Word: indexable
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...light, flashing red and green and yellow at the same time. The NASDAQ has plunged a portfolio-punishing 50% from its highs in March. But the Labor Department announced last week that new claims for state unemployment insurance were down sharply last month. The Conference Board's Consumer Confidence Index fell for the third consecutive month, to its lowest level in two years. But the National Association of Realtors reported on the same day that sales of existing homes rose 4.4%, to the highest level since August. The vaunted New Economy may not have suspended the business cycle, as some...
...foreign stocks: the diversification would reduce overall risk. But in the New Economy, the world's stock markets are increasingly moving in sync. A recent Michigan State University study found that the average international stock fund now has a 66% correlation to the U.S. Standard & Poor's 500 index. Large companies are becoming increasingly similar wherever they are located. Investing in Finnish cell-phone maker Nokia these days is more like investing in American cell-phone maker Motorola than it is like betting on the economic power of Finland. With improved communication and with computers managing inventory levels worldwide, companies...
...even the pros can consistently pick the market's tops and bottoms. That's why individual investors are well served by a disciplined approach: investing a certain amount each month, perhaps in a broad-based index fund like the Wilshire 5000. Such dollar-cost averaging ensures that you'll buy more shares when prices are relatively low. And there's also no better time to start a regular investing program...
...credit cards out and shop yourself silly. George W. Bush will be grateful. But remember, you're on your own out there. Retail sales are down. Car buying is depressed. Consumer confidence is fading. Last week GM and Whirlpool announced big layoffs. In November the S&P 500 stock index finished its first 12-month period of negative returns in a decade, according to Bianco Research. In other words, people are getting squeamish...
...priced for a severe slowdown. They will fall further if a recession occurs. But if growth accelerates at the end of next year, as many expect, the market will lift off in advance. Stay diversified and mainly in blue chips. With mutual funds, consider those that invest in an index. Their lower fees help performance in a tough market. With bonds, longer maturities are best as rates fall...