Sound Advice

Is a total market index fund a better choice than a broad portfolio of stocks?   A total market index fund is generally considered a  better choice for most investors  compared to attempting to assemble a broad portfolio of individual stocks, primarily due to superior diversification, lower costs, and simplicity. Total market index funds provide exposure to essentially all publicly traded stocks in a market (such as the entire U.S. stock market), including large-cap, mid-cap, and small-cap companies, thus reducing company-specific risk and the need for individual stock-picking skills. Key benefits of total market index funds: Diversification:  One fund can offer broad market exposure across thousands of companies and all major economic sectors, lowering the impact of poor performance from any single stock or sector. Low Cost:  These funds typically have very low management fees (expense ratios), which helps investors keep more ...

Private equity may be good for investors, but it's terrible for the companies involved.   The impact of private equity (PE) on companies is a polarizing subject, with strong arguments on both sides. Arguments That Private Equity Is Harmful for Companies: Increased Risk of Bankruptcy:  Companies acquired by private equity are about 10 times more likely to go bankrupt than those not owned by PE firms. Some studies have found a 20% bankruptcy rate among PE-owned companies, which is substantially higher than industry averages. Job Losses:  On average, private equity takeovers result in significant job losses, with a Harvard and University of Chicago study showing an average 4.4% decline in jobs two years after acquisition. High-profile examples like Toys R Us and Red Lobster involved massive layoffs and eventually bankruptcy under PE ownership. Heavy Debt Burdens:  PE firms frequently use leveraged buyouts, making ...

How does the resemblance of the current situation in the U.S. to the  events of 1933 in Germany affect the financial markets? The resemblance of the current situation in the U.S. the events of 1933 in Germany raises significant concerns for financial markets, primarily through heightened uncertainty, increased polarization, and risk of institutional instability -- factors that historically have led to market volatility and reduced investor confidence. Historical Market Reactions In 1933 Germany, the collapse of confidence in government and institutions led to drastic declines in stock prices, widespread business failures, and soaring unemployment. Political outsiders exploiting institutional weakness intensified market disruption; major corporations suffered, but some firms closely connected to the new regime profited temporarily as their share prices rose. Contemporary Parallels Today’s U.S. situation features similar political polarization and a loss of public trust in leadership...

Why price to earnings growth is an important measure of stock value   The price-to-earnings growth (PEG) ratio is an important measure of stock value because it builds upon the traditional price-to-earnings (P/E) ratio by factoring in a company’s expected earnings growth rate. This makes the PEG ratio a more comprehensive tool for investors who want to assess whether a stock’s price accurately reflects its future potential, not just its current profitability. Why PEG Is Important Includes Growth Expectations:  Although the P/E ratio measures how much investors are paying for each dollar of earnings, it does not take into account how quickly a company’s earnings are expected to grow.  Tech firms, for example, often have high P/E ratios simply because investors expect rapid growth.  The PEG ratio helps clarify whether a high P/E is justified by high growth prospects. True Value Indicator:  The PEG ratio is regarded as a mo...

Here's the cover and index of my latest book.  If interested in a copy, please email me: nrwaynebb@gmail.com

What are the advantages and disadvantages of robo advisers?   Advantages of Robo-Advisers Lower Fees : Robo-advisers typically charge much less than traditional human advisers, with management fees often ranging from 0.25% to 0.50% per year, compared to 1% or more for traditional advisers. Low Minimums & Easy Onboarding : Many robo-advisers offer low or no account minimums, making them accessible to beginners and those with modest investment amounts. The sign-up process is usually straightforward and fully online. Automated, Hands-Off Management : Portfolios are automatically rebalanced, and asset allocations are adjusted based on your goals and risk tolerance. This "set-and-forget" aspect is ideal for investors who want minimal involvement. Evidence-Based Algorithms : Many use investment models inspired by accepted financial theories, aiming to maximize returns for a given level of risk. Tax-Loss Harvesting : ...