Online Tools: Checking for Fraud
February 8, 2010
For
investors spooked by financial scams and scandals, the Financial
Industry Regulatory Authority (FINRA) and the Securities and Exchange
Commission (SEC) offer tools to monitor stockbrokers and identify and
avoid fraud. They are helpful for investors who are afraid of getting
into investing because of recent scandals and the economic meltdown.
Continue reading
Constructing Portfolio Using ETFs
February 6, 2010
Having the right mix of stocks, bonds, cash, and commodities in your portfolio, and being well diversified within each
asset class, can have a profound impact of your returns.
ETFs
can be an easy way to gain this diversification. They can be cheap,
flexible, and tax-efficient and may help you gain access to sectors and
asset classes that would otherwise be closed off to individual
investors.
Continue reading
Stock Market Anomaly: January Effect
Updated: January 3, 2010
Historically
stocks of small-cap companies had seasonal tendency of outperforming
the large-caps around the turn of the year, specifically during
January. The existence of this
January Effect of stock market return
has been widely known. In back testing, researchers have found that it
existed in many prior decades.
There are some theories behind
this stock market anomaly. Two possible explanation on the January
effect are that investors’ activity of buying back into beaten-down
small-caps, which were probably sold for
tax loss harvesting and
window dressing reasons late in the outgoing year. Others speculate that the phenomenon has something to do with
less information flow of small cap stock during the year.
Continue reading
Tax-Loss Harvesting
December 15, 2009
From
a tax standpoint, dumping losing-money security prior a year end is not
a bad idea. The tax advantages of setting your gains against your
losses can be enormous as long as you follow all the rules and
implement a few tricks of the trade.
Tax-loss harvesting, also
commonly known as tax selling, is one of the ways to avoid taxes on
some of your portfolio gains. Tax-loss harvesting is the selling of
securities, usually at year-end, to realize portfolio losses, which an
investor can use to offset capital gains and therefore lower personal
tax liability.
Continue reading
Worst Financial Crises since Great Depression in Review
2007 to 2009 Episodes
December 1, 2009
After
more than two-year financial malaise, signs of recovery finally emerged
in 2009 as the economy expanded for the first time in a year in October
and stock markets surged above 50% from their the bottom in March. A
major challenge to a full recovery is the struggling labor market with
a 10.2% unemployment rate.
Housing bubble burst and subprime mortgage disaster in 2006 led to a
series of stunning financial closures. They changed the face of Wall
Street forever, turned the United States economic to the most serious
crisis since the Great Depression, and eventually sent the global
financial system into turmoil in the fourth quarter 2008.
Continue reading
A kaleidoscope of the critical events in 2008 & 2009:
2009: A Recovery Year of American Economy2008: A Dark Year of American and World Economy
U.S. Insurance Fund is In Red
November 24, 2009
The U.S.
government-administered insurance fund that protects depositors slipped into
the red after fifty banks collapsed during the third quarter. The fund that
protects more than $4.5 trillion of U.S. bank deposits fell into the red for
the first time since the fallout from the savings-and-loan crisis of the early
1990s as the pace of bank failures accelerated.
The fund had a negative balance of $8.2 billion at the end
of September after the fund dropped by $18.6 billion during the third quarter
of 2009, federal regulators said Tuesday, Nov. 24. This report confirms what
officials of the Federal Insurance Deposit Corporation (F.D.I.C.) said in
October that the deposit insurance fund had been depleted. Continue reading
Index Investing: Track the Market with Passive Strategy
October 15, 2009
More institutional investors, especially pension funds, are applying index-investing strategy by shifting their assets from active managers to index funds.
Poor investment performance of active managers in the recent bear market caused the significant net inflow into index funds. Acceleration of institutional investment moving toward the passive strategy spiked in the second half of 2008, particularly after the bankruptcy of Lehman Brothers Holdings in mid-September.
In the miserable bear market, index funds may not look very attractive. But it turns out that it is the extremely rare actively managed fund or hedge fund, after fees and taxes, beat a simple index fund. Studies show that very few actively managed funds, including those with impressive short-term performance records, provide better-than-benchmark returns over long periods of time.
Continue reading