Month: January 2022

If your finances are relatively simple, you should be all right creating and checking your own list. However, the more complicated they become, the more you should consider hiring a tax or financial advisor, and perhaps an estate-planning lawyer, to help you see the fullest picture possible.

You need a written checklist so that you don’t forget something important that you should be monitoring. It is vital to check off every item on the list, even if you don’t intend to implement some of them, as in, for example, refinancing a mortgage. You need to know that you have looked at everything.

A financial plan takes a snapshot look at the state of your personal finances. It balances your assets against your liabilities and considers your financial goals and what you may need to do to realize them. It’s a good idea to look at your financial plan annually, as well as after any major life event, such as marriage, divorce, birth, or death, that can substantially affect your finances.

Generally, but not all the time. The bonds that do best in a market crash are government bonds such as U.S. Treasuries; riskier bonds like junk bonds and high-yield credit do not fare as well. U.S. Treasuries benefit from the “flight to quality” phenomenon that is apparent during a market crash, as investors flock to the relative safety of investments that are perceived to be safer. Bonds also outperform stocks in an equity bear market as central banks tend to lower interest rates to stimulate the economy.

No, you should not invest in cryptocurrencies if you are a conservative investor with low risk tolerance. Cryptocurrencies are very speculative investments, and although many of them had huge returns in 2021, their tremendous volatility makes them unsuitable for conservative investors.

Yes, of course. If your employer matches contributions to your retirement plan, take advantage of that perk. Invest in a diversified portfolio of stocks and bonds and consider being a contrarian when the market plunges or rockets higher. If you have the risk appetite and want some sizzle on your steak, allocate a small portion of your portfolio to more aggressive strategies and investments (after doing your research and due diligence, of course). Save on a regular basis to buy a house and keep the down payment in a savings account or other relatively risk-free investment.

It really depends on your risk tolerance, investment time horizon, and personal preferences. A balanced approach that involves investing in a diversified portfolio of stocks and bonds works for most people. However, those with higher risk appetites might prefer dabbling in more speculative stuff like small-cap stocks or cryptocurrencies, while others may prefer to double their money through real estate investments.

In contrast, so-called new economy stocks are the companies leading a revolutionary transition to the internet and activities in the cloud. The market has dubbed Meta (formerly Facebook), Apple, Amazon, Netflix, and Google as five of the top new economy companies to watch under the acronym FAANG but there are also many more. Branching out from basic internet search, investors will find a plethora of internet-based technology offshoots that are also driving new economy growth in the twenty-first century, like companies in the areas of internet of things, social media, cryptocurrency, cloud storage, e-commerce, streaming, sharing, big data, fintech, and artificial intelligence.

New economy stocks are in the business of providing innovation for the easy and fast exchange of services. In comparison to old economy stocks, they can have much lower costs of sales and much less need for the physical assets required to manufacture, store, and sell physical goods.

The new economy era reportedly began in the 1990s, fueling the dotcom bubble and dotcom burst as investors saw the vast potential and economic shift. In the twenty-first century, these companies have proved to achieve much of the success initially envisioned, continuing to take huge strides with relatively high financial risks to achieve new groundbreaking services centered around the capabilities of the internet and internet technologies. As such, new economy stocks tend to fall in the growth category. They have huge growth potential, treading into new waters and uncovering new opportunities that can possibly revolutionize the way individuals and businesses interact.

As service-oriented, growth companies, the fundamentals of these businesses are drastically different when compared to old economy stocks. New economy stocks typically need to take on high levels of debt, may have a low return on equity, and often report high price to earnings levels as investors believe in long-term speculation. New economy stocks are generally not known for paying out dividends and will typically have relatively lower levels of cash flow since cash is often used for reinvestment.

The Industrial Revolution was a time of innovation for the development and manufacturing efficiency of products. As such, old economy stocks were the market’s top leaders, growing throughout the years to build out the foundations of the industrial and manufactured goods sectors. Within these sectors, investors will now find large, mature, well-established businesses with consistent growth and relatively steady fundamental characteristics.

Some of the most notable old economy stocks include names like Ford (F), Caterpillar (CAT), 3M (MMM) and Procter & Gamble (PG). These old economy companies’ business activities dominated the economic landscape before the dotcom era of the late 1990s ushered in an entire industry of new, high-growth companies. Old economy stocks have sustained business activities through many market cycles. While they continue to innovate within their market segments, overall they participate in traditional business activities with relatively minimal investment or involvement in leading new era technologies. 

Many investors equate old economy stocks with the term blue chip. Old economy stocks are also typically classified in the value category which is known for relatively low volatility, stable earnings, consistent returns, dividends for income, and steady streams of cash flow.

Investors can buy speculative penny stocks through the OTCQB⁠—a middle-tier over-the-counter (OTC) market for U.S. stocks operated by OTC Markets Group.