By 2 Cents on May 31st, 2010 | Category: Uncategorized | The following is a guest post by author and investment manager Mariusz Skonieczny. Enjoy!
Creating art is different from selling art, and the same goes for investing – the business of investing is different than actual investing. Not knowing the difference may cost you the opportunity to retire with enough money to enjoy the rest of your life.
Any kind of business is ruled by the following equation:
Revenues – Expenses = Profits
It doesn’t matter whether the business is a hair salon, cable company, or investment company. Unless revenues exceed expenses, the business entity will eventually fail. There will not be enough money to pay for employees, rent, and other expenditures necessary to operate the business.
A wise businessperson knows that if the company’s product or service does not satisfy its customers, the customers will eventually leave and the business will suffer. For example, it [...]
Read on and enjoy … Do You Understand the Difference Between Investing and the Business of Investing?
By 2 Cents on May 28th, 2010 | Category: Life Balance | . . . noise, in Western society, is considered a symptom of healthy economic activity. . . The opposite is the case. Noise kills, excessive input does real damage. Information overload clogs our ability to function effectively.
~ George Michelson Foy
Update: This article was featured in the Money Hackers Carnival – BBQ Edition posted at Saving Money Today.
Today’s Friday Food for Thought comes from an article I came across a while ago in Psychology Today on Why We Need Silence to Survive. I know that some of us (usually introverts) require quite a bit of time in solitude in order to function effectively. Still, all of us could probably benefit from a little more silence in this era of loud marketing, social media and general input overload.
As noted in the opening quote, we tend to [...]
Read on and enjoy … Silence Is Golden: How Quiet Can Be Profitable
By 2 Cents on May 27th, 2010 | Category: Investing | When you have to make a choice and don’t make it, that is in itself a choice.
~ William James
Update: This post was selected for the June 1st, 2010 edition of the Best of Money Carnival posted at Free Money Finance. Thanks very much! It was also featured in the Carnival of Financial Planning - Edition#144 posted at Free Money Finance. Thank you!
A lot of smart people advocate passive investing. Passive investors do not try to time the markets. They are usually buy and hold investors who set an asset allocation and rebalance periodically. They have a core belief that their investments will be profitable in the long term, which usually means 20 years or greater.
Many passive investors are adherents to the principles of Modern Portfolio Theory, and by association, the Efficient Market [...]
Read on and enjoy … Passive Investing and the Ostrich Effect
By 2 Cents on May 25th, 2010 | Category: Saving | The best things in life are nearest: Breath in your nostrils, light in your eyes, flowers at your feet, duties at your hand, the path of right just before you. Then do not grasp at the stars, but do life’s plain, common work as it comes, certain that daily duties and daily bread are the sweetest things in life.
~ Robert Louis Stevenson
Update: This article is included in the Carnival of Personal Finance #259 at A Gai Shan Life.
I love TFSAs. I think they’re the best financial “innovation” to hit the market in a long time. Last week, I wrote a lot about the complexities that have built up, wreaked havoc on, and continue to threaten our financial system.
The beauty of Tax Free Savings Accounts (TFSAs) lies not only in their tax sheltering function, but in their simplicity. The [...]
Read on and enjoy … TFSA Withdrawal Rules
By 2 Cents on May 23rd, 2010 | Category: Investing | Everything is something you decide to do, and there is nothing you have to do.
~ Denis Waitley
Update: This article is included in the Carnival of Money Stories #56 posted at Personal Finance Analyst. Thanks!
I recently received an email from a reader I’ll call Karen. Her husband received a large lump sum settlement from an accident in which his neck was broken. (He has regained 85% mobility.) They have 5 children, but have still managed to pay off their mortgage by living very frugally.
They have a proposal from one of the big Canadian banks that includes management fees of $4000 per year. After 10 years, that would amount to $40 000. Karen was wondering if these fees were excessive, and whether or not I had any opinions on their situation.
Some Background Information
Two of their [...]
Read on and enjoy … How to Invest a Lump Sum of Money: Reader Question
By 2 Cents on May 21st, 2010 | Category: Investing | “. . . the real conundrum in modern markets is the continued reliance of investors and policymakers on two false mantras. The first is that markets are efficient; and the second is that investors are rational. Both assertions are so specious that one has to question both the sanity or the intelligence of those who cling to them.”
~ Michael E. Lewitt
Update: This article was included in the Carnival of Financial Planning #143. Thanks!
My goal with this week’s series of posts was to simply make readers aware of some of the structural problems that our markets and economy face right now. We’ve looked at some of the ways today’s markets are different, a few ways to manage your money in challenging times, and 5 investing challenges for the next decade. Today, I’d like to [...]
Read on and enjoy … Modern Portfolio Theory: Fact or Fiction?
By 2 Cents on May 20th, 2010 | Category: Investing | Pleasure can be supported by an illusion; but happiness rests on truth.
~ Sébastien-Roch Nicolas de Chamfort
Update: This post was included in the Money Hackers Carnival #117 posted at Engineer Your Finances. Thanks!
Monday’s post dealt with some of the ways in which today’s market climate is Not Business as Usual. I’d like to expand on that today with a bit more detail on some of the issues I mentioned. Many of the 5 challenges I’m going to address are double-edged swords. They can be productive market forces, but also have the potential to create enormous problems for our financial system.
5 Double-Edged Swords for Investors
Each of these factors is, in some way, interrelated with the others. Each one has been with us for quite some time and may persist much longer. Each [...]
Read on and enjoy … 5 Investing Challenges for the Next Decade
By 2 Cents on May 18th, 2010 | Category: Investing | There’s more than one answer to these questions Pointing me in a crooked line. And the less I seek my source for some definitive The closer I am to fine.
~ Indigo Girls, “Closer to Fine”
Those of you who have been reading Balance Junkie for a while you know that my economic forecast is as follows: Cloudy with a Chance of Hurricanes. As such, I’m going to start with the assumption that we will be living with elevated volatility in the stock, bond and currency markets for the foreseeable future. That means we could see breathtaking downdrafts like the one on May 6th and we will also likely witness violent rebounds that will shake out short sellers (those betting the market will fall).
Many market watchers have sounded the all clear siren in light of the huge stock market rebound and genuinely improving economic data. They say [...]
Read on and enjoy … How to Manage Your Money in Uncertain Times
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