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Is It Safe to Invest in the Stock Market?

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Opinions about the stock market range from unreasonable fear to ridiculous optimism. Reports of people who made incredible amounts of money in the stock market as well as those that lost everything can be found in publication after publication. So what is the reality? Is it safe or dangerous to invest in the stock market? And if it is safe, what is the best way to invest? Here is the truth about positive returns and the stock market: the longer the time horizon of investment, the safer the stock market is. Since 1928, on a yearly basis, the stock market has resulted in a positive return 61 times and a negative return 29 times. Therefore, if you plan to invest in the stock market for only a single year, you have a roughly 30% chance to lose money and a 67% chance to realize a profit. Those are not good odds. I do not recommend investing in the stock market for short term gains.  The average stock market return since 1928 is 7.6%. The average return in a positive year is 18.5% and th...
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Best 2020 Small Cap ETFs and Mutual Funds

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   TL;DR: Although small cap stocks have underperformed compared to large cap stocks recently, there are still small cap funds that provide good returns. Additionally, history teaches us that small cap stocks will eventually come back into favor and outperform large cap stocks. Find some of the best small cap funds in the table below. A stock is considered a small cap stock if its valuation is generally less than 2 billion. Valuation is calculated by multiplying the number of outstanding shares by the price of the stock.  Small cap stocks are typified by the Russell 2000 and large cap stocks are typified by the S&P 500. Over the last five years, small cap growth stocks have under-performed large cap growth stocks by an annual return of 13.12% to 19.18%.  But if we look back 20 years, small cap stocks outperformed large cap stocks by a total return of 224% to 143%.   If we look even further back to 1979 when the Russell 2000 was established, small cap st...
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Best 2020 Technology ETFs and Mutual Funds

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  TL;DR: Technology stocks have been the big winners over the last decade. Subsequently, there are a lot of technology funds both good and bad. Choose carefully from the list below and enjoy some amazing returns. The technology sector includes a very diverse group of companies. The most popular companies in this sector are household names such as Microsoft Corp., Apple Inc., and Alphabet (Google). A company is considered a technology company if it is involved in research, development, or distribution of technology goods and services. It includes both companies that manufacture electronics as well as those that develop software.  Companies in this sector are typically relied upon by companies in other sectors to make their businesses more efficient and profitable. For this reason, companies in the technology sector with the best advanced products and technology tend to be some of the best companies in the stock market.  The technology sector has over 140 ETFs and mutual f...
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Four Principals for DIY Investing

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Too many people think all financial advisors, funds, portfolio managers are the same. They are not. There are good funds and bad funds, good managers and bad managers. Just like in school there were those that received A's and those that received F's. If you needed a study buddy to pass an end-of-year exam, you would choose to study with the A student, not the F student. The same is true with anything. The reason graduates from ivy league colleges make tend to make more throughout their life than those from state colleges is because the ivy colleges select the very top students. If you want to experience higher than normal returns, pick winners, not losers. When picking winners, small advantages make big long term differences. Take the following example. If $10,000 were invested over twenty years at the typical S&P 500 return of 10%, then the total balance would be a little over $67,000. However, if an investor were able to eek out just a single percentage point advantage ...
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Best 2020 Industrials ETFs and Mutual Funds

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  Industrial stocks include companies that build and distribute machinery , equipment or supplies for use in manufacturing, construction, or defense as well as aerospace, railroads, and waste management. These companies tend to be a strong indicator of supply and demand in the economy and can be good barometers of whether the country is going into a recession or coming out of a recession. This is because they often produce the goods that more retail-like companies (those that sell directly to consumers) need in order to sell finished products to consumers. When the economy contracts, and consumers have less money to buy things, the demand for industrials drops and when there is growth in the economy, the demand for industrial goods grows. Over the last five years, the industrials sector has slightly outpaced the S&P 500. The thing to keep in mind, however, if you add industrial ETFs or mutual funds to your portfolio is that you will likely experience cyclical returns. This mean...
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Best Utility ETFs, Mutual Funds, and Indexes

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  Utilities are not the popular kids of the stock market world. They are generally known for their stability and dividends and rarely have eye-popping returns. Investors include utility funds in their portfolios to hedge against market volatility. When the market is in turmoil, sensitive stocks like technology have a tendency to lose value rapidly. Inversely, because people always need services like water, sewage, electricity, or natural gas the market returns for utility stocks will drop less during hard economic times. But just because utilities tend to be more stable than other stocks does not mean they should comprise a large portion of an investment portfolio. During a short term recession, having a utility ETF or mutual fund in your portfolio may limit your overall losses but over the long term if you have too high a percentage of utilities in your portfolio, that same stability will result in lower overall gains as other sectors such as technology provide greater returns....
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Before You Invest in an ETF or Index Make Sure You Understand Them

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At the moment, investing in ETFs and index funds are all the rage.  Unfortunately, what an investor believes they are getting may not be what they actually get. The most popular ETF is the SPDR S&P 500 ETF which is passively managed and based on the S&P 500 index which includes primarily large cap stocks. The S&P 500 is considered a broad market index because it includes 500 different companies. The appeal of investing in a broad market index is that there is such diversity that gains and losses are averaged out across various kinds of stocks as to realize the overall returns of the market.  But most funds are based on a much more narrow set of indexes which include various sectors, market caps, stock styles, or niche markets. These, more narrow indexes subject the investor to much higher risk. Therefore, you might think you are choosing an ETF in order to diversify, but you might actually be be putting your investments at risk by specializing.  Let's take a c...
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