Index
The Savvy Investor's Guide to Building Wealth Through Traditional Investments
ISBN: 978-1-83909-611-2, eISBN: 978-1-83909-608-2
Publication date: 16 April 2020
This content is currently only available as a PDF
Citation
Baker, H.K., Nofsinger, J.R. and Spieler, A.C. (2020), "Index", The Savvy Investor's Guide to Building Wealth Through Traditional Investments (The Savvy Investor's Guide), Emerald Publishing Limited, Leeds, pp. 189-201. https://doi.org/10.1108/978-1-83909-608-220201008
Publisher
:Emerald Publishing Limited
Copyright © 2020 Emerald Publishing Limited
INDEX
Index
Active wealth creation
, 12–13
Actively managed mutual funds
, 140–143
Advisorkhoj.com
, 105
Age
, 100–101
Age-based asset allocation
, 101–102
Allocation glide path
, 107
Ally Invest
, 47
Alpha
, 146–147
Alternative investments
, 92–95
role in portfolio
, 96–97
Amazon.com (AMZN)
, 42
American Association of Individual Investors
, 57
American Association of Retired Persons website
, 24
American Funds
, 169
Amortizing loans
, 62
Apple (AAPL)
, 42
Asset allocation (see also Portfolio)
, 10, 90–92
best asset allocation strategy
, 110–112
fund
, 107–108
guiding principles for “typical” investors
, 108–110
influencing factors
, 97–101
online asset allocation tools
, 105–106
relationship with risk and diversification
, 113
strategies
, 101–105
Asset class
, 90–91, 144
of investors’ for ETFs
, 153–155
Asset(s)
asset-backed securities
, 80–81
bubble
, 120
financial
, 18–19
investment opportunities
, 92–95
Assets under management (AUM)
, 133, 140
“Average” investor
, 102
Back-end fees
, 132
Back-end load
, 132
Backdoor Roth IRA strategy
, 181
Balanced funds
, 137
Bankrate.com
, 106
Barbell strategy
, 82–83
Beta
, 145
Betterment
, 47
Bid–ask spread
, 152
“Big three” plans
, 172
Black Monday
, 19
Blockbuster
, 54
Bondholders
, 62, 68
Bonds
, 59–62, 101
asset-backed securities
, 80–81
callable bonds
, 77–78
changes in interest rates affecting bond prices
, 71
convertible bonds
, 78–79
credit ratings
, 68–70
defaults
, 76–77
green bonds
, 79
funds
, 136, 144, 145
investing in
, 71–72
investing in portfolio
, 81–82
investing strategies
, 82–83
investment sites
, 85–86
investment’s return measurement
, 72–73
investors in
, 64–65
investors’ mistakes in investing in
, 84–85
issuers
, 63–64
issues of companies
, 83–84
loans, vs.
, 62–63
market
, 59
quotes
, 73–74
risk level
, 64
risks associated with bond investing
, 65–68
tax liabilities of bond investments
, 75–76
TIPS
, 79–80
trade
, 74
treasury yield curve
, 70–71
Book-to-market ratio (B/M ratio)
, 139
Borrower
, 60, 62–64, 70
Borrowing money
, 51
Brokerage account
, 48–49
Bullet
, 62
“Buy cheap and sell dear” strategy
, 41
Buy-and-hold strategy
, 44–46, 82
Buying stock on margin
, 49–50
CalcXML.com
, 106
Call price
, 77
Call protection
, 77–78
Callable bonds
, 68, 77–78
Capital appreciation
, 34
Capital gains
, 16
Capital gains tax
long-term capital
, 17
short-term capital
, 16
Cash account
, 48–49
Cash and cash equivalents
, 92, 97
Cash dividend
, 35
Casinos
, 29–30
Certificates of deposit (CDs)
, 92, 98, 101
Charles Schwab Corp.
