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Month: September 2018

Simple Steps to Successful Investing

There are many times in life when the “KISS” approach is the best. (KISS = keep it simple, stupid!) Successful investing is one of them. The vast majority of investors have a “day job.” That is to say, they work at something other than managing their investment portfolio. That means that most of us need to follow a few simple steps to successful investing. Simple Steps to Successful Investing Take advantage of 401K’s, IRAs, and other tax deferred investment vehicles Invest in your home Pay off credit card debt before any other significant investing Keep your investment vehicles simple IRA’s and 401 K’s An IRA is an account that you create with a financial institution such as a bank or stock broker. It gives you a way to save with the growth of you investment being tax free or tax deferred. Issues such as whether you use a traditional IRA or a Roth IRA are important but the most important part is to have your investments increase in value with being taxed until you cash out. A 401 K is similar to an IRA but it is sponsored by your employer. A common benefit is that your employer matches your contribution each year. Your money grows without being taxed over the years and is only taxed when you withdraw it during retirement when you income is less and your...

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Is a Volatile Investment a Risky Investment?

There are times when the short term outlook of an investment or a whole class of investments, like a stock market sector, becomes uncertain. At that time the investment becomes volatile with its price fluctuating rapidly up and down. Many conservative investors choose to avoid such investments because they (the investments) seem risky. But, is a volatile investment a risky investment? Part of the answer depends on the time frame of you investing. If you try to time the market, jumping in and out, you may realize huge profits in a volatile market and you may simply lose all of your investment capital. By in large a volatile investment is a risky investment if you only focus on the very short term. But, what about the long term risks of a volatile investment? Confusing Risk and Volatility Reuters writes that we should never confuse risk and volatility. Of the many lazy and dangerous ways of thinking about investment these two rank near the top: that risk equates with volatility and that risk and rewards are a straight trade off. Both are overly simplistic and both lie at the heart of some of the most colossal errors in recent finance. And while both contain large amounts of truth at their core, both concepts represent shorthand versions of reality rather than tools which always, or even usually, work. Over the long...

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What Happens to Your Investments if the Trade War Becomes Permanent?

What is going to happen with US Chinese tariffs? The consensus of the stock market seems to be that an amicable agreement will be reached and all will be well. That may not be the case. What happens to your investments if the trade war becomes permanent? We are not the only ones to be concerned. CNBC reports that Moody’s believes the stock market is getting it wrong and that the trade war could be prolonged and cause lasting damage to the world economy. So far the USA has put tariffs on $200 Billion in Chinese goods and the Chinese have put tariffs on $60 Billion in US goods. “It’s a very modest response,” said Edward Alden, a senior fellow at the Council on Foreign Relations, of China’s reaction. “There’s no question China’s hurting and they may want to negotiate. The problem is the Trump administration may be overplaying its hand. The harder they push, they may push the Chinese into a corner where politically and for just reasons of saving face, they can’t negotiate with the administration, and secondly the administration hasn’t established a negotiating process. There’s a real divide between the trade hawks and doves.” Moody’s is predicting that US growth will slow to 2.3% next year and China’s to 6.4%. Why is this happening and why is there a danger of a prolonged trade war and...

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Who Wins if Coca Cola Adds Cannabis to Soft Drinks

As more and more states legalize medical and even recreational marijuana, Coca Cola is talking to Aurora Cannabis about putting non-psychoactive cannabis in beverages. Who wins if Coca Cola adds cannabis to soft drinks? We recently posed the question, are marijuana companies good investments. Tilray is the second largest publicly traded marijuana company. Their sales have doubled in the last year and the stock recently went up 17%. With more and more states legalizing marijuana for medical or even recreational purposes, are marijuana companies good investments? Our opinion as expressed at the end of the article: In the end, the marijuana companies that will be good investments will be those which manage their cost of production, compete well on quality and price, and market most effectively. Right now, it is not clear who that will be! Well, the business of effective marketing may be taken care of for Aurora Cannabis if they team up with the largest soft drink maker, Coca Cola. According to CNBC, the marijuana infused drinks will contain non-psychoactive cannabis and not the stuff that creates a “high.” The companies would likely develop health-focused beverages that will ease inflammation, pain, and cramping, the report said. The health market is full of drinks, pills, and foods offering health benefits. According to Allied Market Research, the natural food and drinks market had a value of $79 billion in...

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Why Are Investors Leaving Emerging Markets?

Remember when the BRICS nations were all set to surge into the forefront of the global economy? Brazil, Russia, India, China, and South Africa were all seeing spectacular economic growth and attracting huge amounts of foreign direct investment. These nations are still substantial actors on the world stage but their growth has slowed and in some cases reversed course. Investors have been pulling their money out of these markets and putting it into the USA, Europe, and Japan. So, what happened? Why are investors leaving emerging markets? China Moves to Adjust Its Economy China helped lead the way out of the financial crisis and the Great Recession by doubling down on their investments in both infrastructure and industrial capacity. Nations, like Brazil, saw huge benefits as China’s industrial machine consumed more and more raw materials. The price of oil skyrocketed making not only OPEC happy but also Russia and Brazil. China had been expanding its state-run economy for years and steadily increasing its customer base to span the globe. But, as large as the world economy is, it is finite. And, the industrialized economies of the world got tired of seeing jobs and whole industries pivot to China. China had over-built its industrial base and now saw a substantial slowdown in growth, closing factories, and even labor unrest. A slower Chinese economy needed fewer raw materials and the emerging...

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