For a long time, many of our portfolios have had a slight bias towards small cap stocks (stocks with a total market value under two billion dollars). Sometimes this bias helps performance and sometimes it hurts. We believe that over the long term, in exchange for a small amount of additional risk, small cap stocks will provide better returns than their large cap counterparts.
Don’t put all your eggs in one basket. I have no idea where that idiom originated from but it is perhaps the best and simplest way to describe diversification. Instinctively investors know they should diversify their portfolio and most do this. Having looked at hundreds, if not thousands, of portfolios, I can tell you that diversification amounts to more than just owning multiple funds. A common mistake that investors make when trying to diversify their IRA or 401k is that they, inadvertently, create a portfolio that has the illusion of diversification. Let me explain.
Imagine this: the year is 2014 and your diversified investment portfolio is earning a measly 7% while your neighbor Joe’s S&P 500 index is up over 14%(1). As if that wasn’t enough, Dianne, across the street made a risky decision to buy airline stocks and she’s all but doubled her investment (2)! So what gives? You’ve hired a financial advisor, and they don’t seem to be keeping up. This is the plight of many investors, but when is the last time Joe and Dianne came to your door to tell you about their big loss?
Each spring, the tax documents emerge from their hibernation as people prepare the information they need to meet their civic duty. Oftentimes, your accountant (CPA) or Financial advisor might take this opportunity to talk to you about deferring some of your income for tax purposes, but what does that mean, and is this right for you?
It feels as if 2020 produced enough headlines for a decade. A global pandemic, mass protests, an emotionally charged election and some dude named the “Tiger King” are just a few of the many stories that kept our interest. Yet, here it is the second month into 2021, and Gamestop is dominating the headlines. Gamestop, which was once a place to buy a video game, became the topic of discussion at every dinner table, group text and social media platform last week.
Well, that was a year to remember! I won’t spend too much time talking about 2020 as we are all looking forward to moving on. However, it may be worthwhile to do a short recap of what happened to markets and how they concluded in 2020.
Socially responsible investing (SRI) is a general term used to describe various subsets of investing that attempt to align your portfolio with your values. There are two categories that tend to be the most popular: ESG (Environmental, Social, and Governance), and BRI (Biblically Responsible Investing).
It all started when a project on my honey-do list required me to dust off the circular saw. I discovered an interest in woodworking... Most people start their research on Google but fail to realize that everyone has a unique set of circumstances and goals, so general advice isn’t going to get you where you need to be, at least not efficiently. The same goes for financial advice. There are a lot of different ways to save and invest, but making sure you are using the right investments and saving your money in the right places will have a huge impact on the quality and success of your goals.