Financial Planning

Recovery in Technology

 April 27 2017     Matt Woebkenberg
The technology sector has provided a wonderful example of the need for diversification.  If you bought the technology sector ETF at the peak of the tech bubble in 2000, you would just now be breaking even on that investment (chart below).This is one of many examples of this phenomenon.  Another very famous example is Japan's Nikkei 225 Index.  The Nikkei peaked in December of 1989 and still has no...

Long Term Progress

 April 26 2017     Matt Woebkenberg
We have written before about the importance of gradual improvement, and I recent stumbled across a new post that depicts exactly that.  This article, "A history of global living conditions in 5 charts," takes a 200 year perspective to show just how much things have improved in a few important categories. Child MortalityIn 1920, 32% of children died in first five years of life.  In 2015, that numbe...

Markets and International Politics

 April 25 2017     Matt Woebkenberg
Markets are inextricably linked to politics.  Government policies can have a dramatic effect on individual industries, and over time, entire markets.  With the rapid globalization of the past couple decades, domestic markets are now effected by policies in other countries.  This makes perfect sense as domestic companies become more reliant on their international businesses for growth.  In fact, 45...

How are Tax Dollars Spent?

 April 24 2017     Matt Woebkenberg
Interesting picture on where your tax dollars go from the National Priorities Project.We will be watching to see how increasing interest rates grow the relative allocation to interest payments on the Federal Debt.

Friday Financial Terms: Alpha

 April 21 2017     Matt Woebkenberg
Alpha is a great finance term.  It is a simple concept that has been wrapped in an unnecessarily jargon-y word.  The barriers to entry in basic finance are about 98% jargon and 2% math.  Put simply, alpha is just any out-performance by an investment manager vs. his benchmark.  For example, if I was managing a portfolio of large U.S. stocks, I would most likely be benchmarked to the S&P 500.  If th...

Markets Only Look Forward: Tesla

 April 20 2017     Matt Woebkenberg
Tesla stock has been in the news recently as Tesla became (briefly) more valuable than both General Motors and Ford when measured by market cap.  This comes despite the fact that Tesla has never actually made money (had positive net income) and, in fact, lost over $650 million in 2016.  For comparison, GM had net income of $9.5 billion in 2016 and Ford made $4.5 billion. Tesla, despite losing mone...

Robot and Human Collaboration

 April 19 2017     Matt Woebkenberg
Here are a few videos showing how robots are working with humans in various industries.  In these scenarios robots are serving a complementary role to many human employees.  For the foreseeable future, this will be the norm far more often than entirely automated industries.

Pop Quiz

 April 18 2017     Matt Woebkenberg
Pop quiz: You invest $100 in a stock. The stock drops by 25% in year 1 and then increases in value by 25% the following year. How much is your investment worth today?       A. $125.25       B. $100.00       C. $93.75       D. Who cares, just tell me the answer.If you answered C, your answer is correct. If you answered A or B, don’t be discouraged. Many people struggle to think in terms of compound...

Markets Only Look Forward

 April 17 2017     Matt Woebkenberg
The Wall Street Journal recently wrote an article about Flipkart receiving a $1.4 billion investment.  FlipKart is billed as the Amazon of India and is a private company with the goal of dominating the growing India e-commerce market.  With this recent investment, Flipkart was valued at almost $12 billion (down from previous $15 billion valuation).  Fascinatingly, Flipkart managed this $12-15 bill...

Friday Financial Terms - Stock Split

 April 14 2017     Matt Woebkenberg
Stock splits occur when a company increases its number of share outstanding using a stated ratio. For example, a company that announces a 2-for-1 stock split is in effect saying "for every 1 share of stock you own in your account, you will now own 2 shares after the split". The price of the stock adjusts to the split ratio as well. If the stock you owned traded at $50 before the split, it would tr...
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