Tail risk refers to the probability of an extreme outcome from a rare event. Here we'll look at what it is, how it affects portfolio construction, and hedging strategies for it. Introduction - What Is Tail Risk? Tail risk describes the likelihood of rare events at the ends of a probability distribution. Specifically, greater tail risk would suggest that the … [Read more...] about Tail Risk – What It Is and How To Hedge Against It
I bonds are low-risk, inflation-linked savings bonds from the U.S. government. Here we'll review why, when, where, and how to buy them. Introduction - Inflation and the Case for I Bonds Unless you've been living under a rock, you know inflation has been heating up. Maybe you didn't know. Have you seen prices around you for things like food, gas, homes, and used … [Read more...] about I Bonds (U.S. Government Savings Bonds) – The Ultimate Guide
In this post I explore what risk-adjusted return is and some different ways to measure it, including Sharpe, Sortino, and Calmar ratios. Introduction - What Is Risk Adjusted Return? So we explored the concept of portfolio risk here recently. A good armchair definition of risk is the permanent loss of capital, though many erroneously conflate volatility - the … [Read more...] about Sharpe Ratio vs. Sortino vs. Calmar – Risk Adjusted Return
In using the term "risk," different investors and advisors mean different things. There are several different types and definitions of portfolio risk. Some are more useful than others. Here's mine. What Is Portfolio Risk? In this post I'm going to be talking about systematic risk, which can't be diversified away. I already covered unsystematic risks - like … [Read more...] about Investing Risk Explained (My Take on Portfolio Risk & Volatility)
ETF. ETN. ETP. So many initialisms. Here we'll explore what these things are and what differences exist among them. ETF vs. ETN vs. ETP - What Do the Letters Mean? First, here's what these initialisms stand for: ETF - Exchange Traded FundETN - Exchange Traded NoteETP - Exchange Traded Product Secondly, I created this crude Venn diagram to illustrate the … [Read more...] about ETF vs. ETN vs. ETP – Differences, Similarities, Risks, Etc.
Humans are inherently susceptible to irrational preferences called biases. Since investors are human, there are a number of investing biases to be aware of and try to avoid. Introduction - What Are Investing Biases? Investing biases are these irrational preferences that affect investing decisions and subsequent outcomes. They are errors in logical thinking. Not … [Read more...] about 23 Investing Biases and How To Avoid Them
Market timing refers to trying to predict future market movement to buy or sell at the best price. Here we'll look at why it doesn't work, and why you should stay the course and go ahead and invest as soon as possible to maximize time in the market. Introduction - What Is Market Timing? Market timing describes the speculative strategy of trying to time one's … [Read more...] about Market Timing – Time in the Market Beats Timing the Market
Inflation fears are always lingering. Here we'll look at what inflation is, why it occurs, how it's measured, and the best assets to hedge against it with their corresponding ETFs for . Introduction - What Is Inflation? Simply put, inflation refers to an aggregate increase in prices, commonly measured by the Consumer Price Index (CPI). Put another way, purchasing … [Read more...] about The 7 Best Inflation Hedge Assets and ETFs for 2022
With high stock valuations and low bond yields, is the "4 percent rule" for retirement withdrawal rate still valid for the 21st-century investor? Let's dive in. What Is the 4% Rule? The 4% rule refers to what is widely accepted as a safe withdrawal rate (SWR) for retirees from their investment account. Using this figure and assumptions about future expenses and … [Read more...] about The 4% Rule for Retirement Withdrawal Rate – A Revisitation
Here's how to calculate investment returns (known as return on investment, or ROI for short) to see your portfolio's performance. Introduction - Return on Investment Return on Investment (ROI) measures the gain or loss of an investment, as a percentage, relative to its cost. ROI is used in business to evaluate revenue performance, such as the return from marketing … [Read more...] about How To Calculate Investment Returns (ROI and CAGR)
Covered calls are pitched as a "free lunch" and a way to "collect rent" on your stocks. Let's explore why that's not the case. What Are Covered Call Options? Options contracts are derivatives that allow traders to speculate on the value of the underlying security. Call options allow the holder to buy an asset at a set price within a given time period. Put options … [Read more...] about No, Covered Call Options Are Not a Free Lunch
Portfolio diversification is considered to be the only free lunch in investing. In this post, I'll show you why and how to diversify your portfolio. What Is Portfolio Diversification? Portfolio diversification simply means combining different assets in one's investment portfolio, effectively spreading out your risk. As the related adage says, "Don't put all your … [Read more...] about Portfolio Diversification – How To Diversify Your Portfolio
Dollar cost averaging and "lump sum investing" are two different timing strategies for getting cash into the market. Let's compare them. What Is Dollar Cost Averaging (DCA)? Dollar cost averaging (DCA for short), also sometimes called a constant dollar plan, is a systematic investment timing strategy in which the investor divides up a total amount equally across … [Read more...] about Dollar Cost Averaging vs. Lump Sum Investing (DCA vs. LSI)
Three of the most popular international ETFs are Vanguard's VWO, VEA, and VXUS. Is there one that reigns supreme to hold alongside U.S. stocks? Diversifying with International Stocks Index investors in the U.S. usually know it's a good idea to diversify in equities outside the United States. At global market weights, U.S. stocks only comprise about half of the … [Read more...] about VEA vs. VWO vs. VXUS – Which ETF for International Stocks?
