Investments

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.
Categories: Chapter 1, Chapter 2, Economy, Financial Planning, Investments, Retirement Planning, Stocks | Tags: , , , | Leave a comment

Investing in Collectible Coins

Collectible coins have some historic or aesthetic value to collectors.  The value of many collector coins exceeds their melt value because the precious metal content is so small.  Coin collectors refer to this collectible value as numismatic value, and it is determined by factors such as the type of coin, the year it was minted, the place it was minted, and its condition—or “grade.”

Dealers who sell collectible coins often have valuable coins graded by professional services.  A grader examines the coin’s condition based on a set of criteria.  Then the grader assigns it a numerical grade from one to 70, and places it in a plastic cover for protection.  But factors like “overall appearance” and “eye appeal” are subjective, and the grade assigned to a particular coin can vary among dealers.

Expect to hold your investment for at least 10 years before possibly realizing a profit.  That’s because dealers usually sell collectible coins at a markup.  In addition, the market for numismatic coins may not be the same as the market for precious metals or bullion coins.  It’s possible that the price of gold can increase while the value of a gold numismatic coin decreases.

For more information click here.

Teaching Suggestions

  1. Ask Students to make a list of the risks and rewards of investing in collectible coins.
  2. Ask students how they can protect themselves from fraudulent practices in the collectibles market.

Discussion Questions

  • What are some important questions to ask before you invest in collectible coins?
  • Is it possible to make a practical decision about buying a particular coin based on a photo or conversation with the seller?
  • Why is it important to get a second opinion about the grade and value of the coin you are considering to buy?
Categories: Investments | Tags: | Leave a comment

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?
Categories: Chapter_12, Investments, Stocks | Tags: , | Leave a comment

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?”
Categories: Chapter 1, Chapter_11, Economy, Financial Planning, Investments, Savings | Tags: , , | Leave a comment

Bonds and Interest Rates

“Interest rate changes are among the most significant factors affecting bond return.”

When it comes to how interest rates affect bond prices, there are three cardinal rules.

  1. When interest rates rise–bond prices generally fall.
  2. When interest rates fall–bond prices generally rise.
  3. Every bond carries interest rate risk.

This article describes how each of the “3 cardinal rules” described above affects a bond investment.  It also explains the role the Federal Reserve plays in determining interest rates in the economy.  Specifically it describes the federal funds rate, the discount rate, and basis points for bond investments.

Finally, this article provides information on where to find economic indicators that measure not only changes in interest rates but also other economic indicators for the nation’s economy.

For more information, click here. 

Teaching Suggestions

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

  • Review why investors choose bonds for their investment portfolio.
  • Explain how the three cardinal rules described in this article affect a bond’s value.

Discussion Questions

  1. Assume you are 35 years old, married, and earn $85,000 a year. In what circumstances would bonds be a good choice for your investment portfolio?  In what circumstances would bonds be a poor choice?
  2. What happens to a bond’s price if interest rates in the economy increase? If interest rates in the economy decrease?
  3. In addition to interest rates, what other factors that could affect the value of a bond?
Categories: Bonds, Chapter_11, Economy, Investments | Tags: , , , | Leave a comment

How to Invest in Stocks

“Before you buy your first stock, you should master the basics of stock investing.”

This article provides basic information that you can use to help students learn more about investing.  For example, there are over 25 different links to more detailed information including:

  • Basic Stock Terms for Beginners
  • What Is a Balance Sheet?
  • What Is an Income Statement?
  • What Is Investment Risk?
  • How to Buy Your First Stock
  • How to Value Stocks
  • How to Analyze Stock Fundamentals

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 learning about stocks before making a stock investment.
  • Use a specific link(s) and show how students can use detailed information to become a better stock investor.

Discussion Questions

  1. Assume you are 35 years old and have $40,000 for investment purposes. Would you choose stocks or some other investment alternative?  Explain your answer.
  2. Access one or two of the links listed in this article. How could the information in this link help you evaluate a possible stock investment?
Categories: Chapter_12, Investments, Stocks | Tags: , | Leave a comment

Robo Investment Advice

With many investors already making their own trades online, investment companies believe that robo advisors have these additional benefits:

  • lower costs for obtaining advice and conducting transactions.
  • an ability to adjust the portfolio for tax purposes by selling shares that have declined to offset gains.
  • an easier investment approach for younger clients with less-complicated financial lives.

