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Showing posts from October, 2020

Sound Advice: October 14, 2020

“I like the dreams of the future better than the history of the past.”Thomas JeffersonHistory is a useful, though not infallible, guide to what lies ahead. Invariably, excess in one direction is followed by offsetting movement in the other direction. Strength is followed by weakness and vice-versa. Within the universe of investments, there are those that do better than the averages and those that do worse. When interest rates are low and credit is loose, the stage is set for an acceleration of growth. When interest rates are climbing and credit gets tighter, the brakes are being applied to economic advances.Stocks tend to rise when investors expect earnings to rise. They weaken when the view ahead is less rosy. Bonds rise when interest rates are dropping. Typically, this takes place when monetary policy eases or when investors’ fears prompt a flight to quality. As business conditions improve, monetary policy tends to tighten, causing bond prices to fall and bond yields to rise. As int…

Sound Advice: October 7, 2020

Why Dollar-Cost Averaging is a Good IdeaAt times such as these when more than a few reasonably experienced Wall Streeters have commented on the richness of current stock valuations, it makes sense to review worthwhile investment approaches that have been tested over time.One that tends to get a lot of lip service, though certainly less attention in practice, is Dollar-Cost Averaging.With that strategy, the investor commits to buying a fixed-dollar amount at regular time intervals, which might be monthly, quarterly or some other period.One of the key arguments in favor of Dollar-Cost Averaging is the benefit of gaining an average cost over time, rather than committing all at once and risking the possibility of being on the cusp of a significant market downturn.For most investors, this benefit may sound more promising than it really is.Why?Since the market moves up two-thirds of the time, the probability is that the average prices paid will be higher than they might have been from a one…