INVESTING BLOG

Diversifying your funds among different types of investments is an important way to minimize your investment risks. It can also play a large role in the return you can expect. In fact, how you allocate your investments among asset classes (stocks, bonds, mutual funds, etc.) may be the most important factor, by a significant margin, in determining portfolio performance. That means making asset allocation choices should be one of your first steps in the investment process. The objective of any asset allocation plan should be to find the asset mix that provides the appropriate combination of expected return and expected risk that will allow you to achieve your financial goals. Choosing the optimal asset allocation for your investments can, however, be extremely difficult. The asset allocation most appropriate for a single, 32-year-old investor who is earning $75,000 a year might be quite different from that of a 55-year-old with two children in college who is planning for retirement. But ...

Investing can be a complex and confusing process. Even success can throw your investment strategy out of kilter. For instance, let's say you want to have 60% of your portfolio invested in various types of stocks. If the market does really well and you are realizing higher than expected returns on your stocks, after a couple of years you may find that you now have 80% of your portfolio invested in stocks, even though you haven't changed a thing. No matter what type of investor you are, it is important to keep your plan on track. Revisit your asset allocation periodically (every year or two, depending on market conditions) and see whether it needs adjustment. You should also periodically re-examine your risk tolerance and investment profile, especially as you get closer to your goal. You may discover you need to tweak your portfolio's risk exposure over time. Sitting down regularly and reassessing your goals, time frames and asset allocations allows you to fine-tune your stra...

All investments involve a trade-off between risk and return. A certain amount of risk is inevitable if you want your money to grow. The key is determining how much risk you feel comfortable with. Know Your Risk Tolerance Are you uncomfortable with change? Can you stick with your long-term strategy even if you face short-term losses? Will you be overly anxious the first time your investments drop in value? These are all questions to answer before developing your strategy. Understanding your personal risk tolerance will help you create a plan you can stick with through good times and bad. Many investors forget the risks involved with buying stocks when the market is soaring. It's easy to be tempted by the lure of sky-high returns and to forget the possibility of a market downturn, or worse, of a bear market. Likewise, during a bear market or a sharp drop in the market, many investors suddenly become extremely risk averse. But if you create a plan built around your personal risk toler...

Financial planning means something different to everyone. For some, it's about getting by on their paycheck, for others it's about watching the stock market each day. Unfortunately, very few of us feel prepared to meet our ongoing financial obligations and objectives. Worries about money have become one of the greatest anxieties of our day. Because our lives and goals are so different, there is no turn-key solution for managing ones finances and meeting financial goals. We can, however, identify several steps successful people take in planning for and meeting their financial goals. We call these steps "Life Cycle Planning" because each step can be tied to the attainment of certain life defining events that almost everyone goes through. Development of Human Capital Human Capital is a person's ability to turn their skills and abilities into a livelihood. The development of these skills and abilities helps us maximize our income potential in a competitive marketplace...

Occasionally in the news we will hear about someone well known who, when seriously ill or injured refused "heroic measures" and received only palliative (comfort-easing) care at their home, hospital or other health care facility. Perhaps we have even witnessed how this decision has come to fruition with our own family members or loved ones, as measures taken previously determined the extent of the medical care they would receive when they encountered a life threatening illness or accident. These people retained control over their final medical care through use of a living will and a health care power of attorney. Perhaps you've reflected on your own wishes if you were to face a similar situation. Although no one likes to imagine the possibility of being in such a helpless state, the statistical possibility of such an event remains fairly high. This is why it's wise to ensure that your wishes will be respected if you become incapacitated. Just as a will becomes the gov...

  If you want to invest in the stock market but don't have a large enough portfolio to achieve the diversity you want through individual stock purchases, mutual funds may provide the solution you are looking for. Mutual funds are a collection of stocks designed to meet a stated investment objective or strategy. For instance, you may be able to choose between a fund that holds small- or mid-sized companies, large blue chip companies, or government bonds. Some funds are designed to provide growth, others to give you income. Fully diversified mutual funds can offer you dozens and sometimes hundreds of individual stocks or bonds. Achieving a similarly diversified portfolio by purchasing individual stocks is more difficult and costly. The trading costs for buying and selling stocks can quickly eat away a smaller portfolio's value. This is less of a problem if you have a larger sum of money to invest. Understanding the Risks Mutual funds provide a stated objective or strategy, giving...

Without health insurance, a single illness can cause serious, and often irrevocable, financial hardship. Insurance of any kind is intended to transfer financial risk to an insurance company in exchange for a reasonable insurance premium. Where most insurance coverages pay once a loss has occurred, health insurance has the added benefit of paying to keep your loss from getting worse. Health insurance is probably your most important coverage since it can be the difference between life and death. Fortunately, most employers offer some form of health insurance. Often you will have to select from several different alternative plans with differing coverages and premiums. There are two broad categories of health insurance coverage. One is fee-for-service and the other is managed health care . Under managed health care there are health maintenance organizations (HMOs), preferred provider organizations (PPOs), and point-of-service (POS) plans. Fee-For-Service Fee-for-service and managed health...