While summer isn’t officially over yet, once those big yellow school busses reappear, it’s hard to not consider it a wrap. Likewise, we’re ready to wrap our summer series of investment basics. We hope that doesn’t mean you stop learning how to invest in ways that bring the greatest meaning to you and your family. After all, to circle back to the beginning, that is what investing is really all about. To...

How do I decide whether to invest in individual bonds, bond funds or both? In our last post, we addressed why we typically advise using stock funds instead of individual stocks to implement your investment strategy. Today, let’s talk about why we usually recommend the same for bonds. For bond and stock investing alike, turning to low-cost, well-managed funds instead of trying to juggle individual securities is a relatively straightforward way...

How do I decide whether to invest in individual stocks, stock funds or both? So far in our summer series, we’ve been talking conceptually. As we inch toward the end of summer (bummer), let’s discuss a few logistics. To put rational theory into practice, we feel most investors are best served by avoiding attempts to pick individual stocks. Typically, the far more efficient approach is to build the stock portion of...

What is rebalancing? Why and when should an investor do it? “Buy low, sell high.” The expression is so familiar that it’s become a cliché. And yet, few investors actually follow this most basic advice. Instead, they panic and sell (low) during market crises, and chase already-hot stocks at premium (high) prices. Deliberate rebalancing is one of the best ways we know of to more consistently buy low and sell...

What is diversification and why does it matter to you as an investor? Risk, Return and Diversification If market risk is the fuel that drives expected returns, diversification is your steering wheel for navigating more assuredly toward your desired destination. As we covered in our last post, if you want to earn a return on your capital, you must put it to work in one or more markets. This also means you...

What are market risks, and how should you approach them an investor? Nothing Ventured, Nothing Gained We’re all familiar with how risk is a double-edged sword. Those who are willing to take on daring risks improve their odds for reaching the greatest rewards. But they also can fall the hardest by stretching beyond the safety net of the status quo. In investing, this means that market risk can be your strongest...

What is asset location and why does it matter to you as an investor? Let’s begin by noting that asset location should not be confused with asset allocation, which we addressed in last week’s post. The two are related, but each makes its own contribution to your investment experience. Asset allocation (as described here) is about spreading your money among different asset classes, based on the amount of market risk...

What is asset allocation and why does it matter to you as an investor? In last week’s Investment Basics Summer Series, we defined asset classes as categories (classes) by which we organize individual securities (assets) that share significant factors. To review: There are broad asset classes for stocks, bonds and real estate. Within these broad classes, there are narrower ones based on company size and certain business metrics for stocks,...

What is an asset class, and why does it matter to you as an investor? Asset classes are categories (classes) by which we organize individual securities (assets) that share significant factors. Significant factors are the ones that help us associate an investment with a particular level of risk and expected return. For example: Significant – Stocks vs. Bonds: Owning (stocks) is inherently riskier than lending (bonds). That’s why stocks and bonds...

As we kick off our Investment Basics Summer Series, we’ll lead with the most important question of all: Why are you investing to begin with? It’s common for advisers and investors alike to rush into talking terminology and leveraging logistics, without first setting the all-important stage. Maybe it’s human nature to want to get right to the task at hand, and why many financial folk seem far more comfortable discussing...