Our Portfolio 01/01/2010
 
A new part of my website is up.  Under the label of 'Our Portfolio,' I will keep you guys updated on my simulated stock portfolio's performance as well as my own analysis and the thinking process behind decisions that I take. 
 
 
As expected, this news has caused the Dow to open up, dollar to rally, and for gold to drop. 

Payrolls in U.S. Decline 11,000; Unemployment at 10% (Update1) Share Business
By Timothy R. Homan

Dec. 4 (Bloomberg) -- Employers in the U.S. cut the fewest jobs in November since the recession began and the unemployment rate unexpectedly fell, signaling the recovery is lifting the labor market out of the worst employment slump in the post-World War II era.
 
 
By Nazim Toksavul

Ethics... the very word makes many CEO and shareholder alike shudder with fear.  Ethics is a topic that many see as a obstacle to profits.  It may come to a surprise to many, but reasearch has shown that the most ehtical companies are generally the most profitable companies. 

This may seem like a contradictory notion.  So the question remains, why is this so? I attribute it to two main reasons:

1. Ethics Premium
2. Trouble Indicator

Studies have demonstrated that people are willing to pay a premmium for a ethical company's products.  The premium is not that much more higher than that of a company's product that they have no information but it is significantly higher than a company that has been acting unethically.

A company that acts unethically may also be a indicator that trouble may be brewing.  If employees in the company is willing to act unethically in one area, are they willing to act unethically in others if they think that they can get away with it? Is the company acting unethical because acting ethically is a luxury it cannot afford?

Milton Friedman is quoted as saying, "So the question is, do corporate executives, provided they stay within the law, have responsibilities in their business activities other than to make as much money for their stockholders as possible? And my answer to that is, no they do not. "

Perhaps not, but when making your investments perhaps you should consider it.
 
Post Title. 11/27/2009
 
The following story about Dubai possibly defaulting on their loans have hit the airwaves hard for the past few days.  Stock indexes have dropped in response to this.  If Dubai defaults on their loans, it will reverberate through the financial instituations due to the interconnectiveness of the financial market.  My suggestion is to keep an eye out for the next few days and weeks on this current development. 
Dubai default fears rock markets
Global markets had their biggest collective fright since the chaos of the financial crisis as fears that Dubai could default on its debt gripped investors.

Telegraph.co.uk
 
 
By Nazim Toksavul

"According to The American Journal of Medicine, medical problems is the leading cause of bankruptcies in the United States.  According to their most recent study 62.1% of all bankruptcies in 2007 were due to medical reasons with over 90% of the debtors being $5,000 in debt or more.  Of these people that declared bankruptcy in the study, three quarters of them had medical insurance at the time that they bankruptcy.

These numbers are telling.  I think that we can all agree that bankruptcy is not a good thing for society as a whole since it socializes the loss meaning that we all end up picking up the bill for people unable to pay.  In the spirit of keeping this website neutral, I will not offer a solution, but I will state that something must be done in order to fix this.  If medical problems was removed as a cause of bankruptcy, bankruptcies would drop by half.
 
 
By Nazim Toksavul

When making investments, you have the choice of an active or passive investing style.  An active investor will attempt to make profit by researching and analyzing companies and try to sort through the ones he or she believe to be winners, and time the market correctly.  A passive Investor would utilize a more hand-off approach when it comes to investing.  He or she will diversify his or her portfolio so that his or her returns, more or less, matches market performance.  His or her portfolio may contain stocks in as few as two companies—or as much as an index fund comprising an entire stock index, such as the S&P 500, which can number in the hundreds or thousands.  This diversification reduces risk and makes it more or less likely that your returns will match market returns.  Passive investors will more likely buy-and-hold stocks than an active investor.

The question remains, which style is better for you? Research has been conducted comparing the returns actively managed funds vs. passively managed funds.  The results have demonstrated that in the vast majority of cases, passively managed funds have outperformed actively managed funds.  There are two main reasons for this.  One, it is all but impossible to take into account all the past, present and future events that will effect price and make a reliable, consistent and accurate predictions.  The second main reason is that even if you are able to outperform market, you would have to outperform market by a considerable margin in order to break even with a passively managed fund.  The expenses, fees and taxes that you will accrue from an actively managed fund will exceed the costs of a passively managed fund and this will require high returns in order to recover the cost.  So with an actively managed fund, you are already starting from behind.

If you want to play it safe, my suggestion is to invest in a passive manner.  If you want some thrill in your life and play your hand in active investing or trading, then I suggest that you take a small part of your portfolio that you will allow yourself to play with whilst playing it safe with the rest of your portfolio.  I would keep this at or below the annual return of the rest of your portfolio – you probably don’t want to risk cancelling out the rest of your portfolio’s return.
 
 
By Nazim Toksavul

To begin my website, I thought that it would be appropriate to to open explaining the 3W's, that is the What, Why and Where in Investing.

What is Investing

Investing is how you make your money grow or appreciate according to your long-term financial goals.  It is the active redirection of resources; from being consumed today, to creating benefits in the future.

Why Invest

There are two ways to earn money in this world.  You can either exchange your labor for money, and/or you can have your money earn money.  There are many reasons to invest your money.  You might want to beat inflation, save up towards future expenses such as paying for college for your kids, or you might want to save up for retirement.

Where to Invest

Where and how you invest your money depends on your financial goals and and risk aversion.  If you are looking for higher returns, you will have to accept a higher level of risk.  If your risk aversion is high, you may want to look into money market investments or high-grade bonds.  The downside would be the lower returns.  For higher returns but higher risk, you can look into stocks.

Conclusion

Your investment decision will be based on your risk aversion and your financial goals.  In order to make wise and accurate investments, it is important to be educated when making decisions. Otherwise, you may be stacking the odds against you lowering your returns, or worse, coming out with a loss.
 
First Post! 11/15/2009
 
Welcome to my blog.  I have been interested in starting one about a wide array of topics but never got around to it.  I think that this will be a fun and educational endeavor.  Right now I'm not 100% on the direction to take this website but I hope that it will continue to change and evolve over time as new ideas come in and I gain more experience.