Commodities offer a diversification benefit in a long-term investment portfolio. Here we look at how to invest in commodities broadly with the best commodities ETFs. Introduction - Why Commodities ETFs? Commodities - metals, energy, livestock, and agriculture - offer what's called an uncorrelation to the stock market, meaning the movement of one does not follow … [Read more...] about The 3 Best Commodities ETFs To Invest in Commodities in 2022
State-owned enterprises typically have inherently lower operating efficiency due to compromised business interests. It may be prudent to avoid them in your international portfolio. Here we'll see what the data has to say. What Are State-Owned Enterprises? State-owned enterprises, or SOEs, refer to companies with at least partial government ownership. The … [Read more...] about Should You Avoid State-Owned Enterprises in Your Portfolio?
Sequence of return risk may very well ruin your financial retirement plans, and all from sheer bad luck. Here we’ll look at the nature and implications of sequence of return risk in retirement, and some proposed solutions to at least mitigate its potential negative impact. What Is Sequence of Return Risk? Sequence of return refers to the variability of … [Read more...] about Sequence of Return Risk in Retirement Explained
Factor investing refers to specifically targeting independent risk factors in securities markets that explain the differences in returns between diversified portfolios. Here we'll look at what factor investing is, various factor models from the research, and how to do it using factor ETFs. What Is Factor Investing? Factor investing simply refers to consciously … [Read more...] about Factor Investing and Factor ETFs – The Ultimate Guide
Interest in ESG investment products has skyrocketed in recent years, particularly among young investors. Let's explore what ESG investing is, why you might be interested in it, and how to implement it in your portfolio. What Is ESG Investing? ESG investing - also referred to as socially responsible investing, sustainable investing, and impact investing - means … [Read more...] about ESG Investing – Going Socially Responsible in Your Portfolio
Day trading and investing involve very different audiences, time horizons, trade frequencies, risk profiles, mindsets, tactics, and methodologies. Here we'll explore the differences and similarities between day trading and investing. What Is Day Trading? Day trading, as the name suggests, refers to attempting to capitalize on intraday changes in the share price of … [Read more...] about Day Trading vs. Investing in Stocks – Which Is Better?
With the new year usually comes new or renewed interest in investing and personal finance. Let's explore why you should be looking into automating your investing. The Benefits of Automated Investing Any successful investor knows to invest early and often. That means regular deposits into an investment account. Thankfully, this usually happens automatically with a … [Read more...] about Why Automated Investing Is More Powerful Than You Think
I've always tried to both max out and "front load" my 401k contributions each year. Front loading refers to contributing more earlier in the year to get money in the market sooner and then dropping the contribution election down for the rest of the year, while staying under the annual max contribution limit. For my personal situation, for example, I front load heavily in the … [Read more...] about 401k Front Loading Max Contribution Calculator
Gold can be used as a store of value and a significant alternative asset in a diversified investment portfolio. Here we'll explore how to invest in gold quickly and easily online. Why Invest in Gold? Gold has long been a common currency of the world. The shiny metal is now traded on exchanges via futures and ETFs. Gold is considered a commodity. Commodities as a … [Read more...] about Why and How To Invest in Gold for Beginners
I would have loved some sort of a roadmap laid out for me when I started over a decade ago. The goal of this page is to do just that, so that you can start building wealth today. View this page as a reference sheet; a pathway along which you'll progress; a general framework, from which the details branch off. I would suggest taking a brief look at all the steps first, and … [Read more...] about Beginners Start Here – 10 Steps To Start Building Wealth
Leveraged ETFs allow investors to increase exposure without additional capital outlays. Below we'll explore what leveraged ETFs are, how they work, and why you might want to use them. Prefer video? Watch it here. What Is a Leveraged ETF? A leveraged ETF, as the name suggests, is an ETF (exchange-traded fund) that allows investors to utilize leverage in their … [Read more...] about What Is a Leveraged ETF and How Do They Work?
