Can you tell the difference between real and ‘fake’ stock prices? New study says that most people can
There's a neat online video game that tests whether you can identify real stock data from randomized, generated data. The game is called ARORA, an abbreviation for "a random or real array" of prices.
(found via Technology Review)
The purpose of the game
Many economists argue that markets are efficient, meaning prices reflect ...
Complete list of Investing articles
Buffett: The Making of an American Capitalist book review
Warren Buffett is a man who needs little introduction. He's America's most famous and successful stock picker. His holding company Berkshire Hathaway has seen spectacular returns in the past.
This is a story that sets the stage for Roger Lowenstein's biography Buffett. The very opening of the book is a graph ...
Diversification as a long term investment strategy
Diversification is usually discussed as a method to lower risk. And rightly so: investing in many stocks reduces the influence of any particular holding.
But there is another, lesser talked about benefit to diversification: big returns for long-term investors.
I learned about this benefit during a high school investment seminar, and it ...
Protecting your nest egg
This is so beautiful, and yet in a way so scary. A bird's nest in the winter is entirely exposed to the elements, much like your stock portfolio "nest egg" during a recession.
Birds seek shelter. Shouldn't you?
(Today is just a picture piece...detailed articles to come)
(picture credit: Crystalline Radical)
The Misbehavior of Markets
Personal note: this is the first post since my hiatus a few weeks ago...Postings will still be slow in the next week. Also, if you're emailed me I'm still working on replying back--but hope to be back to full speed soon. Thanks for understanding during this transition.
Why do markets misbehave? ...
Think about more than timing: 6 questions you should ask yourself before making any investment
While there are many issues to consider when investing, most people make a decision based on a single question: "Is it a good time to buy?"
I can sympathize because I used to think that way. My first investment was a speculation on an airline stock since I had a hot ...
4 tips for making the most of the recession
The recession has been painful. Some of my friends have lost their jobs. Others are finding it harder to stay afloat. But this is no time to look down--rather, one must make the most of a bad situation.
There are opportunities during bad times. But to see them, one has to ...
Keeping perspective during the economic downturn
photo credit: notsogood
Investment losses never feel good. Perhaps the worst part is that the losses remind us we are not always in control. The stock market is impacted by unpredictable macro-economic events. We can't control government bailouts, job layoffs, and irrational panic, but these are the things hurting all ...
Do stocks bounce back after a recession?
They do, but that may not be as interesting as it sounds.
Many advisers have recently circulated a chart illustrating how the stock market recovers. Though each company has added its own touch, the original data come from Ned Davis Research, Inc.
Here is one version from Charles Schwab:
source
The data seem impressive. ...
3 important lessons from the financial crisis
It's hard to know what to think these days. I find myself overwhelmed sorting through all the data and predictions. It's time for reflection, so here are three of my lessons during this downturn:
1. Saving for emergencies: time to revive age old wisdom
Ancient societies understood the need to save for ...
Calculating stock or investment returns: the difference between ROI and IRR
Whether you are investing in the stock market or a business project, you need to understand rates of return. Stock gurus talk about things like ROI and IRR, but what do they mean? I'll go through the logic of each method and explain why IRR is my preferred choice.
Rate of ...
Age old wisdom for dealing with the financial crisis
photo credit: Brian-Progressive Spin
Lately I’ve been fielding a lot of questions about the financial crisis. What should I invest in? When will the market recover? What is causing it?
I pause before I answer. The truth is no one can answer these things with much certainty. My own opinion is to ...
Which investment news is worthwhile?
These days it is not much fun to read about the markets. So I think it's important to keep a good sense of humor. On that note, today I share a light story from one of my previous email newsletters (you can sign up here).
Friend: I can't believe it. ...
Improve Savings by Planning for Failure?
My friend was thrilled to find a multimedia section at her library. It had movies, even new ones, for a one-week loan. And the best part was DVD rentals were free. She quickly cancelled Netflix and rejoiced in saving hundreds of dollars a year.
All was going well until she got ...
Take Fewer, Not More Risks with Your Money
image source: szlea via flickr
Financial people often tell you to take more risks, especially when you’re young. Why is that, and is the advice any good?
The usual reasons I hear to take risks early are (1) you can’t do it later (2) it’s easier to recover from failure. But by ...
The Basics of Managing Inflation Risk
What is inflation?
Inflation refers to an increase in the average price level in the economy. One way economists measure inflation is by tracking the price of an “average basket” of goods in the economy. The most common inflation index is the Consumer Price Index.
It’s important to remember that ...
Thinking about the 401(k) Account: Should I Have One? How Much Should I Contribute? What are the Risks? Trying to Interpret the Experts
Planning for retirement raises a number of difficult questions. I'll admit that I often get confused coming up with answers. And I'm an economics graduate who started investing in high school and enjoys reading financial articles. I have sympathy for anyone that feels overwhelmed or confused by the ...
Is Sex Making Men Lose Money?
This is a thought that crossed my mind after mulling over a few recent studies.
I came to one gut reaction: internet pornography is making men lose more money.
Take a look at the evidence for yourself. What do you think?
1. Overwhelmingly, Men Look at Internet Pornography
There are some amazing (and ...
Risk is Not the Science of Calculated Odds; It is an Art of Skepticism
We can measure and compute risks more accurately than any period in history. But is this a good thing for risk management? I'm not sure, and I see two separate problems.
One issue is that more information can confuse rather than inform. Just ask yourself if the risk assessments of nutrition ...
Most Financial Advisers Don’t Put You First
This is the second article in the Mind Your Decisions “week of skepticism.” All this week I am discussing misguided or crooked financial advice. The general theme is to be more careful about advice from people who sell you products or don’t consider strategic implications. See the first article on ...
The Calculating Guru Asks: When Should I Care about Market Swings?
The Calculating Guru is Presh’s alter ego—a cold, number-crunching force. TCG is not a financial professional--use your own judgment or consult a professional before implementing any ideas. Read more about TCG here.
Special thanks to Glenn B. for the idea.
Does it matter when a stock has a good year or a ...
Financial Tools
In response to a reader request, I have created a separate page dedicated to the financial tools and spreadsheets that I develop.
So far, I have put up the popular "The Simple Expense Tracker" and the "APR and APY Converter."
Stay tuned as more tools are upcoming, like how to track investment ...
Understanding the rule of 72: a popular rule that has little practical value
The Doubling Question: If your money grows at a certain rate, how long will it take to double?
You can surprisingly answer this question without doing much math. All you need to know is the Rule of 72, which states:
For instance, if an investment returns 6% annually, it will take 12 ...
APR and APY converter
I've made spreadsheet that converts an APR to an equivalent APY (and vice versa) to complement my article about the difference between APR and APY.
You have to enter a frequency of compounding. Many savings accounts like ING's Orange Savings compound interest monthly. This means you enter 12 for the compounding ...
