Archive for the ‘Alternatives’ Category

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Stop Crying, It’s Hurting Your Portfolio

Wednesday, November 25th, 2009
If investors just trusted classic investing strategies instead of getting so emotional, their portfolios would be much better off…
  • A new study found investors are making two big mistakes: 1) they get too emotional about their investments and make hasty decisions, and 2) they assume recent performance dictates future performance.
  • The study also explained that the most classic investment strategies – asset allocation and portfolio rebalancing – would help investors avoid these mistakes.

Facts & Figures

  • Over the past 2 years, a basic portfolio with conservative asset allocation and annual rebalancing dropped by only 3.5% compared to a 30% S&P drop during the same time.
  • During a boom, a basic portfolio with conservative asset allocation and annual rebalancing returned 8.3%, not so much less than 9.7% for the S&P.

Best Quote

“People spend all their time looking at the trees and not the forest. It’s the forest that’s important, and that’s asset allocation.” – Gary P. Brinson, Chicago-based Asset Manager

Could You Be Tricked Into A Trade By A Cute Name? Probably.

Thursday, November 19th, 2009

There are lots of risky and complicated investment vehicles available that can mislead investors with the power of cute-sounding acronyms…

  • A psychological phenomenon called “fluency” makes acronyms that sound like familiar words (like “ELKS,” “LYONS,” and “NINJAS”) more appealing than the complicated, clunky investment vehicles they stand for.
  • The same phenomenon extends to stock ticker symbols as well, with snappy and pronounceable symbols tending to outperform clunkier symbols in short-term gains.
  • Investors should be especially cautious when considering stocks or other investment vehicles represented by acronyms rather than their full names. Is it possible that the name is designed to deflect attention from potential risks?

Facts & Figures

  • In an experiment involving ordinary people judging the safety of various fake food additives, easily-pronounceable additives were perceived to be 29% safer than those with hard-to-pronounce names.
  • When Harley-Davidson changed its stock ticker symbol from HDI to HOG, the stock price rose by 5%.
  • Some choice acronyms and what they stand for: BIMBOs (Buy-In Management Buyouts); STRYPES (Structured Yield Product Exchangeable for Stock); SPARQS (Stock Participation Accreting Redemption Quarterly-Pay Securities); PRIDES (Preferred Redeemable Increased Dividend Equity Securities).

Investments in Art Roaring Back

Friday, November 13th, 2009

Huge sales continue to beat expectations as collectors and investors start to buy art again.

  • Pieces by Andy Warhol, David Hockney and Alice Neal were among large lots sold for prices that have not been seen since before the recession.
  • Large auction houses like Sotheby’s or Christie’s host auctions and then take a percentage of the sale price of every lot.
  • Auction houses lowered expectations by 50-75% so that when they make large sales, it looks as if the numbers are better than they actually are. Still, selling a large amount of high-priced art is impressive, regardless of the recession.

Facts & Figures

  • Warhol’s 1962 “200 One Dollar Bills” sold at a Sotheby’s auction for $43.8 million. The seller originally paid $385,000 for the piece in 1986.
  • The Sotheby’s auction totaled $134.4 million against the company’s earlier/ estimate of $97.7 million.
  • Sotheby’s highest auction total was $362 million in May of 2008.

Best Quote

“The art vacation is over. Art has come back more than stocks or housing.” – Jack Tilton, New York Art Dealer

A Venture Capitalist is…

Tuesday, June 30th, 2009

A venture capitalist is someone who provides funding for high earning-potential companies.  It can be early, mid, or late stage investing. For instance, if you have a new and cool idea for a company but you do not have the money to start it, you could pitch your idea to a venture capitalist and hopefully attain early-stage financing.

Alternatives are…

Wednesday, June 10th, 2009

Alternatives are investments other than traditional stocks and bonds, like real estate, start-up companies, and blended funds.

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