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WHAT DO LOW INTEREST RATES MEAN? Part 1

In economic terms, the Federal Reserve Bank which decides monetary policy is trying to pull our economy out of a recession and jump start growth. As part of this effort, the low interest rates are designed to promote spending by consumers and corporations. Firms fund growth through expansion and frequently take on debt to finance that growth.

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DO YOU CHECK THE PRICE OF STOCKS YEARS AFTER YOU SELL?

I’ve been investing for a long time. And, I’m somewhat of a student of finance and Modern Portfolio Theory. This unscientific exercise reminded me of an historical fact; over long periods of time stocks go up. In the aggregate, patience and time in the market is rewarded. I’m not sure if I would have been better off holding the original portfolio or not, but I’m pleased that our stock holdings have risen these past two years, in spite of the recent downturn.

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WHAT DOES PATIENCE HAVE TO DO WITH INVESTING?

If you pull out your money when the market drops, you lock in the “paper loss” and make it real. Compound the loss with declining to invest during a low price environment. Furthermore, you have another decision to make; when to get back in the market? That is the most difficult question of all.

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