Browsing Category: Investing

5 Steps to Overcoming Bad Investing Behavior

retirement invest

Many people who invest wonder why they’re not getting some of the investment returns that others are getting, even if it seems like they are doing the exact same thing. retirement invest

One of my favorite presentations that tackled this topic was between Carl Richards, author of The Behavior Gap, talking with Betterment founder Jon Stein. They went over bad investing behaviors and how to fix them.

  1. Evaluate & Set Goals: Carl emphasizes getting a snapshot of your current reality. Once you know where you’re currently are financially he then says create specific goals about where you want to be . He points out setting goals around what you want to do with your money, reflecting your unique values.
  2. Be Realistic: You’re Not Going to Beat the Market: You have to determine how to invest the money. We tend to take past and use it to predict the future, especially with stocks.
  3. Avoid the Gap: Investment returns vs investor returns – Carl show how we actually invest is so different from the reported returns. Many times human nature  has people buying and selling at the wrong times. Don’t find the best investment, become a better investor.
  4. Automate: Automation helps us overcome our tendency to tinker with our investments when we shouldn’t. It’s not exciting, but it works.
  5. Keep It Simple: Think of creating a financial system as a set of guardrails to protect yourself from hurting your own finances. If it’s a complicated system you won’t be able to keep up with it.

I think Jon had some great points to add with Carl’s tips. He shared his own story about investing in the wrong stock and how it made him realize that investing in the market rather than just stocks was the ticket.

Thoughts on Investing

How about you? How are your investments doing? How many of you have made some of these investing mistakes in the past and have changed?

Betterment: Retire Richer

Betterment Gift Registry – Is It For You?

betterment gift review

For those who haven’t read my Betterment review, Betterment offer easy investment solutions for those looking into passive investing. Now they released a new option this week that can be a great help for those looking at giving a practical gift that can build in value – Betterment Gifts.

Gift Registries That Matter

With loved ones celebrating life events like marriages and births, having a gift registry can be incredibly helpful for both the recipients and the givers. When we were planning our wedding, we worked hard at creating a registry that only had these we planned on using many times. No one wants to give or get a gift that’s not needed or wanted.

It was smaller than the typical registry, but givers knew that if they bought something off the list, we’d truly use it as we settled into our first apartment together. Besides guifts, we were also grateful to receive cash and checks as gifts. Instead of splurging that money, we instead used it for savings, including as seed money for our house down payment.

Creating a Betterment Gift Registry betterment gift review

When I heard about Betterment’s new service I thought of how helpful it would be for couples and families to use for long term goals. I asked for more information. I wanted to see how hard or easy it was for customers to create and give on their site.

The good news is that Betterment makes it simple to create a registry for your special event.

  • Create a new account or login to your existing Betterment account
  • Click “add new registry”
  • Create a preferred URL address for people to visit
  • Choose an event type for your registry
  • You can now give the details of the event. Please enter an event name, date, description, and location.
  • Add your investing goal and select which account you want the gifts contributed towards.
  • Go ahead and save your registry and make it public.

Betterment Gifts – Easy and No Fees for Giving

Giving a gift through Betterment is even easier. You simply need a credit or debit card and the money is contributed towards the recipient’s goal. Betterment doesn’t charge a transaction or credit card fee for your deposit.

Thoughts on Betterment Gifts

I’d really like to hear from you. For those getting ready for a big life event like getting married or having a baby, what are your plans? Are you going to have a gift registry? What are you planning on including in it?

How to Start Investing with $500 or Less

investment money

One concern for new investors is knowing where to start when you don’t have much to invest. When I first wrote about investing, I started out with $1,000 or less. I’ve found some more options for those who invest $500 or even less.

Invest with $500 (or Less)

Some index funds require that you have a minimum. Even if you are limited on your budget, there are ways you can go ahead and invest. I went ahead and searched for some index fund for you to start off with.

Here are 5 index funds that have a minimum requirement of $1,000 or less to open:

  • Homestead Stock Index (HSTIX) – $500 minimum
  • Vanguard STAR Fund (VGSTX) – $1,000 minimum
  • T. Rowe Price International Equity Index Fund (PIEQX) – $1,000 minimum
  • T. Rowe Price Equity Index 500 Fund (PREIX) – $1,000 minimum
  • T. Rowe Price Spectrum Growth (PRSGX)

Here are 5 index funds that have a minimum requirement of $250 or less to open:

  • Schwab S&P 500 Index Fund (SWPPX) – $100 minimum
  • Schwab Total Stock Market Index Fund (SWTSX) – $100 minimum
  • Schwab 1000 Index Fund®(SNXFX)
  • Schwab Small-Cap Index Fund®(SWSSX)
  • Schwab International Index Fund®(SWISX)

This isn’t a comprehensive list of investments, but it’s enough to get your started with your retirement account. You just have to look over the funds and see if it’s right for you and your investment goals.

