Blog 2018-03-16T01:07:17+00:00

Articles of Interest

Bonds Can Be Risky

If you own individual bonds or bonds within mutual funds, you may want to start taking a more cautious approach to your bond investing.  Although bonds are typically considered a relatively safe investment, we may be entering a period where bond prices could be volatile. We are seeing signs that interest rates could be moving up in the near future.  Rising interest rates are not a good thing for bond investors as bonds generally lose value when rates rise.  For example, if you own a bond that matures in 10 years, or own a bond fund with an average maturity of ten years, a 1% rise in interest rates could cause your bond investment to decrease in value by as much [...]

Traditional IRA Vs. Roth IRA

Let’s explore some of the differences between a traditional IRA and a Roth IRA. With a traditional IRA, your contributions may be tax-deductible and can grow tax-deferred. In retirement, traditional IRA distributions are taxable as ordinary income. With a Roth IRA, your contributions are non-deductible, but have the opportunity to grow tax free. At retirement age, distributions from a Roth IRA are tax free. Here is a list of some of the primary differences: Traditional IRA Roth IRA Tax Treatment of Contributions: Tax-deductible Non-deductible Tax Treatment of Distributions: Taxable as ordinary income Tax free Mandatory Distributions: Mandatory at age 70.5 No mandatory distributions Early Withdrawal Penalty: 10% on entire amount 10% only on earnings Although the above table highlights some of [...]

Core Investing Beliefs Part 2: Managing an Investment Portfolio

In the last post, we talked about our first core investing belief, that asset allocation is the most important decision in investment management. This post introduces our second core investing belief, that changing financial markets require continuous monitoring and tactical flexibility. This philosophy is contrary to the typical buy-and-hold approach that investors have been persuaded to embrace. Many people are convinced the proper way to invest is to simply leave their money in the market and hope for a decent return. We believe there is a better way! We feel investors should emulate the large, institutional investors by taking a more sophisticated, tactical approach to investing. At Willamette Investment Advisors, we maintain a forward-looking investment process that is focused on long-term [...]

Core Investing Beliefs Part 1

We have 2 primary investment beliefs: 1)   That asset allocation is the most important decision in investment management. 2)   That changing financial markets require continuous monitoring and tactical flexibility. This post focuses on asset allocation and we’ll address the second core belief in the next post. Asset Allocation is simply the term we use in the financial industry to describe how your money is invested in all of the various investment options available, and in what proportion.  For example, if you have a financial advisor making the asset allocation decisions for you, they are deciding how much you should be investing in US Large company stocks, how much in bonds, international stocks, etc. An important study by two Nobel Prize winning researchers [...]

Inflation or Deflation: Watching for Warning Signs

There's been much debate in investing circles over the last year about whether inflation or deflation represents a more likely threat to the future of the U.S. economy. With a recovery that's still tentative compared to previous recessions, measures designed to stimulate the economy or cut spending to rein in the budget deficit provoke warnings about their potential to create one or the other. The case for inflation As the economy has begun to recover, worries about the potential for future inflation have become widespread. The Fed has undertaken extraordinary measures to make sure there is plenty of money in circulation, but some experts worry that the increased money supply will eventually cut the dollar's purchasing power, especially if interest rates [...]

The Math of Losses

Everyone knows the stock market has its ups and downs, but just what’s involved in recovering from a serious down?  If you lose 10% one year but your portfolio returns 10% the next year, are you even again? The short answer:  no.  The math of recovering from a loss isn’t quite that symmetrical.  You have to gain more than you lost to recoup all your losses.  To understand why, let’s look at a hypothetical example.  Say you have a $100,000 portfolio.  In Year 1, you suffer a 10% loss and are down $10,000.  That leaves your portfolio worth only $90,000. In Year 2, the market rebounds and your portfolio rises by 10%.  However, that 10% increase is based on a $90,000 [...]

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