U.S. Indexes such as the Dow are used to measure the general health of a segment of the economy. Indexes are not just used in the U.S., they are also used in nearly every country with a developed financial market. Some of the most well known indexes include: Financial Times Stock Index (U.K.), CAC 40 (France); Hang Seng (Hong Kong); All Ordinaries (Australia); and many more. Indexes are …Read More