, 48
Checking accounts
, 92
Circuit City
, 170
Climate bonds (see Green bonds)
Closed-end mutual funds (CEFs)
, 126–129
Collateral
, 62, 80
Combined time-threshold approach
, 121
Commission
, 47
costs
, 152
Compounding
, 11
Consumer Price Index (CPI)
, 13, 66
Contribution plans
, 18
Convenience
, 130, 150
Convertible bonds
, 68, 78–79
Corporate bond
, 98
funds
, 136
Corporate borrowers
, 70
Costs
, 131–133
Coupon
, 61
payment
, 61
tax treatment
, 75
Credit ratings
, 68–70
Credit risk
, 65–66, 136
Credit trade
, 83
Current yield
, 72
Day trader
, 31
Default investment
, 107
Defined benefit retirement plans
, 161
Defined contribution retirement plans
, 160
Direct stock purchase plan
, 48
Discount bond
, 74
Discount broker
, 47
Distressed debt
investors
, 76
strategy
, 83
Diversification
, 112–114, 125, 130, 151
disadvantages
, 117–118
mistakes
, 114–117
relationship with risk and asset allocation
, 113
Dividend reinvestment plan (DRIP)
, 35
Dividends
, 35
Dodd-Frank
, 81
Dodd-Frank Wall Street Reform and Consumer Protection Act (see Dodd-Frank)
Double dip
, 173
“Double limit catch-up” provision
, 173
Downside risk
, 56
Downward sloping
, 70
Dreamers
, 1–2, 13
Due diligence
, 95
Dynamic asset allocation (DAA)
, 104, 112
E-Trade Financial Corp
, 48
Earnings
, 35–36, 41, 99, 183
investment
, 11
saving and spending
, 6–7
Embedded option
, 77
Emotions
, 54–55
Employee Retirement Income Security Act (ERISA)
, 166
Energy Select Sector SPDR Fund (XLE)
, 151
Enron
, 170
Environmental, social, and governance (ESG)
, 37, 44, 144
Equity
, 10, 49
Equity securities
, 32–33
Event approach
, 121
Ex-dividend date
, 35
Excessive cash holdings
, 134
Exchange-traded funds (ETFs) (see also Mutual funds)
, 17, 27–28, 60, 65, 72, 94, 126, 149–150
advantages
, 150–152
disadvantages associated with investing
, 152–153
investors’ using asset classes and strategies
, 153–155
online resources
, 157
Expected returns
, 94
Expense ratio
, 133
Expenses in retirement
, 21–22
ExxonMobil (XOM)
, 42
Facebook
, 54
Federal employees, TSP for
, 173–174
Federal Home Loan Mortgage Corporation (Freddie Mac)
, 80
Federal National Mortgage Association (Fannie Mae)
, 80
Fees
, 72
back-end
, 132
management
, 133
marketing
, 132
minimum investment and
, 95
12b-1 fee
, 132
Fidelity Contrafund
, 128
Fidelity Growth Strategies
, 147, 148
Fidelity Investments
, 107, 108, 140, 169, 175
Financial
advisor
, 14–15
assets
, 18–19
capital
, 18–19
gambling
, 32
goals
, 97
leverage
, 40
plan
, 15–16
Firm risks
, 130
Five-star mutual funds
, 148
50% matching contribution
, 162
Fixed income
, 61
Flat yield curve
, 70
FOCUS
, 16
401(k) plan
, 7, 18, 81, 117, 159, 170, 173, 181, 183, 185
for company employees
, 168–169
Roth 401(k) plan
, 177–178
403(b) plan
, 18, 81, 159, 171–173, 183
Roth 403(b) plan
, 177–178
457 plan
, 159, 172–174
Foreign currency
, 68
Free money
, 5, 162
Front-end sales load
, 131
Full-service broker
, 47
Fund
attributes
, 129
of funds
, 107
Fundamental analysis
, 36–38
Gambling
, 29–31
Global/international funds
, 138
Going public
, 33
Governments
, 171–172
403(b) plan for
bond funds
, 136
Green bonds
, 79
Growth at a reasonable price (GARP)
, 42
Growth investing
, 41–42
Herding
, 142
High tax bracket
, 76
High-yield stock
, 40
House
, 30
Human capital
, 18–19
Humped yield curve
, 71
Hybrid fund
, 133
Income
, 7–9
income-producing investments
, 98
investing
, 40–41
taxes on earned income and investment income
, 16
Indenture
, 77
Index fund (see Passively managed fund)
