Re: Unique financial nuggets
With the markets soaring, leveraged buyouts by private equity firms reached 41 in q2 2014. The highest since 2014. In terms of dollar amt it us 2nd highest since 2007. So these guys have been buying more as the targets get more expensive. Another sign of froth?
Time will tell. Meanwhile, rinse your hair with Head and Shoulders shampoo.
And repeat.
Source July 17 wsj
#Nuggets](http://www.paklinks.com/gs/usertag.php?do=list&action=hash&hash=Nuggets)
Re: Unique financial nuggets
How to avoid the biggest 401(k) mistakes - MarketWatch
Must read. Only place I would differ a bit. Article states Rebalance every year or two. I would rebalance twice a year. Once in two years seems to far apart.
Re: Unique financial nuggets
O wise one, is it time to sell again ?
Re: Unique financial nuggets
I did my rebalancing the last time we discussed. Abt 2 months ago I think. At the time I recall mentioning I did bit more than rebalncing. Reduced stock allocation from abt 68 to 63 pct. In other words I changed my asset allocation. This is NOT recommended by most advisors. And I agree. But the allocation mix did not change that much. So not a major move.
Now I am kind of done with rebalancing. If you hadn't done ur rebalncing earler this is as good as a time as any.
Re: Unique financial nuggets
Southie....Why do gold prices change when stocks go down?
Re: Unique financial nuggets
Mahool
I am not into gold. When it was at 1850 per ounce some here were bullish. It was clear that gold was over values then. Now it is at 1300. No idea where it will be tomorrow or next year.
One thing to note - gold has barely kept pace with inflation over last 150 plus years.
I typically don't pay attention to day to day price movements is the stock market. And I don't follow gold.
Re: Unique financial nuggets
Thanks for the reminder. Rebalanced ever so slightly. Reduced stock allocation by 0.33 pct and moved that to cash.
Re: Unique financial nuggets
Ok Mahool. I got time to kill. So I will attempt to answer per my limited grasp.
It is my understanding gold is popular during geopolitical crisis. People also stock up on gold to fight inflation (though gold has barely kept pace with inflation). Gold should up post 2001 from abt 250 to 1850 in the year 2012 I think. Some may attribute to multiple wars during this time. In the shirt term whenever there is geopolitical crisis gold seems to shoot up.
Now during such crisis stocks take a hit. People "rush to safety of gold and govt bonds" Yes most people think short term and get played like a yo yo.
Re: Unique financial nuggets
That is why during crisis bonds and gold go up in price. And stocks drop.
Now let us look at inflation. Bond yields rise at hint of inflation. So prices drop. Stocks may drop initially. Cause net present value of future cash flows is decreased due to higher rates. Gold may initially rise. Cause people get all worried and rush to gold for "safety" But eventually, stocks do ok. Cause their earnings Power may increase with inflation since they can charge more for their products.
So in the long run, stocks do all right. Bonds also have a place in one's portfolio. I can't see why anyone would go for gold. Except in the Olympics.
Re: Unique financial nuggets
Today Monday wsj had article on walk street strategists trying to guess where mkt will rend up. Apparently the financial advisers who put their clients money to work rely on these advisers to guide them on market direction for each year.
Wait a minute. So these advisers pay so much attention to short term direction? And charge clients 2.5 pct of assets. AND a break up fee? What is not to like?
Re: Unique financial nuggets
So how do these strategists provide guidance? Not very well.
Re: Unique financial nuggets
Some were bullish in 2001. Mkt rose only 25 pct. Same were bearish last year. Mkt up 32 pct.
Then they were bearish at start of 2014. Mkt kept.going up. Now they r bullish.
How abt simply recognizing in 2009 March mkt got oversold. And rebalance occasionally. Seems like a better and more reliable strategy than these jokers.
Re: Unique financial nuggets
What is diversification of investment? What does mean by rebalncing of stock?
Re: Unique financial nuggets
Southie....Why do gold prices change when stocks go down?
Let me see if I can make sense. When people think the economy is doing well, they tend to invest in stock ( meaning in companies contributing to the economy ). When they think economy is not doing well, they take the money from stock market and buy gold. That is why when the stock goes down, gold is going up, coz there is demand for goal.
This works well, if you stay with the underlying assumption that the amount of money is fixed ( or relatively fixed ). It goes out the door, if the fed starts printing money. Then you will need an economist or someone insane to explain what happens and why.
Re: Unique financial nuggets
What is diversification of investment? What does mean by rebalncing of stock?
Great question. I will answer with examples.
First everyone should have at least 6 months worth of living expenses in liquid investment. That is bank CD money market etc. That has 0 risk of going down.
On top of that us say I have Rs 1000 worth of savings. First, I need to select or fix my ASSET ALLOCATION. If it is properly DIVERSIFIED, not all assets will go down at same time. Typically stocks and bonds do not move together. Bonds - especially US treasury bonds or other government bonds are considered safer than stocks. In the sense you will ALWAYS get ur money back at the end of its term. So 10 yr bond u get money back after 10 yrs.
Re: Unique financial nuggets
I don't own bonds. But us treasury website shows how to buy them. Or u simply buy a bond mutual fund.
Now suppose I want to put 65 pct of my savings in stocks. 25 pct in bonds. 15 pct in cash. That is my ASSET allocation. Some people would add say 5 pct in gold. Say 10 pct in real estate. But u get the picture.
Re: Unique financial nuggets
Suppose I started investing in 2003 june.
650 stocks
250 bonds
100 cash.
Stocks rose 50 pct from 2003 to 2007 let us assume.
Bonds 30 pct
Cash 10 pct
If u did nothing u have 650 times 1.5 or 975 Rs in stocks
U have 250 times 1.3 or 325 Rs in bonds
And 100 x 1.1 or 110 cash
Total 1410
Stocks 975/1410 or 70 pct (mental calcs)
Bonds 23.3 pct
Cash 7 pct.
So sell some stocks and buy some bonds and put in cash to get to original allocation. This is REBALANCING
Re: Unique financial nuggets
To get to 65 pct in stock I need to sell 5 pct of 1410. Or 70 Rs
To get to 25 pct bonds buy 1.3 pct of 1410 or 17 Rs
To get to 10 pct Cash buy 3.3 pct of 1410 or 43 rs.
So sell rs 70 of stocks. Put 17 in bonds. And 43 in cash. And u r rebalanced.
Re: Unique financial nuggets
does anyone know of any good books on investment/stock investment for someone who knows zilch about finance?
Re: Unique financial nuggets
Stocks for the long run by Jeremy Siegel is a good starting place.
For a person who knows zilch abt finance,
1) asset allocation
2) low cost index funds
3) annual rebalance
4) dollar cost averaging
Is all you need to know.