Some will be concerned about automated portfolio management.  Human advisors will still be available to address issues about mortgages, insurance, estate planning, retirement income, and other topics that robo-advisers are not yet equipped to answer.

For additional information on robo advice, click on the following articles:

Article #1
Article #2
Article #3

Teaching Suggestions

  • Have students ask people to describe the process they use to select investments.
  • Have students create a framework to analyze when using robo advice might be appropriate for an investor.

Discussion Questions 

  1. What are benefits and drawbacks of robo advice?
  2. What factors might be considered when using robo advice for investment decisions?
Categories: Bonds, Chapter_11, Chapter_12, Chapter_13, Financial Services, Investments, Mutual Funds, Stocks | Tags: , , , , | Leave a comment

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?
Categories: Chapter 5, Debt, Investments, Savings | Tags: , | Leave a comment

Investors Face Quagmire of Falling Earnings, Higher Rates

“Investors may wade into unknown territory next month as the Federal Reserve readies the first rate hike in nearly a decade amid a corporate earnings recession.”

In this Reuters article, Rodrigo Campos explores the following factors that can be used to predict what could happen in the financial markets in the near future.  Consider the following

  1. The Federal Reserve may raise interest rates in December–the first increase in nearly a decade.
  2. Earnings for the third quarter of 2015 for 90 percent of the corporations listed in the Standard & Poor 500 are lower than expected.
  3. The decline in corporate revenues has been steeper than the drop in earnings.

As pointed out in this article, rising interest rates are always a negative factor for stocks.  Since 2013, every time the Fed has indicated a rate hike is on the horizon, the stock market throws a tantrum, and the Fed decides not to raise rates.  At the time of this blog, it is impossible to know if the Fed will raise interest rates in December–especially with corporate earnings on the decline.  Even the experts are not sure what will happen between now and the end of the year.

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 relationship between corporate revenues, earnings, and stock prices.
  • Explain the affect an increase in interest rates could have on the financial markets and consumers.
  • Explore possible investments for a down market and a market on the upswing.

Discussion Questions

  1. What is the relationship between corporate revenues, corporate earnings, and stock prices?
  2. What affect would a Fed decision to raise or lower interest rates have on the financial markets? On consumers?
  3. Assume you have $375,000 invested in a diversified retirement portfolio. Corporate stocks in your portfolio include utilities, technology, energy, and consumer stables–some of which have reported lower earnings for the last two quarters.  You also assume the Fed will raise interest rates in December.  Would you sell some or all of your holdings?  If you decide to sell, how would you determine which securities to sell?  Explain your answer.
Categories: Chapter_12, Investments, Stocks | Tags: , , , | Leave a comment

Mutual Fund Rankings, 2015

“If a bull market must continually climb a wall of worry, then the current bull, which started more than six years ago, should be on the brink of exhaustion.”

As a preamble to Kiplinger’s 2015 Mutual Fund Rankings, this article describes the concerns that investors have about interest rates, corporate earnings, the economy, political upheaval, and other factors that could impact not only mutual fund investments, but all investments and the U.S. and the world economy.

In addition the article also provides links to Kiplinger’s Mutual Fund Finder tool and specific information about the top-performing mutual funds including large-company stock funds, midsize-company stock funds, small-company stock funds, hybrid funds, large-company foreign stock funds, small- and midsize foreign stock funds, global stock funds, diversified emerging-market funds, regional and single-country funds, sector funds, and alternative funds.

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 that there are many factors that can affect mutual fund investments.
  • Show students how to use the link to the Kiplinger Mutual Fund Finder tool that is described in the article.
  • Stress the importance of a long-term investment program–especially when planning for retirement.

Discussion Questions

  1. Assuming you believe there is a strong possibility the value of your mutual funds will decrease over the next 12 months, would you sell your funds or would you hold them? Explain your answer.
  2. Depending on your answer to the above question, what factors did you consider to help make your decision?
  3. Pick one fund you believe could help obtain your investment goals. Then use the Kiplinger Mutual Fund Finder to research the fund. Based on the information, would you still want to invest in this fund.
Categories: Chapter_13, Investments, Mutual Funds, Retirement Planning, Savings | Tags: , , | Leave a comment

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