Individual retirement account (IRA)
, 7, 18, 24, 166, 174–177
converting into Roth IRA
, 179–181
rollover
, 185
Roth IRA
, 177–178
Individuals
, 65
Inflation
, 66–67
affecting wealth accumulation
, 13–14
risk
, 66
Initial public offering (IPO)
, 33, 47
Institutional investors
, 64
Insured asset allocation
, 105
Interest payments
, 7, 65, 72, 75
Interest rate risk
, 66, 136
International Index Fund
, 140
Intrinsic value
, 36
Inverted yield curve
, 70–71
Invesco QQQ Trust
, 150–151
Investing
, 29–31
in bonds
, 71–72
GARP
, 42
growth
, 41–42
in high-quality bonds
, 94
income
, 40–41
momentum
, 43
in mutual funds
, 149
in portfolio of bonds
, 81–82
risks associated with bond
, 65–68
screen-based
, 44
size-based
, 42–43
in stocks
, 34–35
strategies in bonds
, 82–83
value
, 41
Investing.com
, 85
Investment (see also Wealth)
, 6
horizon
, 73
investment-grade corporate bonds
, 98
overlap
, 116
return measurement of bonds
, 72–73
returns
, 11–12, 21, 50
sites
, 56–57
strategies of mutual funds
, 138–139
style
, 144
traditional and alternative
, 92–95
Investment Company Institute 2019 Fact Book
, 131
Investopedia
, 56, 85
Investors
, 33–34
using asset classes and strategies for ETFs
, 153–155
in bonds
, 64–65
companies distributing profits to
, 35–36
using margin accounts
, 49–51
mistakes in investing in bonds
, 84–85
mistakes in investing in stocks
, 53–56
novice investors engaging in short selling
, 51–52
iShares Latin America 40 ETF (ILF)
, 151
iShares MSCI Switzerland ETF (EWL)
, 151
iShares Russel 2000 EFT (IWM)
, 151
Issuer (see Borrower)
Laddered strategy
, 82
Large cap funds
, 138
Leverage
, 49s
Life cycle fund
, 107, 137
Limit order
, 52
Limit taxes
, 6
Lipper Leader
, 149
Lipper ratings
, 148–149
Liquidity
, 41–42, 67, 150–151
risk
, 67
Loads
, 131–132
bonds vs.
, 62–63
Long position
, 51
Long-term capital gains tax
, 17
Long-term health insurance
, 22
Long-term investment plan
, 55–56
Longevity risk
, 9
Low costs
, 150
Lower tax bracket
, 76
Maintenance margin
, 51
Management fee
, 133
Margin
, 49
account
, 49
call
, 50
requirement
, 49
of safety
, 41
Market
, 52
capitalization
, 138
order
, 52
timing
, 53
Marketing fee
, 132
Mediare.gov website
, 24
Merrill Edge
, 48
Micro cap funds
, 138
Mid-cap funds
, 138
Mid-cap stocks
, 43
Military personnel, TSP for
, 173–174
Millionaire
, 2–3
retirement with million dollars
, 3–4
tax
, 3
tips to becoming
, 5–6
Minimum investment and fees
, 95
Modified adjusted gross income (MAGI)
, 175
Momentum investing
, 43
Money market
, 136
account
, 98
deposit accounts
, 92
funds
, 92
Money.cnn.com
, 106
Moneypaper
, 57
Morningstar ratings
, 148
Motley Fool
, 23–24, 56, 85
Multiple
, 40–41
Municipal (muni) bonds
, 63
Municipal bonds
, 17, 76
funds
, 136–137
Municipal borrowers
, 70
Munis
, 64
Mutual funds (see also Exchange-traded funds (ETFs))
, 17, 65, 72, 125–129
actively managed
, 140–142
advantages of owning
, 129–131
categories
, 135–138
characteristics
, 143–145
costs
, 131–133
disadvantages
, 133–135
investing in
, 149
investment strategies
, 138–139
online resources
, 157
performance evaluation
, 145–149
MySpace
, 54
NASDAQ 100 Index
, 151
National Association of Securities Dealers Automated Quotations (Nasdaq)
, 47
National Mortgage Association (Ginnie Mae)
, 80
Natural disasters
, 19
NerdWallet
, 24
Net asset value (NAV)
, 127, 149
Netflix
, 54
New York Stock Exchange (NYSE)
, 47
No-load fund
, 132
Nonprofit firms, 171–172, 403(b) plan for employees of
Normal yield curve
, 70
Novice investors
