Investing
Archived Posts from this Category
When Fed Rates Go Down, Mortgage Rates can (and did!) Go Up!
Posted by miller on 04 Feb 2008 | Tagged as: Housing/Mortgages, Investing, Personal Finance
Conventional wisdom says that when the Feds cut rates, mortgages rates go down. However, it is also possible for mortgage rates to in fact increase! This is exactly what happened last week when the Feds provided a second significant rate cut in as many weeks. Why does this make sense? We must separate the long term and short term effects of rate cuts. Continue Reading »
What are You Going to Do about the Recent Market Drop?
Posted by miller on 03 Mar 2007 | Tagged as: Investing
It seems like most people aren’t getting overly excited about this last week’s market drop, which is good. To be honest, this is really the first significant drop I’ve experienced first hand. I’ve had 401K/IRA accounts for a while, but always just let those grow in the background. It was right after last May’s drop that I actually bought my shares outside a retirement account. I bought shares of Fidelity’s total market index fund (FSTMX). And as you probably know, the second half of last year did pretty darn well! So how did I react to this recent drop?
Well, I’ve gotten overly excited (ut oh)… and I’m going to act on it (ut oh!), but it’s not what you think! I’m going to buy more. I remember some study somewhere (we’ve all heard that one…) saying this is a good strategy, if you can stomach it. It goes back to the counter-intuitive strategy of “buying losers” that makes rebalancing work so well. Buy when market takes a tumble, and just hold when it takes a big gain.
Anyway, that’s my plan. Is the right thing to do? Come on, we know we can’t answer that question. Only time will tell!
Are Non-Deductible Traditional IRAs Worth It?
Posted by miller on 12 Feb 2007 | Tagged as: Investing, Retirement
Within the last month, I’ve had two friends ask me the same question. Both friends have healthy jobs (lawyer in LA and finance in NYC) with salaries well into the six figures. Their salaries make them ineligible for deductible traditional IRAs and Roth IRAs. Their question was this: Since I can’t get a tax-deductible or Roth IRA, should I even bother in getting an IRA?
(I would like to note that I originally posted this subject here, but Samerwriter pointed out an error in my assumptions. This is my revised conclusions. Big thank you for Samerwriter!)
The answer? MAYBE (unsatisfying, I know). Non-deductible traditional IRAs offer great tax benefits that should not be overlooked. While you can’t deduct your contributions or pull your money out tax free, you can grow your money tax differed. However, as Samewriter pointed out to me, IRA distributions are taxed as income, not just capital gains. Okay, what does this really mean? I’ve broken this down into five main points. Continue Reading »
What are *Real* Returns?
Posted by miller on 11 Feb 2007 | Tagged as: Investing
In financial modeling, inflation can make things messy. Not only does inflation devalue our money over time, but it also makes it harder to get a sense of the value of the dollar in the future. Hence, one common tactic is to do all modeling and analysis using real returns. This means that the numbers will represent present day buying power. It describes the value of the money, not the quantity of the money. Continue Reading »
Note to the High Salaried: Non-Deductible Traditional IRAs are Still Great!
Posted by miller on 08 Feb 2007 | Tagged as: Investing, Retirement
[This post is being re-done here after a commenter's great input. The new results will be quite different!]
Within the last month, I’ve had two friends ask me the same question. Both friends have healthy jobs (lawyer in LA and finance in NYC) with salaries well into the six figures. Their salaries make them ineligible for deductible traditional IRAs and Roth IRAs. Their question was this: Since I can’t get a tax-deductible or Roth IRA, should I even bother in getting an IRA?
Here’s the short answer. YES!!! Even non-deductible traditional IRAs offer great tax benefits that should not be overlooked. They don’t allow you to deduct your contributions or pull your money out tax free, but they do allow you grow your money tax differed. Okay, what does this really mean? I’ve broken this down into four critical points. Continue Reading »
Featured in the 58th Carnival of Investing
Posted by miller on 29 Jan 2007 | Tagged as: Investing
I’m proud to say that my “How Long do You Need to Leave Your Money in the Market” posts are featured in the latest Carnival on Investing. Check out the rest of this Carnival’s posts here. There are ton of good looking posts there (I honestly haven’t have time to read them yet… but some of the synopses look intriguing).
How Long Do You Need to Leave your Money in the Market? Part 2
Posted by miller on 16 Jan 2007 | Tagged as: Investing
In part one, we examined some the basic charactistics of historical S&P 500 data. Most importantly, we noticed that month to month, S&P 500 returns are terribly unpredictable. However, in this part, we will exam how time will be our great risk reducer! We will model our historical S&P 500 data to answer one very important question: long do I need to leave my money invested in the market to reasonably ensure I will have solid returns? I’ll conclude that from historical data, planning on 10 years seems to do the trick.
Can the Professionals Out Guess the S&P 500?
Posted by miller on 12 Jan 2007 | Tagged as: Investing
You know how all the “experts” love to give advice on which funds to buy each year… sometimes for a sizeable fee? I’m sure that you, like me, always wondered how well they actually do. John Bogle would have you believe that they are pretty much just lucky. Well, now that I’m running a blog, let’s test the experts at Money Magazine! Continue Reading »
BFP Follow Up: (120 minus Age) Stock Allocation Rule
Posted by miller on 08 Jan 2007 | Tagged as: Investing, Personal Finance
Jim of Bargaineering ran interesting post examing those new target retirement year funds that many financial companies are offering. I suggested plotting his data in the comments. So with his permission, here we are! Read his post and the comments — there are lots of good thoughts.
How Long Do You Need to Leave your Money in the Market? Part One
Posted by miller on 08 Jan 2007 | Tagged as: Investing
Everyone knows the stock market is a risky investment. It gives hope for high returns, but first you must take your chance in the market up’s and down’s. Year to year, there is a significant chance your investment will do really well, but also a significant chance your investment will do really poorly. The longer you leave your money in the market, the more up’s and down’s you will ride, resulting in a nicely averaged return. At least, that’s the hope. Here, I explore how your risk/return changes the longer you leave your investment in the market. I analyze historical S&P 500 data. Find out why 10 years is the magic number for how long you should plan on leaving your money in! Continue Reading »
