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Month: December 2018

How Will Higher Interest Rates Affect Your Investments?

The US Federal Reserve Open Market Committee raised interest rates again last week by a quarter of a percent. How will higher interest rates affect your investments? There are several ways that that higher rates will affect your portfolio both immediately and over the long term. Here are a few thoughts on the subject. Immediate Effects of Higher Interest Rates on Your Investments U.S. Treasuries Corporate Bonds Dividend Stocks U.S. Treasuries and Corporate Bonds If you currently have U.S Treasuries, AA, or AAA corporate bonds in your investment portfolio, they just became a little less valuable when the Fed...

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What Investments Should You Choose Right Now?

There is always a risk in giving or receiving investment advice. Many times do we read that an expert is making suggestions based on “what their charts show.” There may be useful information in their research but there is also a huge fudge factor. This is because the “expert” is not really giving you specific advice but only relaying what their “chart” might be predicting. Meanwhile, as the market is heading downward every day, you are wondering this, what investments should you choose right now? General versus Specific Investment Advice General investment advice, when it as some value, is based on past performance. For example, money invested in the US stock market and left there over time tends to out-perform other investments such as bonds, real estate or bank deposits. So, is it good general advice to invest in stocks? Yes, it is. But, in order to correctly follow this advice you need put money in an index fund that follows the S&P 500 or perhaps the Dow Jones Industrial Average. And, you need to leave it there through good years and bad. This is because individual investors are typically not very good at timing the market. An interesting article in The Balance shows us 20 years of stock market returns by year. Negative stock market returns occur, on average, about one out of every four years. Historical data...

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Defensive Investment Strategy for 2019

As the year ends and investors celebrate the holidays with family and friends, the stock market is deep into correction territory and the real estate market may not be very far behind. The suggestion one hears from all sides is that it is time to adopt a defensive investment strategy for 2019 and perhaps beyond. But, just what is a defensive investment strategy? When should you go defensive? And when will it be time to get aggressive again? First, here are some thoughts about going defensive for the coming year. Defensive Investment Strategy for 2019 As a practical matter,...

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Pros and Cons of Infrastructure Investing

With the Democrats in control of the House of Representatives for the next two years a consensus may be reached to fund upgrades in the sorry state of US infrastructure. This issue needs to be addressed but has repeatedly been pushed back due to political fights over attempts to repeal the Affordable Care Act or fund a big wall between the USA and Mexico. Assuming that funding goes through to repairs roads and bridges, water treatment and the power grid, or rail links and airports, what are the pros and cons of infrastructure investing. And, where would the best...

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When Investments Are Volatile Should You Sell or Buy?

The stock market has been in a selling mood for the last two weeks and the bears are predicting more of a selloff. The VIX indicator of market volatility is roaming in the low 20s which is higher than the teens where the CBOE volatility indicator resides during periods of no market turmoil. As market falls it would appear that many investors have decided to take a little profit while others are buying in expectation of a rebound. The question is if this is the start of a long term slide, a more substantial market correction, or just a...

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