, 51–52, 54, 68, 96
NYSE American
, 47
“One-size-fits-all” solution
, 108
Open-end mutual funds (OEFs)
, 126–128
Operating leverage
, 40
Orders
, 52–53
Over-diversification
, 115–116
Over-the-counter
, 74
Owning stocks
, 27–28
Passive wealth creation
, 12–13
Passively managed fund
, 133, 139–140
“Pay yourself first” rule
, 7
Paying for advertising and marketing
, 132
Payless Shoes
, 170
Penalties for early withdrawal from retirement plans
, 182–183
Penny stock
, 32
Pension
, 161
Performance evaluation
, 143
Personal.Vanguard.com
, 106
Pooled investment vehicles (PIVs)
, 126
Portfolio (see also Asset allocation)
, 90
diversification
, 112–114
drift
, 119
investing in portfolio of bonds
, 81–82
theory
, 115
traditional and alternative investments role
, 96–97
Portfolio rebalancing
, 118–120
mistakes need avoid in
, 122–123
strategies for
, 120–121
ways for
, 121–122
Premium bond
, 74
Price risk (see Interest rate risk)
Price-to-book ratio (P/B ratio)
, 41
Price-to-earnings ratio (P/E ratio)
, 41–43, 139
Primary dealers
, 72
Principal
, 61
Professional management
, 131, 134–135
Progressive tax system
, 16
Proliferation of ETFs
, 153
Prospectus
, 127
Public finance
, 64
Qualified plan
, 164
Quantitative analysis
, 39
Radio Shack
, 170
Real return
, 14
RealDealRetirement.com
, 106
Rebalancing
, 117, 118–120
Regulation
, 95
Reinvestment risk
, 67–68
Retirement
accounts
, 18
estimating spending needs in
, 22–23
expenses in
, 21–22
factors affecting
, 4
income sources
, 21
with million dollars
, 3–4
Retirement Fund 2040
, 107
Retirement plans
, 159–160
in building wealth
, 161–163
“catch-up” options for making larger contributions
, 183–184
changes in plan when changing employers
, 184–185
characteristics
, 167
company’s stock investment as part of
, 170–171
defined benefit
, 161
defined contribution
, 160
401(k) plan for company employees
, 168–169
penalties for early withdrawal from
, 182–183
after retirement
, 185–186
tax advantages for investments
, 163–168
Return needs
, 99
Reverse mortgage
, 21
Risk
associated with bond investing
, 65–68
creep
, 119
relationship with diversification and asset allocation
, 113
and return
, 94–95
risk-adjusted return
, 38
risk-adjusting performance methods
, 145
risk–return trade-off
, 145
tolerance
, 15, 99–100
Robo-advisor
, 47
“Robotically” rebalance
, 121
Rookie investors
, 53
Roth 401(k) plan
, 177–178
Roth 403(b) plan
, 177–178
Roth conversion
, 24
Roth IRA
, 177–179, 183
contribution limits
, 178
IRA converting into
, 179–181
Roth TSP
, 177–178
Russell Mid-Cap Growth Index
, 147–148
S&P 500 Index
, 140, 145, 148
Saver-investors
, 1, 13
Saving
, 29
accounts
, 92, 98, 101
earnings
, 6–7
Savings incentive match plan for employees (SIMPLE)
, 166
Savvy investing
, 55
Savvy investors
, 2–3, 28, 32, 59, 65, 76, 83, 90, 162
School districts, 171–172, 403(b) plan for
Schwab Emerging Markets Equity ETF (SCHE)
, 152
Screen-based investing
, 44
Sears
, 65
Securities and Exchange Commission (SEC)
, 32, 127
Securities Industry and Financial Markets Association website
, 85
Seeking Alpha
, 57, 85
Segment exposures
, 151
Sentiment
, 41
SEP IRA
, 181
Share repurchases
, 35–36
Sharpe ratio
, 146
Short selling
, 43, 51–52
Short-term capital gains tax
, 16
SIMPLE IRA
, 181–182, 184
Simplified employee pension plan (SEP plan)
, 166, 168, 181–182
“Sin stocks”
, 44
Size-based investing
, 42–43
Small cap funds
, 138
Small-cap stocks
, 43
SmartAsset.com
, 106
Social Security
Administration
, 24
benefits
, 21
income
, 164