Where to Invest?

If you’re looking for companies to invest in, here are a few suggestions:

  • Vanguard: One of the most trusted names in investing
  • TD Ameritrade: Open and fund an IRA today and get up to $600.
  • E*Trade: Trade Free for 60 Days
  • Betterment: Easy to set up and a very affordable option

You may also want to check with your local bank or credit union to compare fees and expenses.

Thoughts on Starting to Invest

I’d like to hear your take on investing and where to begin. How did you get started? How do you keep on target for contributions?

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Is The Demise of the U.S. Dollar Inevitable?

forex investing

In September 2008 at the outset of The Great Recession, the global economy nearly collapsed completely.  Lehman Brothers and several major financial institutions nearly brought down the modern financial system, and there was actually a brief period of days in September and October 2008 when the very survival of the entire global economy was hanging in the balance.

During a normal recession, banks tighten credit markets, but in the fall of 2008, the interbank lending market complete froze up and banks were not lending to one another.  This credit freeze was a serious enough threat that it could cause a complete failure of every major financial institution in the developed world because every major bank is dependent on the overnight interbank market in order to finance day-to-day operations.

Central Bank leaders around the world joined together in a cohesive act of unprecedented unity and slashed short-term interest rates to historically low levels in an attempt to stimulate and loosen credit markets, and it worked.  Credit markets eased off a little and a complete financial collapse was averted. An uninitiated investor would tend to think that the U.S. dollar should get very weak during such a time when the very stability and existence of the U.S. economy was under such serious threat, but the reality is that the U.S. dollar experienced one of its most dramatic and emphasized bull market runs in history.

When risk aversion grips financial market, the U.S. dollar usually gets strong because in times of great economic uncertainty, the investing public still trusts the U.S. government.  Therefore, investors tend to park their capital in U.S. Treasuries and other government-backed debts since the default rate on these investments is virtually 0%.  During times of risk aversion, investors are not concerned necessarily with making money and earning yield, they simply do not want to lose money, and the U.S. dollar is the one currency on earth where investors can have a very high confidence that funds will not be lost due to a sovereign default.
Thus, when times are bad and investors are scared, the U.S. dollar will tend to strengthen significantly as investors rush into the safety of U.S. treasuries, but when the economy rebounds and there is no serious systemic risk in the global economy, there is really no incentive for investors to hold the dollar.  The Federal Reserve has slashed short-term interest rates to historically all-time low levels of 0.25%, and this exceptionally low rate is expected to continue well into 2012.  Therefore, if there is no significant threat in the global economy the U.S. dollar has tended to underperform significantly over the last two years as investors search for higher yielding investments.

Currently, the U.S. economic recovery is slowing significantly.  The Federal Reserve has made it clear they will be moving forward with another round of quantitative easing either in November or December, and the market and forex brokers have begun to price this news into the currency market and the dollar has gotten slaughtered.

Where is the Dollar Headed?

This chart, which can be pulled up in almost any forex demo account for free, shows U.S. dollar weakness in the most liquid currency pair traded, the EUR/USD.  Over time interest rates tend to drive currency value and the incredibly low interest rate in the U.S. has caused the dollar to be sold aggressively.  Thus, we come to the biggest fear of all:  if investors want no part of the U.S. dollar during times of normal economic growth and they want the U.S. dollar only during times of economic uncertainty because of confidence in the U.S. government, what will happen if investors lose confidence in the safety of the U.S. dollar?  Then, there would be no reason to ever hold the dollar.  Investors already want no part of the dollar during periods when the global economy is moving forward.  If investor sentiment toward the U.S. shifted, and investors no longer felt confident in the sovereign health of the U.S., then the days a cataclysmic collapse of the U.S. dollar could be a realistic happening.

Another round of quantitative easing from the Federal Reserve is going to begin really worrying some investors.  Keep focused on the sovereign health of the U.S.  As soon as credit rating agencies begin warning the United States, then the early stages of a severe run on the U.S. dollar could begin to unfold.

Daniel Burkhart is a trader by day, writer by night and part owner of Accutemp