How Index Investing Became What It Is Today
Index investing came from humble beginnings to become one of the most widely used strategies in use today.
What Is the Stock Market and How Does It Work?
Before you go investing your life savings in the stock market, you should have a basic understanding of what the market is and how it works.
Indexes 101, Part 2: Why So Many Indexes?
Everyone has heard of the S&P 500 and Dow Jones, but what’s the difference between the two? And which one should you trust?
What Does It Mean When People Say the Trump Rally Has Created an ‘Overvalued’ Market?
A number of people are suggesting that the Trump Rally, along with the longer-term bull market, has pushed prices beyond justification. Therefore, the markets must be on the verge of a downturn. Are they right?
Indexes 101, Part 1: What Is Index Investing?
Everyone has heard of investing in an index, but not many people understand what that really means, so we decided to break it down for you.
How the Fed Impacts Your Investments
The financial media loves talking about changes in the target for the Federal Funds Rate. What the financial media want to talk about and what actually matters don’t overlap much. Let’s take a look at how changes in the Federal Funds Rate actually impact your investments.
What Do TIPS Tell Us About Future Inflation Rates?
Today, I want to talk about what TIPS can tell us about inflation. Exhibit 1 shows the TIPS yield curve for January 3, 2017. Yields are negative for TIPS maturing prior to 2022, and positive beyond that, although the longest ones do not even reach 1%. The Treasury stopped issuing thirty-year TIPS in the early 2000s and, more recently, eliminated twenty-year TIPS. That is why you see gaps in the yield curve—represented by dashed lines in the exhibit—with no TIPS maturity in 2030-31 and 2033-39.
How Far Should You Trust Market Models?
We use models all the time. We are constantly making decisions based on them – everything from simple heuristics (nachos taste good), all the way up to (and including) quantum mechanics. They’re great tools for helping us understand and make sense of the world. But it’s important to understand their limitations and the dangers of […]
What Is The Bond Yield Curve?
Understanding the relationship between bond risk and time to maturity and duration of a bond provides the basis for understanding the bond yield curve. The yield curve shows the yields to maturity for a series of bonds — typically U.S. Treasury bonds — with the same credit quality but different maturity dates, along with the term structure for interest rates.
What Bond Liability Means For Your Retirement Plan
Bond prices are sensitive to interest rate changes, and bond duration is a measure of just how sensitive. For instance, if a increase in interest rates from 2% to 3% caused a bond’s price to fall by 8.5%, the bond would have a duration of 8.5, meaning that a 1% rise in interest rates leads to an 8.5% drop in price.
