Novel Investor

Compounding investing wisdom...

Happy Hour: Hedge Fund Ads & Earnings Season

by Jon

Welcome to the end of the week and another edition of Happy Hour! Just sit back, relax, and enjoy your end of the week roundup of all things interesting in the land of  money.

Hedge Fund Ads

This week, the SEC made the poor decision to lift the ban on hedge fund advertising. Its been 80 years since the ban took effect. While there still are restrictions in place limiting who is eligible, (you must be accredited which means have a net worth of $1 million or more, not counting your home, or have an annual income over $200,000 in the past two years) understand that these funds have underperformed the S&P 500 in recent years. In other words, anyone with money in a hedge fund was better off in an index fund! Continue Reading…

Market Cap Weighted Index: Benefits And Pitfalls

by Jon

market cap weighted indexIndex funds are the most popular investment product used today. Most of those funds are based on a market cap weighted index.

But do you know how market cap weighting works? Or how it affects your portfolio? It pays to know how the index works, so you understand how the fund and your money is invested.

Cap Weighted Index

An index is used to measure the performance of financial markets. A market cap weighted index uses, you guesses it, market cap to build the index. Market cap is the stock price multiplied by the total number of outstanding shares.

In a cap weighted index, the stock with the largest market cap gets the highest weighting in the index. The second largest gets the second highest weighting and so on, down to the smallest market cap stock. But it doesn’t end there. Continue Reading…

Contrarian Investing: Going Against The Grain

by Jon

Contrarian InvestingJust like arguments, there are two sides to every investment. Behind that are investors reacting to news, both good and bad. When enough people believe the news, it moves prices. Sometimes that information is spot on and it warrants a price swing. Other times it’s not, yet the majority reacts anyways. That is where contrarian investing comes in.

When everyone is running for the exits, most people don’t think to walk inside. Most just follow along and head for the door. It may sound counterintuitive to go against the grain. Yet, a contrarian investor sees an opportunity, does the opposite, and walks inside.

What Is Contrarian Investing

Contrarian investing is an investment strategy that goes after the unpopular choice, the beaten down stock (or sector), and doesn’t follow the crowd. Continue Reading…

Happy Hour: July 4th And New Treasury Notes

by Jon

Welcome to the end of the week and another edition of Happy Hour! Just sit back, relax, and enjoy your end of the week roundup of all things interesting in the land of  money.

July 4th

Can’t argue with an early edition of happy hour. Have a great Independence Day!

Floating Rate Treasury Notes

In other news, the Treasury will start issuing floating rate T-Notes later this year or early 2014. Just because it’s available doesn’t mean you should own it. Take the time to do some research and see if it fits with your investment strategy. You can get a general idea about floating rate bonds here. Continue Reading…

Create A Stock Watch List

by Jon

stock watch listThere are a number of great tools you can use to simplify and streamline your investment process. An investor armed with a good stock screener, an investment checklist, and a stock watch list is set for success.

There’s a number of reasons to create a watch list. First, it’s an easy way to track your portfolio. It keeps you updated on all the news and information around the stocks and funds you own.

A stock watch list is most useful for tracking those great companies you run across through research but don’t meet your price requirement yet. You can try to remember it or you can write it down.

You ever go grocery shopping without writing down what you need. It works when you’re just grabbing bread and milk. But what if its several dozen items?

Shopping for stocks without a watch list is like grocery shopping by memory. Continue Reading…

Happy Hour: Optimism And Selling Low

by Jon

Welcome to the end of the week and another edition of Happy Hour! Just sit back, relax, and enjoy your end of the week roundup of all things interesting in the land of  money.

Optimism

Investing seems to be only place where there’s a constant struggle between optimism and pessimism. The markets are full of both and the media is their battleground. There’s a constant flow of information trying to convince us to one side.

It’s easy to get swept up in the all the short-term rhetoric (the sky is always falling for someone). The odds for long-term success is so much rosier. Most of the time we should just shut it off and focus on the big picture. Continue Reading…

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