Green Magazine: No B.S. Book - Softcover

Kurson, Ken

 
9780385487597: Green Magazine: No B.S. Book
Softcover
ISBN 10: 0385487592 ISBN 13: 9780385487597
Verlag: Crown, 1998

Inhaltsangabe

Straight-up, jargon-free advice on personal finance for those made nauseous by the phrase "personal finance."

What the hell's a stock? A bond? A mutual fund? And why do I need to know?
Is it better to start investing, or pay off that lingering credit card balance?
Should I borrow money to buy a bungalow? A Jaguar? A jalopy? How?
What's so great about compound interest anyway?
Is the price of this book tax-deductible?

The Green Magazine Guide to Personal Finance answers these questions and provides savvy, sensible money advice for anyone who doesn't want to wade through lots of b.s. Ken Kurson, editor of the critically acclaimed Green magazine, demystifies all types of personal financial matters--investing, retirement planning, credit card debt, student loans, first-time home buying, insurance, taxes--as well as providing valuable information on learning to live within your means, dealing with deadbeat roommates or spendthrift boyfriends, and putting on a cheap wedding. Ken Kurson's engaging yet always pragmatic money-speak is enlivened with real-life examples, pie charts, comics, and dead-on humor. His advice doesn't always sound like Dad's, but it's every bit as solid. The Green Magazine Guide is the only book that speaks to all those who are cynical, intimidated, or simply flummoxed about money matters.

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Über die Autorin bzw. den Autor

Ken Kurson is the founder of Green, a financial magazine that has been profiled in numerous publications, including Wired, Cosmopolitan, Esquire, the Chicago Tribune, Factsheet 5, Utne Reader, and others. A contributing editor and financial columnist at Esquire, Kurson has written about money for a wide range of publications. He has appeared on financial programs on CNBC and ABC, and is a regular on CNNfn. He lives outside New York City.

Aus dem Klappentext

jargon-free advice on personal finance for those made nauseous by the phrase "personal finance."

What the hell's a stock? A bond? A mutual fund? And why do I need to know?
Is it better to start investing, or pay off that lingering credit card balance?
Should I borrow money to buy a bungalow? A Jaguar? A jalopy? How?
What's so great about compound interest anyway?
Is the price of this book tax-deductible?

The Green Magazine Guide to Personal Finance answers these questions and provides savvy, sensible money advice for anyone who doesn't want to wade through lots of b.s. Ken Kurson, editor of the critically acclaimed Green magazine, demystifies all types of personal financial matters--investing, retirement planning, credit card debt, student loans, first-time home buying, insurance, taxes--as well as providing valuable information on learning to live within your means, dealing with deadbeat roommates or spendthrift bo

Auszug. © Genehmigter Nachdruck. Alle Rechte vorbehalten.

More Investment Strategies and Concepts: The Not-So-Basics

Timing the Market

Of all investing clichÚs, perhaps the most overused is "buy low, sell high." While that is, of course, the key to successful equities investing, it's also too often misinterpreted as an invitation to jump in and out of the market.

No one can reliably call the day-to-day direction of the market. By sheer chance, there will always be a few market timers who successfully predict the crashes that occur from time to time. These people--and their firms and newsletters--then become the next big thing, with investors following them around like Hamelin rats.

Don't believe it. Expert after expert has proven incapable of consistently predicting the highs and lows of the market. Investors chronically pile on whatever was hot last year. Technology mutual funds, for example, repeatedly reap high inflows just as they've hit their peak, and pay high withdrawals after returns start to sink. That means that those investors stayed in just long enough to lose money.

Another form of market timing is less obvious but equally toxic, and it's a mistake that market newcomers make all the time (yep, I'm guilty, too). Ever thought to yourself: I want to invest, but the market's been rising so much lately? The corollary thought is: The market's really been tanking lately, maybe I should get out.

These thoughts are understandable. But they're also the exact kind of sentiments that get young investors into trouble. It's tough to take the plunge when the water suddenly turns chilly and it's tough to stay in the action when the market's overheating. But the notion that the market's too high or too low is just another form of timing that young people ought to avoid.

Think of it this way. Being afraid to buy after a market drop is equivalent to going to a store and being excited about a pair of shoes. Suddenly, the clerk notices that the shoes had been mismarked and lowers the price. But the new, lower price makes you not want them anymore. While a big drop in an individual stock often warrants a closer look (though there, too, panic selling isn't going to help), a dip in the market as a whole should be viewed with a cool head.

