Wealth in Words

Socially Responsible Investing (SRI) is an investment style that caters to environmental, social, and corporate governance concerns. A socially responsible investment has two mandates: find companies that promote positive social impact as well as offer opportunity for financial gain. As it turns out, the two are not mutually exclusive. For example, from 1990 through 2013 an investment in the MSCI KLD 400 Social Index would have produced a higher return on your investment than a buy and hold strategy with the S&P 500 Index. Visually, the chart below dispels the myth that investors may sacrifice some potential gains in order to meet their socially-conscious investment objective. Instead, the opposite may be true. That is, socially responsible companies may make better products and earn more money for their shareholders, thereby creating long-term value through a higher share price. As the markets have evolved so too have SRI objectives, driven by shifts in societal and i...

Since their inception in 1993, Exchange Traded Funds  (ETF’s) have increased exponentially in popularity with institutional and retail investors. The advent of ETF’s to the investment landscape is analogous to the introduction of flat-screen TV’s to the home entertainment arena. In other words, in the investment product space ETF’s function like the sleek, flat-screen High Definition TV’s, while their predecessor, the mutual fund, is big and clunky just like an old TV set. Accordingly, record assets have been invested in these products with hardly a sign of slowing down. This relentless demand is being fueled for a few reasons. First, ETF’s cost less than their primitive counterparts, the index fund and mutual fund. The costs to run a fund are ultimately passed onto the investor in the form of an expense ratio and, with mutual funds, additional sales and load fees. Since ETF’s offer a comparable investment strategy to an index fund (that is, both products are built to mirr...

Dollar cost averaging is a simple, yet effective investment strategy. In effect, you as an investor contribute a set amount of money to an account to buy a fixed amount of an investment regardless of share price. For example, you can set aside $100 a month to invest into a particular product, thereby averaging out the cost per transaction given the fixed amount contributed over the lifetime of your investment. Using dollar cost averaging will allow for you to begin to accumulate wealth in the stock market just as setting aside a pre-determined amount each month for savings will create a financial safety cushion. Additionally, dollar cost averaging is an excellent way to eliminate trying to time the market, which in most cases can lead to paralysis by analysis. In other words, creating a systematic process for investing can help automate the saving process and focus your thoughts on long-term results. For those of you who are new to investing, dollar cost averaging is ...

In the world of investing Blue Chips are known as large, financially established companies with generally attractive stock prospects. Think of iconic American brands like Disney, Walmart, General Electric, Intel, or Visa. In fact, all thirty of the constituents of the Dow Jones Industrial Average can be considered good examples of Blue Chips. Given the financial well-being of Blue Chip companies, they often pay a tasty dividend that can be just as pleasing to your portfolio as those corn tortilla Blue Chips are to your palette. All joking aside, since Blue Chips are well-established financially they generate excess cash that can be returned to shareholders in the form of a dividend. In some cases, the dividend payment and persistent growth in payouts is the best reason for owning one of these stocks. Furthermore, dividend-rich companies can be used as an alternative to comparable fixed income products in a low interest rate environment. In addition to the stream of divid...

Realizing your investment goals takes time. Warren Buffett famously remarked, “Successful Investing takes time, discipline and patience. No matter how great the talent or effort, some things just take time: You can't produce a baby in one month by getting nine women pregnant.” While this comment is somewhat tongue-in-cheek, the premise of staying the course for the long-term when investing should not be overlooked. Investors should write out and review goals at least annually. More visual people can use images or physical objects to help them focus on reaching their investment goals. Ultimately, you as an investor need to have a method to keep yourself focused on the long-term objective. Given the ever-present volatility in financial markets, which can create painful unrealized and realized losses in our portfolios, it is easy for investors to become distracted by transitory price shocks and shift to myopic thinking. For example, w anting to withdrawal all your money during a...