The oft-cited advice is to put your emergency fund in a safe, high-liquidity savings account or money market fund, but there may be a better way if you're willing to take on some additional risk. Here we explore how you can invest your emergency fund to beat a high-yield savings account and inflation. Introduction - Why Invest Your Emergency Fund? An emergency … [Read more...] about Why, How, & Where To Invest Your Emergency Fund To Beat Inflation
Bonds are a critical part of a diversified investment portfolio alongside stocks, lowering volatility and risk. Here we'll explore what a bond is, why you'd want to invest in bonds, types of bonds, and how to buy bonds online. In a hurry? Here are the highlights: A bond is an instrument by which lenders/investors are paid periodic interest payments for providing a … [Read more...] about Why and How To Buy Bonds Online: A Guide for Beginners
For beginners who lack investing experience, "the stock market" can seem like a big, complex, intimidating entity, especially after seeing scary headlines about market crashes. But it doesn't have to be this way. Here we'll explain what the stock market is, how it works, and how to invest in it. In a hurry? Here are the highlights: A stock is an instrument by which … [Read more...] about What Is the Stock Market? How It Works & How to Invest in It
Recent technological advances in the investing world have resulted in new mobile apps that make it easier than ever before to get in the market and start saving for retirement. In this post we'll look at the best investing apps for beginners for . In a hurry? Here's the list: M1 FinanceSchwabAcornsWebull Introduction - Features of the Best Investing … [Read more...] about The 4 Best Investing Apps for Beginners (2022 Review)
Index investing is a simple yet powerful approach to consistent investment portfolio growth. Here we'll explore what index funds are, their benefits, how they work, how to invest in them, and some of the best index funds for . What Is an Index Fund? An index fund, as the name implies, is simply an investment product designed to track a particular index in the … [Read more...] about The Best Index Funds for 2022 for the Passive Investor
The recent race to zero for fees and trade commissions from online stock brokers has made investing cheaper and more accessible than ever before. This has caused the brokerage landscape to change drastically over the last few years. Here we'll look at the 5 best stock brokers online for investing. In a hurry? Here's the list: M1 FinanceSchwabFidelityInteractive … [Read more...] about The 5 Best Stock Brokers Online for Investing (2022 Review)
Asset allocation refers to the ratio among different asset types in one's investment portfolio. Here we'll look at how to set one's portfolio asset allocation by age and risk tolerance, from young beginners to retirees, including calculations and examples. Prefer video? Watch it here. In a hurry? Here are the highlights: Asset allocation refers to the ratio of … [Read more...] about Portfolio Asset Allocation by Age – Beginners To Retirees
Warren Buffett has advised DIY retail investors to simply buy a low-cost S&P 500 index fund and sit back and relax. Here we'll look at how to invest in the S&P 500 index with the 3 best S&P 500 ETFs - VOO, IVV, and SPY - and why you might want one over the others. Introduction - What Is the S&P 500 Index? The S&P 500 Index, the modern … [Read more...] about How To Invest in the S&P 500 – The 3 Best S&P 500 ETFs (VOO, IVV, SPY)
Get your portfolio off the ground on the right foot at a young age with passive, buy-and-hold index investing. Here we'll look at the best index funds for young investors for . In a hurry? Here's the list: VOO - Vanguard S&P 500 ETFITOT - iShares Core S&P Total U.S. Stock Market ETFVT - Vanguard Total World Stock ETFIXUS - iShares Core MSCI Total … [Read more...] about 13 Best Index Funds for Young Investors (6 From Vanguard)
Investing in the stock market can appear daunting, but it doesn't have to be. Technology and modern online brokers have made it easier, cheaper, and faster now more than ever for DIY investors to create a simple and effective portfolio. Index funds allow you to make an initial investment and then sit back, relax, and watch your portfolio grow. Here we'll look at the best index … [Read more...] about The 6 Best Index Funds for Beginners for Long-Term Growth
Bonds are usually held in a portfolio with equities to reduce volatility and to offer downside protection against black swan events. Let's dive right into comparing corporate bonds and government bonds. Prefer video? Watch it here. In a hurry? Here are the highlights: Corporate bonds are more volatile than government bonds.Government bonds are also called treasury … [Read more...] about Corporate Bonds vs. Government Bonds (Treasuries) – The Showdown
The term "lazy portfolio" refers to a portfolio designed to perform well in most market conditions, that can be held for an extended period without changing the asset allocation leading up to retirement. Popular examples are the traditional 60/40 Portfolio and the Bogleheads 3 Fund Portfolio. Lazy portfolios are usually simple, diversified collections of low-cost index … [Read more...] about 52 Lazy Portfolios and Their ETF Pies for M1 Finance (2022)
A Health Savings Account (HSA) is an extremely powerful vehicle for both investing and paying for medical expenses, but a common question is how exactly to invest inside it. Here we'll explore the the properties, benefits, and investment options of an HSA. In a hurry? Here are the highlights: An HSA is a tax-advantaged account used to pay medical expenses and/or to … [Read more...] about How To Invest Your HSA (Health Savings Account)
This post largely originated after seeing all the misinformation surrounding dividends floating around Reddit and YouTube recently. Most users on the M1 Finance subreddit, for example, seem to be very pro-dividend, almost unwaveringly so and nearly cult-like, so I’m a little afraid to even open this can of worms for fear of being pitchforked. It’s scary how much cavalierness, … [Read more...] about 8 Reasons Why I’m Not a Dividend Income Investor