Tag Archives: investments

Mar 26 2022

THE 33-33-33 PORTFOLIO

For decades, a 60/40 (60 percent stock, 40 percent bond) investment portfolio has been encouraged by financial advisors. However, we live in a new world, so in recent years a 33/33/33 allocation has been suggested, with investments divided equally among stocks, bonds, and alternatives. This shift in portfolio strategy is the result of unsustainable stock prices, looming inflation, and expected higher interest rates.  

The alternative investments include assets such as venture capital, real estate, private equity, private debt, commodities, and cryptocurrencies. These asset categories offer investors enhanced diversification, and have a low correlation with stocks to provide an inflation hedge. 

Real estate offers an opportunity for an improved yield for investors with a lower risk tolerance. Venture capital and private equity are suggested for investors comfortable with more risk.

Recent J.P. Morgan research revealed that an allocation of 30 percent of these alternatives can substantially increase annual returns, while strengthening portfolio stability and decreasing risk. However, these illiquid assets can’t be quickly sold, or liquidated, so careful cash-flow planning is also necessary.

Remember, every portfolio must be personalized to the needs of the individual based on liquidity need, risk tolerance, and the time horizon of financial goals.

For additional information on the 33/33/33 portfolio, go to the following articles.

Article #1

Article #2

Teaching Suggestions

  • Have students research alternative investments (venture capital, real estate, private equity, private debt, commodities, cryptocurrencies) to determine recent returns, risk, and suitability for their personal portfolio.
  • Have students create a visual proposal or video with a suggested investment portfolio for their current or future situation.

Discussion Questions 

  1. What factors should a person consider when planning an investment portfolio?
  2. Describe actions a person might take to determine if alternative investments are appropriate for their financial situation. 
Jan 15 2022

Environmental, Social and Governance (ESG) Investing

An increasing number of investors are seeking a more ethical portfolio with an emphasis on socially responsible and sustainable investing. An emerging trend is environmental, social and governance (ESG) investing, with these factors used to evaluate the financial return and overall impact. 

The ESG score measures how investments and companies perform in these categories:

  • Environmental – carbon emissions, air and water pollution, deforestation, green energy initiatives, waste management, water usage
  • Social – employee gender and diversity, data security, customer satisfaction, company sexual harassment policies, human rights at home and around the world, fair labor practices
  • Governance – diversity of board members, political contributions, executive pay, large-scale lawsuits, internal corruption, lobbying

Many view “sustainable” investing as very vague. The ESG criteria hopes to provide a grading of investments that clarifies what sustainable involves. ESG scores are calculated using different methods. Some ratings are created by using data collected from company disclosures and government, academic and NGO databases. Other scores are developed with self-reported data from participating companies.

Recent benefits of ESG investing include higher returns and a lower downside risk than traditional funds and conventional investments.  To start investing, you can search on your own to identify an ESG fund or an individual stock with a high ESG score that fits your investment beliefs and goals.  Investors can also use a robo-advisor to guide their ESG investment choices.

For additional information on ESG investing, click on the following links:

Article #1

Article #2

Article #3

Teaching Suggestions

  • Have students search online to identify ESG funds or companies they might consider for their investment portfolio.
  • Have students talk with others to obtain the level of interest for ESG investing among potential investors of various ages.

Discussion Questions 

  1. What aspects of ESG investing do you find attractive?  What are your concerns?
  2. What concerns might be associated with methods used to create ESG scores?
Dec 16 2017

Personal Financial Satisfaction

The Personal Financial Satisfaction Index (PFSi), reported by the AICPA (American Institute of Certified Public Accountants) is at an all-time high.  This quarterly economic indicator measures the financial situation of average Americans.  PFSI is the difference between (1) the Personal Financial Pleasure Index, measuring the growth of assets and opportunities, and (2) the Personal Financial Pain Index, which is based on lost assets and opportunities. The most recent report had a Pleasure Index 68.1 in contrast to a Pain Index of 42.1, resulting in a positive reading of 25.9, the highest since 1994.

While the stock market is high, unemployment is declining, and inflation is low, remember the economy is cyclical.  Be sure to consider and plan for your long-term goals. Stay aware and position your financial plan appropriately to safeguard finances when the economy is in a downturn.  Also, analyze your cash flow to an attempt to increase savings, including an appropriate emergency fund.

For additional information on financial satisfaction, click here.

Teaching Suggestions

  • Have students create an action plan for situations that might be encountered in times of economic difficulty.
  • Have students create a team presentation with suggestions to take when faced with economic difficulties.

 Discussion Questions 

  1. What are examples of opportunities that create increased personal financial satisfaction?
  2. Describe actions a person might take when faced with economic difficulties.
Jan 7 2017

5 Things You Need to Know About Dow 20,000

“The Dow’s ongoing flirtation with the 20,000 market milestone is the talk of Wall Street.”

