Articles by Francis Armstrong III, CFP®
It’s BAAACK! Inflation Rears Its Ugly Head
Consumer prices have been creeping up. Bad news at the gas pump, where prices topped $3 a gallon, accounted for about 90% of the run-up. The core inflation rate, which excludes both energy and food from the calculation, behaved much more benignly.
Equity Linked CDs meet the Regulators
Both the SEC and NASD have recently expressed “interest” in equity linked CDs. Their concern revolves around whether they should be regulated as securities rather than bank instruments. I have another concern: Equity linked CDs may be just about the worst understood, most misrepresented financial product available.
Less Than Meets the Eye: Equity Linked CDs
It sounded too good to be true, which should have tipped me off: A five-year equity-linked CD that offers a return-of-principal guarantee backed by the U. S. government, coupled with 100% of the average appreciation of the S&P 500 index during that time period.
Understanding Investment Measurements
Measuring investment return is slightly less straight forward than it might appear at first glance. But, it's not rocket science. Some very simple examples can be used to explain more clearly each measurement. Understanding these different measurements will make you a better and more informed investor.
Dollar Cost Averaging: Effects of Volatility
A simple exercise turns conventional wisdom on its head. Conventional wisdom held that Dollar Cost Averaging works best with funds or stocks that have sharp ups and downs, since that gives you more opportunities to purchase shares less expensively.
Growth Stock Investing: A Primer Part II
In our previous article we discussed the underlying theory that propels growth stock investing as a philosophy. Now let's look at the practical problems that investors have when they try to implement. Voodoo Investing
The dividend discount method gives growth stock investing a pseudo-science basis conferring a completely undeserved credibility on the process.
The dividend discount method gives growth stock investing a pseudo-science basis conferring a completely undeserved credibility on the process.
Growth Stock Investing: A Primer Part 1
Growth stock investing is ever popular, even if unrewarding. Growth stock investors are willing to pay more than the current value for a company with higher growth potential than the market. They reason that the company will be worth much more later, and are willing to pay a premium over today's value to obtain the additional value later. Few investors understand the underlying theory.
Fama-French Three Factor Model - Part II
The Fama French Three Factor Model finds that stock investors most care about three variables: market, size and value. Each of these three variables has associated with it a priced risk, or equity premium. This turns out to be extraordinarily useful.
Stocks as an Inflation Hedge
The talking heads have gone into overdrive: Inflation is the next big peril! These are the same bright guys that warned us of deflation last year, which should tell you something. You will detect a recurring theme in this hysteria: Inflation is bad for the stock market. You have to do something now to prevent your equity portfolio from being ravaged.
Beyond Indexing
Passive investing is a major improvement over actively managed techniques. Index funds have long been the standard for passive investing. More recently, exchange traded funds (ETF's) have emerged to challenge index funds with some advantages, particularly in cost. However, there is still room for significant enhancement. Security markets, even in emerging economies, are generally efficient.
Commodities as an Asset Class
At first blush, commodities sounds like a risky strategy that only a wild and crazy guy would consider. In fact it's just the opposite. Properly utilized, it's a way to reduce risk in a portfolio consisting of stocks and bonds. We are not talking about an individual contract in a single commodity.
No Break Points!
B Share mutual fund pricing is hardly ever a good thing for the investor, but it's a great thing for brokers. Brokers seem to be born with a special gene.
Gotcha! A Hard Look At The Annuity Business
Insurance companies have the perfect "Heads I win, Tails You Lose" game in the fixed annuity business. It's very profitable, and few consumers understand the how the rules are stacked against them. First, a quick review about annuities. They come in two general flavors, variable and fixed.
Zero Cupon Bonds
Zero coupon bonds are an interesting derivative investment. As we shall see, they are not necessarily a great investment for long-term investors. Where do zero's come from?We think of bonds as having two parts, an income stream usually payable each six months, and a principal value payable on maturity.
What Makes A Good Mutual Fund?
As you build your portfolio, once you have decided on your asset allocation between stocks and bonds, and then picked your investment categories within the equity markets, it's time to select the mutual fund for each category.
Mutual Funds and Tax Efficiency
About this time of year, millions of mutual fund investors begin getting some shocking news. Their funds are going to generate big tax bills for them next year. Make no mistake about it, taxes on an investment portfolio are not a good thing. Every penny that leaves the field to march off to the IRS is a penny that can't grow for our tomorrow. It's gone forever.
Funds of Funds: Perfect Solution or Dangerous Shortcut
It would be nice to achieve all of your investment objectives with a single fund. At first glance, a mutual fund that invests in various other funds " called, appropriately enough, a "fund of funds" might seem like an easy way to do that. However, fund of funds are not always what they appear to be.
Brilliant but Not Free!
Just a few years ago, if you wanted to sell one no-load mutual fund to buy one from another company you had to write (that's right-snail mail!) to the first fund company to ask them to liquidate your shares and send you a check. The mail took a few days, and the fund companies took a few more days to open it. Then they sold your shares and a few days later cut you a check.
Lump Sum v Dollar Cost Averaging
Congratulations! You won the lottery, inherited some money from a distant relative, sold your company, or rolled your pension into your IRA. You have designed an asset allocation policy that meets your unique needs, and selected your funds. Now it's time to invest the money.
Avoiding Advisor Risk
Market Risk, and Behavior Risk are well known and frequently discussed. But, there is another type of risk that is often overlooked; The Advisor Risk.
