The gimmick of dollar cost averaging (DCA)
You just received a $100,000 in cash. Do you invest the money all at once, or do you spread it out into equal investments using dollar cost averaging? Most advisers will say to dollar cost average, but I do not think this is the right answer. Dollar cost averaging has nearly ...

Siegel’s paradox about exchange rates
Exchange rates always seemed simple to me, until I learned a bit more finance. There are some quirky things that can happen, as today's problem will illustrate.

Year End Financial Checklist, 2010
The end of the year is an interesting time financially. It's a natural time to review the last 12 months and plan for the upcoming year. It's also a time to take action. Because many financial activities like taxes and insurance are based on the calendar year, it's important to take ...

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 ...

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 ...

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 Automatic Millionaire: book review and criticism
Can you become a millionaire...without making a lot of money or having willpower? You can, promises money writer David Bach in The Automatic Millionaire. Bach is one of the most popular money advisers and his explanations can be very catchy (he's the one who coined the term "the latte factor"). Does ...

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 ...

The Money Book for the Young, Fabulous and Broke
What advice would you give to young people struggling with debt? I was wondering this question and decided to see what the experts had to say. I recently read The Money Book for the Young, Fabulous & Broke by financial expert Suze Orman. I have seen Orman appear on TV many ...

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 ...

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 ...

Using mechanism design to improve your finances…it’s as easy as splitting a Coke
I have to thank my fifth grade math teacher for unintentionally introducing me to game theory. The game theory is hidden in the following extra-credit problem that he asked us: My mother would often give a can of Coke to me and my two brothers and tell us to split it. ...

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 ...