The 120-year-old Dow Jones Industrial Average consists of 30-blue chip stocks that make up arguably the world’s best-known stock index.  At the time of this article and this blog post, the average is trading at near record levels and threatening the break the 20,000 mark.  So how important is breaking the 20,000 barrier?  Consider the following five questions.

  1. Why, with the Dow so Close to 20,000, can’t it get over the hump?
  2. Is Dow 20,000 a big deal?
  3. Does a new milestone mark a new stage of the bull run we’ve seen?
  4. Will Dow 20,000 improve the mood of investors?
  5. Is Dow 20,000 a reason to buy?

Adam Shell, in this USA Today article, provides some answers to the above 5 questions that can help investors keep a more balanced perspective on what a Dow 20,000 really means for both individual investors and the economy.

For more information, click here.

Teaching Suggestions

You may want to use the information in this blog post and the original article to

  • With so much in the news about the stock market, record high values, a possible correction or pullback in market values, the Federal Reserve’s interest rate changes, and other economic factors, you may want to use this article and this blog post to explain why the Dow Jones Industrial Average is just one of many factors that affect investors, the market, and the economy.

Discussion Questions

  1. Since the Dow Jones Industrial Average is in record territory, is this a good time to invest in the stock market? Explain your answer.
  2. At the time you answer this question, what is the current Dow Jones Industrial Average? Has it gone up or down in the last six months, and what affect has the change had on the stock market and the economy?
Oct 15 2016

How the Presidential Election Will Affect Your Investment Strategy

“The sky is falling!  If my chosen candidate doesn’t win, the markets are doomed and so are my investments.”

In this article, Bijan Golkar points out that a presidential election can cause excitement or despair depending on if you are a Republican or a Democrat and who the major parties nominate for the highest and most powerful office in the world.

The article discusses market returns both before and after a presidential election year and some of the underlying reasons for market volatility.  Then the article stresses the importance of a person’s long-term goals and a plan for long-term growth as opposed to “emotional investing.”  Finally, the article discusses the pros and cons of our economy that could affect investment values.

For more information, click here. 

Teaching Suggestions

You may want to use the information in this blog post and the original article to

  • Discuss the importance of a long-term investment plan that will take advantage of the time value of money.
  • Describe some of the pitfalls of “emotional investing.”

Discussion Questions

  1. What are the typical characteristics of an emotional investor? Of a long-term investor?
  2. What are the advantages of a long-term investment program when compared to “emotional investing?”
Jan 16 2016

Investor Alert: Securities-Backed Lines of Credit (SBLOC)

SBLOCs are loans that are often marketed to investors as an easy and inexpensive way to access extra cash by borrowing against the assets in your investment portfolio without having to liquidate these securities.  They do, however, carry a number of risks, among them potential unintended tax consequences and the possibility that you may, in fact have to sell your holdings, which could have a significant impact on your long-term investment goals.

Set up as a revolving line of credit, an SBLOC allows you to borrow money using securities held in your investment accounts as collateral.  You can continue to trade and buy and sell securities in your pledged accounts.  An SBLOC requires you to make monthly interest-only payments, and the loan remains outstanding until you repay it.  You can repay some (or all) of the outstanding principal at any time, then borrow again later.  Some investors like the flexibility of an SBLOC as compared to a term loan, which has a stated maturity date and a fixed repayment schedule.  In some ways, SBLOC are reminiscent of home equity lines of credit, except of course that, among other things, they involve the use of your securities rather than your home as collateral.

The Financial Industry Regulatory Authority (FINRA) and the SEC’s Office of Investor Education and Advocacy (OIEA) have issued an investor alert to provide information about the basics of SBLOC, how they may be marketed to you, and what risks you should consider before posting your investment portfolio as collateral.  SBLOCs may seem like an attractive way to access extra capital when markets are producing positive returns, but market volatility can magnify you potential losses, placing your financial future at greater risks.

For more information, click here.

Teaching Suggestions

  • Ask students to prepare a list of possible advantages and disadvantages of securities-based loans.
  • How might market volatility magnify potential losses placing your financial future at a greater risk?

Discussion Questions

  1. How are securities-backed lines of credit different from home-equity lines of credit?
  2. Why some investors prefer SBLOC to a traditional short term loan?
Sep 12 2015

10 Reasons You Will Never Get Out of Debt

“Do you feel as if you’ll be in debt forever?  You’re not alone.”

According to a CreditCards.com survey, 13 percent of Americans say they’ll never pay off all their loans, and another 8 percent say they won’t pay off what they owe until they’re 71 years old.  While the results of the survey are discouraging, this Kiplinger article describes the following 10 reasons people can’t get out of debt and also provides suggestions for getting out of debt.

