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Diversified Portfolio

Review: Think Bitcoin Is a Bubble? 5 Ways to Short It

By | Investing, Diversified Portfolio, Weekly Review | No Comments

We’ve seen increasing interest in the media about bitcoin and other cryptocurrencies lately. And we’ve already talked about  whether it makes sense for most people to include them in their investment portfolios (short answer: no). Now, I have no idea whether there’s a bitcoin bubble. Bubbles are slippery things. If you ask financial academics, you can get an interesting conversation going about whether bubbles even exist, or if it’s just “rapid discounting of risk.” In financial media, calling something a bubble usually just means that something has been going up for a while, and you want to write a story about why it “has to” go down. It would be nice if we could call when a bubble will pop, but there’s just no evidence that anyone can effectively time the market. Plus, the article points out that there’s not really a good way to short bitcoin right now anyway. But I want to stop for a minute and defend the poor, helpless short sellers of the world. While it’s easy to vilify them – and they often make it so easy – they are crucial to a well-functioning market. No one really likes people who profit off other people’s […]

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Review: How to build wealth: 10 rules backed by science

By | Investing, Diversified Portfolio, Weekly Review | No Comments

I spend a lot of time complaining about the financial media, but occasionally something good sneaks through the cracks. This is one of those times. Everything in this article is something I would agree with. I want to expand on one point in particular: you shouldn’t focus on past returns. It’s easy to say past performance is not indicative of future returns (as the SEC dictates), but it’s another thing to follow through on it. How else are you supposed to figure out which are the good or bad funds? At the end of the day, you invest so that you’ll have more money in the future. So, it stands to reason that you want to invest with someone who has made money for their investors. The problem is that risk and return are related. To get higher returns, you need to take on more risk. There don’t seem to be many folks out there who can consistently beat the market. As nice as it would be to pick the best funds from the past couple years, it just doesn’t work. The funds that won last year are no more likely to win again this year. You need to focus […]

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How Can You Prepare for the Next 2008?

By | Diversified Portfolio | No Comments

In early October 2007, the S&P 500 Index hit its highest point, then lost more than half its value over the next year and a half during the global financial crisis. In the coming weeks and months, we’ll see anniversaries of other major crisis-related events (for example, Lehman Brothers collapsed ten years ago next week), and we’ll likely see a stream of retrospectives detailing what happened and offering opinions on how today’s financial climate may be similar or different from the period leading up to the crisis. Because financial markets are habitually unpredictable in the short run, it’s challenging to draw useful conclusions based on these observations. However, there are important lessons investors would be well-served to remember: Capital markets generally reward long-term investors, and having a resolute investing approach may better prepare you for the next crisis and its aftermath. But What About Really Bad Market Meltdowns? In 2008, the stock market value dropped by nearly 50 percent. A decade removed from the crisis, it may be easier to take it in stride. And undoubtedly, the years of double-digit gains that followed have also helped our perspective. But as the events of the crisis were unfolding ten years ago, […]

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