Investment Risk Management Strategies – 5 Ways to Play Defense

money chains defenseAaron Rodgers and Greg Jennings may get all the glory when it comes to reliving the big Super Bowl plays of 2011, but it wouldn’t have mattered how many points the Packers put on the board if they didn’t have a strong defense as well.

In other words, a good offense can’t be successful without an effective defensive program. And the same is true for your investment strategy.

Here are the best strategies to protect yourself when it comes to the game of investing.

Investment Offense

Click to continue reading...

What is a Secular Bear Market (Definition & Chart) and How to Invest In One

bear market chartThe stock market has risen about 90% since the March 2009 lows. Mind you, that rally followed a steep 57% decline. Still, in light of the gains of the past two years, how can some analysts say we’re still in the midst of a secular bear market?

Bulls vs. Bears

For those who are new to stock market lingo, a bull market is one where the primary trend is upward. A bear market means stock prices are falling. A secular trend usually refers to a longer-term trend, whereas a cyclical trend reflects the short-term market momentum. So you can have a cyclical bull market within a larger secular bear market and vice versa.

Click to continue reading...

New Job Hunt Dilemma – Stable Jobs with Salary or High Paying Jobs on Commission?

climb corporate ladderWould you rather have a stable job with lower income, or a position with fluctuating, but potentially higher income? This is something my family and I have wrestled with a few times over the past 3 years. Now, we’re in that position again. It takes a lot of consideration to sort through all of the variables in order to make the right choice for our family and our future.

Fixed vs. Variable Income

Most people who are self-employed or work in sales earn some form of commission that allows them to make more as they sell more. You can earn a lot more than most standard salaries by working hard and providing good service.

Click to continue reading...

Nominal vs. Real Interest Rate – Effects of Inflation

interest rates yellow boxesWhen you hear people discussing interest rates or investment returns, you may notice that they make a distinction between real and nominal rates.

What’s the difference and why should it matter to you?

Essentially, the inflation rate is the difference between the two. It matters because nominal rates don’t tell the whole story – for your investment returns or the economy. To really understand what’s happening with your money, you need to look at real rates, too.

Nominal Rate of Return or Interest

Click to continue reading...

Investing Strategies & Styles – Are You an Alpha or Beta Investor?

Are You Are an Alpha or Beta Investor?One of the biggest debates in the investing community is whether the average investor should look for alpha or beta results from his or her portfolio.

What’s the difference? Let’s take a look at each investment style and then you can decide which one best fits your needs.

The Alpha Investor

You’ll often hear active investors refer to their “alpha.” This is basically the amount by which they have exceeded (or underperformed) their benchmark index. For instance, if you invest primarily in US stocks, you might use the S&P 500 index as your benchmark.

Click to continue reading...

4 Financial Norms to Challenge During the Current Economic Crisis – When Heroes Become Villains

hero villain moneyThe past 3 years have been rife with changes – economically, financially, and socially. We’ve seen a lot of cultural and financial icons go very quickly from hero to villain. Many pop stars and sports heroes of the past decade have spent more time in tabloids than pursuing their chosen careers. Even President Barack Obama, once heralded as an instrument of change himself, has recently suffered a fall from grace.

Click to continue reading...

Setting and Achieving Your Long-Term Financial & Personal Goals In Life Now

Financial planning and maintenance are easy to put off. That’s why they appear on so many top 10 lists about how to help stop procrastination and how to keep your financial New Year’s resolutions. We know that organizing our finances, like exercising and eating right, will improve our quality of life and make us feel better. We know that it’s important to track spending, boost savings, set up an emergency fund, and plan for the future. And yet, many of us have a hard time actually sitting down and doing these things!

Click to continue reading...

Where Are Your Financial Boundaries for Personal Budget Planning?

Boundaries are so important in every area of our lives. Without them, anarchy and chaos would have free reign. Managing our personal finances requires boundaries perhaps more than any other aspect of our lives.

For most of us, a creating an effective budget is the perfect way to set these financial boundaries. But a lot of us have trouble deciding how much to budget for each category. While some expenses are fairly regular, others can vary by quite a bit from month to month. How can we predict exactly how much we will spend on groceries or other variable expenses in a given month or year?

Click to continue reading...

How to Avoid Budgeting Problems With a Positive Cash Flow Statement

There’s more to tracking your finances than understanding your net worth and having an effective personal budget in place. It’s also critical to keep a close eye on your cash flow. What’s is cash flow exactly? Let me first delve into the 3 types of financial statements including the cash flow statement, and then I’ll go into the importance of maintaining a solid positive cash flow.

3 Types of Financial Statements

Businesses have three different types of financial statements: a balance sheet, an income statement, and a cash flow statement. Most people don’t realize that these same statements also directly apply to their personal finances, even if they don’t have their finances labeled as such. Let’s briefly look at each of these statements:

Click to continue reading...

Is Investing In Bonds Safer Than Stock Investing?

Are Bonds Safer Than Stocks?Most investment professionals consider bonds a safe component of portfolios. They’re supposed to provide the stability and certainty that stocks can’t. Others say that bonds aren’t as safe as they seem. Who do you believe?

Both sides actually make some good points. How much you decide to allocate to bonds vs. stocks will depend not only on factors like your age and risk tolerance, but also the amount and stability of your income. Your investment success will also largely depend on your ability to curb spending and set aside money for the future. Before we look at the pros and cons of investing in bonds over stocks, we need to make an important distinction between investing in bonds through funds or ETF securities vs. buying individual bonds.

Click to continue reading...