payments
, 185
Socially responsible investment (SRI)
, 44
Sovereign
bonds
, 64
borrowers
, 70
SPDR S&P 500
, 150
SPDR S&P 500 ETF
, 150
Specialty funds
, 138
Speculating
, 32
Spending earnings
, 6–7
State taxes
, 18
Stock investing
, 27
Stock market
companies distributing profits to investors
, 35–36
equity securities
, 32–33
gambling
, 29–31
investing
, 29–31
investment sites
, 56–57
pros and cons of investing in stocks
, 34–35
saving
, 29
speculating
, 32
trading
, 31–32
Stockholders
, 33
Stocks
, 99
brokerage account
, 48–49
buying and selling
, 47–48
fundamental analysis
, 36–38
investment strategies
, 39–44
investor’s mistakes in investing in
, 53–56
mutual funds
, 137
quantitative analysis
, 39
risk level of
, 46
technical analysis
, 38–39
Stop order
, 52–53
Stop price
, 52
Strategic asset allocation (SAA)
, 102–103, 112
Strategies
, 129–130, 144–145
of investors’ for ETFs
, 153–155
Street vendors
, 89
Street.com
, 57
Systematic risk
, 145
T. Rowe Price
, 107, 169
Tactical asset allocation (TAA)
, 103–104, 112
Target 2050
, 107
Target retirement year funds
, 137, 169
Target-date funds (TDFs)
, 107–108, 112, 121, 169
Tax advantages for retirement plan investments
, 163–168
Tax Cuts and Jobs Act of 2017
, 180
Tax liabilities
, 84
of bond investments
, 75–76
Tax(es)
, 134
avoiding, reducing, or deferring
, 17–18
deductible
, 49
on earned income and investment income
, 16
limit
, 6
state
, 18
tax-advantaged accounts
, 18
tax-deferred basis
, 164
treatment for bonds
, 76
TD Ameritrade Holding Corp
, 47–48
Technical analysis
, 38–39
Threshold approach
, 120
Thrift savings plan (TSP)
, 173–174
Roth TSP
, 177–178
Time approach
, 120
Time horizon
, 97
Total Market Index Fund
, 140
Total World Bond ETF (BNDW)
, 151
Toys “R” Us
, 65, 170
Tracking error
, 153
Trade, bond
, 74
Trading
, 31–32
costs
, 130, 152
Traditional investments
, 92–95
role in portfolio
, 96–97
Traditional IRA
, 174, 178–179
tax deduction rules
, 176
Tranche
, 80
Treasuries
, 64, 98
bills
, 92, 146
bonds
, 64, 74–75
yield curve
, 70–71
Treasury inflation-protected securities (TIPS)
, 79–80
Treasury securities (see Treasuries)
Treynor measure
, 146
“Triple tax free” investments
, 76
TWA
, 170
12b-1 fee
, 132
Uncertainty
, 67
Under-diversification
, 114–115
Uneven diversification
, 117
Unit investment trusts (UITs)
, 126, 129
US Bureau of Labor Statistics (BLS)
, 8
US Securities and Exchange Commission
, 86
US Treasury Department
, 85–86
US Treasury securities
, 98
Value investing
, 41
Value stocks
, 41
Vanguard
, 169, 175
Vanguard 500 Index mutual fund (VFINX)
, 140
Vesting
, 163
Virtuosos
, 1, 13
Vultures
, 76
Wall Street Survivor
, 57
Wealth
, 7–9
investment return to building
, 11–12
passive and active wealth creation
, 12–13
protection
, 19–20
retirement plans in building
, 161–163
tax
, 3
time horizon for building
, 10–11
transferring to future generations
, 23–24
Wealth accumulation
, 9–10, 12
inflation affecting
, 13–14
online resources for learning
, 24
Wealth Simple
, 48
Wealthy individuals
, 65
Well-balanced portfolio
, 119–120
Window dressing
, 134
Yield
, 70
curve
, 70
Yield to maturity (YTM)
, 72–73
- Prelims
- 1. Building Wealth and Achieving Financial Freedom
- 2. The Stock Market: Owning a Piece of Companies
- 3. Being a Lender not a Borrower: The Bond Market
- 4. Designing Your Portfolio: The Role of Asset Allocation, Diversification, and Rebalancing
- 5. Using Mutual Funds and Etfs to Achieve Your Financial Goals
- 6. Maximizing Retirement Plans
- Index