How a Strong US Dollar Can Hurt Emerging Markets

The US Dollar has surged in 2014, increasing in value since the start of the year versus every other major currency. A strong US dollar has big implications for the global economy and affects almost every investment in your portfolio. Not all of these effects are the same, however, and the most substantial impact may be on investments in emerging markets.

Topics: Blog Currency Risk Russia Emerging Markets

Reducing Your Capital Gains Tax Bill

The end of the calendar year can be a good time to try to reduce the amount you have to pay in taxes. You have to pay capital gains taxes on your investments that have been sold for a profit during the year (at least in standard investment accounts; you don’t have to worry about this in tax-advantaged accounts such as 401k, IRA, and 529 accounts). But if you also have investments that have declined in value, you could potentially sell some of these before the year ends to create “capital losses” to offset the capital gains. This tactic, called “tax-loss harvesting,” can lower the amount you pay in taxes and therefore boost the size of your portfolio over time.

Topics: Blog Taxes

Avoiding Confirmation Bias

Managing your wealth involves a plethora of decisions, from choosing how much money to save to selecting an appropriate asset allocation to picking individual investments. Every one of these decisions requires your brain to gather and process large amounts of information, which means that there are plenty of ways for it to make mistakes. One of the most common mistakes is “confirmation bias,” the (very natural) tendency for people to seek out and interpret information in ways that support beliefs they already hold.

Topics: Blog Confirmation Bias

Apple Stock Reaches a Milestone

Apple stock reached a symbolic milestone last week as the total value of all the company’s stock—its “market capitalization”—surpassed $700 billion for the first time. Some analysts are now speculating that the company could grow to become worth over $1 trillion. These numbers are gaudy, and they reflect the fact that Apple’s business has been booming. But they may distract from what Apple shareholders should really focus on, which is the stock’s total return.

Topics: Blog Dividends Apple

The Latest Twists and Turns in Japan’s Economic Battle

Since the election of Shinzo Abe as Prime Minister in 2012, Japan has instituted a number of bold economic reforms (dubbed “Abenomics”) to try to jolt the country’s economy back to health after almost a quarter-century of stagnation. These reforms included increased government spending, more purchases of government bonds by the country’s central bank, deregulation, and new international trade agreements. Recently, however, Abenomics has hit a bit of a snag.

Topics: Japan Blog Abenomics

How Long Will Low Commodity Prices Last?

Commodities as an investment haven’t done well in recent years, but this year has been especially bad. They’ve been the worst-performing asset class in 2014, with a return of -16% year-to-date. Barring a rebound in the next month and a half, that would be their worst performance since the financial crisis in 2008. So is the pain now over for investors with exposure to commodities? The answer depends on the key factors that have driven down commodity prices.

Topics: Blog Energy Commodities

What the End of QE Will Mean

Many commentators have suggested that the good performance of both stocks and bonds in recent years has been largely due to the unconventional ways the Federal Reserve has tried to boost the economy. Chief among these has been its “quantitative easing” programs (or “QE”) that essentially use newly created money to buy bonds. With the Fed recently announcing the end of its third QE program, it’s tempting to think that markets may now be primed for a fall. The relationship between QE and investment performance, however, isn’t quite so simple.

Topics: Blog

The Importance of International Diversification

With a seemingly constant drip of bad news from around the globe—military conflicts in Eastern Europe and the Middle East, the spread of Ebola, slowing economic growth in Western Europe and many emerging markets—it may feel that the US is the only safe place to invest your money. But not having enough exposure outside the US means not enough diversification, and that can actually mean higher risk and potentially lower returns over the long run.

Topics: Blog Stock Market International Valuation Diversification

How Fast Will China Grow?

For many years China experienced extremely rapid economic growth, with its GDP often growing by more than 10% in a year. In the last few years its growth has slowed a bit, and the International Monetary Fund (IMF) projects that its growth rate will fall to 7.3% next year and 6.5% by 2019. While this is a substantial decline from some of its sky-high growth rates in previous years, these numbers still represent very rapid growth. By comparison, US economic growth has averaged less than 2.5% per year during the past 5 years.

Topics: Blog Larry Summers China

Reacting to a Stock Market Decline

The last month has been a rough one for the stock market. The S&P 500 index of large US stocks has fallen by more than 7% in the last four weeks (as of the end of the day on October 16th), and many international stock markets have fared even worse. Such a sizable decline can be painful, especially since stocks in general have done so well since the end of the global financial crisis in 2009. But sticking to your long-term strategy, rather than panicking and trying to change things up in response, is (as usual) probably the right way to react.

Topics: Blog Stock Market Risk