  1. You don’t know how much you owe.
  2. You pay only the minimum.
  3. Your mortgage is too big.
  4. You took out too many student loans.
  5. You can’t say no to your kids.
  6. You don’t have money for emergencies.
  7. You feel a sense of entitlement.
  8. Your car loan is too long.
  9. You rack up late fees.
  10. Your interest rates are too high.

For more information, click here.

Teaching Suggestions

You may want to use the information in this blog post and the original article to

  • Explain how people get in trouble when they make financial decisions without considering the consequences.
  • Go into more detail about how each of the 10 reasons described in this article affect an individual’s financial future.

Discussion Questions

  1. How do you plan to balance your objective of creating an enjoyable and entertaining life with the objective of building a secure financial future?
  2. Based on the 10 reasons in this article, what steps can you take to improve your financial planning for the future.
Aug 1 2015

The Retirement Number Secret No One Wants to Tell You

There’s a substantial gulf between the amount of money Americans have actually saved for retirement and what they might need to last throughout their golden years.”

This article reports the results of a survey conducted by the Employee Benefits Research Institute which discovered that nearly three in five people surveyed had saved $25,000 or less for their retirement.  Even worse—more than a quarter of those surveyed had saved less than $1,000.

To help plan for retirement, many financial experts suggest that you need between 70 and 85 percent of whatever yearly income you had during your career in order to sustain the lifestyle you enjoyed prior to retiring.  While these calculations provide a recommended dollar amount to provide retirement income, the same calculations often create two problems.  First, there is often a big gap between what people have saved and what they need for retirement.  Second, the amount of money you need in retirement is based on what’s important to you and the standard of living you want in retirement.  And the you may be the most important part of retirement planning.

For more information, click here.

Teaching Suggestions

You may want to use the information in this blog post and the original article to

  • Explain why you should plan for retirement early in your career rather than waiting until you are about to retire.
  • Reinforce the concepts of the time value of money and a long-term saving and investing program.

Discussion Questions

  1. Many financial experts suggest you begin retirement planning as soon as you begin your career. What are the benefits of planning for retirement planning sooner rather than later?
  2. How is the time value of money related to a long-term investment program and retirement planning?
Jul 22 2015

How to Open a Mutual Fund Account at a Brokerage Firm

“It’s easy to figure out the right type of account—just start with what you’re saving for.”

Too often, investors want to invest, but they don’t know where to start.  While most investment companies and brokerage firms make it as easy as possible to open an account and begin investing, for many would-be investors opening an account is confusing and often traumatic.

The link below describes a practical approach that helps would-be investors to begin investing at Vanguard—one of the largest and most successful companies in the investment world.  Note:  The link below provides information for Vanguard, but other investment companies and brokerage firms provide similar information on their websites.  At the Vanguard site, there is basic information about mutual funds.  Then specific information about fees and no-load funds is included in the section “Discover Vanguard’s Advantages.”  Next, there is a section on choosing the right fund.  Then, information about different types of investment accounts is provided.  Finally, there is a 3-step process that can be used to open an account.

For more information, click here.

Teaching Suggestions

You may want to use the information in this blog post and the original article to

  • Remind students of the advantages of beginning to invest sooner rather than later.
  • Visit the Vanguard (or other investment or brokerage firm websites) for more information.
  • Encourage students to open a mutual fund investment account when they have saved the money needed to begin an investment program.

Discussion Questions

  1. Why do you think people are reluctant to begin investing?
  2. Even though investment companies and brokerage firms make the process as easy as possible, people are often “afraid” to open an account and begin investing. How can you overcome this fear?
Jul 4 2015

Quiz: What’s Your Financial SPF Factor?

“So put aside that beach read for a few minutes and take this quiz to assess your financial SPF factor.”

While most people recognize SPF as standing for sunscreen, SPF–as defined in this article stands for Save, Protect, and Fund.  After a brief explanation of each SPF financial term, the article asks 11 questions that someone can use to help gauge their financial knowledge and financial planning skills.

At the end of the quiz, you are also told how your answers stack up and then the article provides suggestions about how to improve not only your score, but also your ability to plan for your financial future and retirement.

For more information, click here.

Teaching Suggestions

You may want to use the information in this blog post and the original article to

  • Stress the importance of effective financial planning over your lifetime.
  • Begin a discussion about the benefits of long-term investments.
  • Review time value of money calculations.

Discussion Questions

  1. How can financial planning help you obtain your goals and objectives?
  2. Why should you begin investing sooner rather than later?
  3. A common problem for some people is they don’t have the money they need to begin an investment program. Given your current circumstances, what steps can you take to “find” the money to start an investment program?