Another classic timing mistake is overreacting to news that's already widely available. You'll hear people say stuff like "I just heard on CNBC that Merck is going to release a new drug that's going to make a pile of money so I'm going to buy some shares of Merck." By the time news that will affect a stock price is in the paper or on TV, you can bet that it's already built into the price you'll end up paying. Unless you have some sort of information so inside that it's illegal to act upon, count on being beaten to the punch by people who do nothing but follow the health care industry. They've already acted on the news, which drives the price up, and thousands of other viewers or readers are already on the phone to their brokers, driving the price up further. By the time you get there, the price will have likely gone even higher than is justifiable by the good news--and you'll be left holding the bag when those who bought for the quick lift start selling and the price settles back to where it "should be."

Investors' tendency toward bad timing was recently proven by an exhaustive look at trading records by market analyst and finance professor Terry Odean. Using data from a discount brokerage, Odean found that 10 percent of the traders made more than 50 percent of the trades. But he noticed a disturbing trend: most investors bought at the tail end of a stock's run-up and sold at the bottom of a crater.

More often than not, individuals who buy on good news and sell on bad news shoot themselves in the wallet, getting in at tops and selling at bottoms. Reactive, short-term investing decisions are almost always regretted. Investors will do better to come up with a sensible long-term strategy and stick to it. If you're in a stock for the long haul, you'll enjoy the benefits from those who pile in every time there's good news. So do your best to analyze companies based on your expectations of their long-term performance. By all means, be prepared to make a change if whatever attracted you to the stock is no longer valid. But take the daily news events with a big dose of salt--over the long term, those zigs and zags will likely be smoothed.

Misconception: One example from recent stock market history demonstrates how timing the market can be more dangerous than buying and holding. The strong market of 1982-87 lasted 1,276 trading days and returned an average of 26 percent a year. An investor in the S&P 500 who missed just the top ten days during those five years would have had an annual return of just 18 percent. Missing the top twenty days would have meant a 13 percent annual return, while missing the best forty days would have produced a 4 percent return.

Dollar-Cost Averaging

Dollar-cost averaging means investing an equal chunk of money at regular intervals, usually monthly. The point is that when the price of whatever you're buying is low, your fixed amount automatically buys more shares up, and when it's high, you get fewer shares--all without having to follow the ups and downs or trying to time your investment decisions.

Here's how it works. Say you've got $20,000 that you want to invest in the stock market. You've picked a stock mutual fund and on January 1 you put your first $5,000 in. If the fund is selling at a net asset value (NAV) of $50 per share, you end up getting one hundred shares. On February 1, the NAV has fallen to 40 so your next five grand buys 125 shares. On March 1, the NAV of 64 equals 781/8 shares and on April 1, the NAV has returned to 50, meaning another one hundred shares.

All told, your $20,000 has bought 403.125 shares. So even though the average price of the fund during your four months of investing was $51 (50 + 40 + 64 + 50 = 204; 204 * 4 = 51), you only paid an average of $49.61 (20,000 * 403.125 = 49.61). I call that a bargain.

Beyond the nifty little price break produced by dollar-cost averaging, there's the moderating effect it has on your portfolio. Even though the fund began and ended at the same place, there was a lot of volatility in between. The investor in this example, however, didn't have to worry about tracking the fund in the paper or worrying about when to dive in: she was guaranteed not to overbuy at the high price and to pile on at the low.

The strategy works the same way with other types of mutual funds and with individual stocks (perhaps even more effectively as an evening force because of the greater volatility of a single stock compared with mutual funds). This example presumes a large chunk of uninvested cash, say from an inheritance or lottery windfall. A more common form of dollar-cost averaging occurs when people have automatic payroll deduction into retirement plans.

Warning! Dollar-cost averaging is easy and effective. But it's not always the magic bullet it's hyped to be and there're some things you should think about before embracing it.

Even though it's touted as a way to avoid "timing the market," dollar-cost averaging is itself a form of market timing. Nobody knows where the market's going from one day to the next. But because the market does have an upward bias, doling out your money in smallish increments is a way of trying to protect yourself from a collapse the day after you plunge headlong. Young investors, who have time and earning power on their side, may be better off diving in all at once. Some studies have indicated that long-term investors face greater risk missing bull markets than they do getting clipped by sudden dips.

Tip: If you decide to employ dollar-cost averaging, whether through...

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Verlag
Crown
Erscheinungsdatum
1998
Sprache
Englisch
ISBN 10 
0385487592
ISBN 13 
9780385487597
Einband
Taschenbuch
Anzahl der Seiten
304
Kontakt zum Hersteller
Nicht verfügbar
Verantwortliche Person
gpsr@libri.de
gpsr@libri.de

Friedensallee 273
Hamburg
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Deutschland