Stock Funds: Risk Assessment

Stock Funds: Risk Assessment

Small funds are more likely to soar – and more likely to flop

When it comes to safety, big stock funds, are often better. Smaller stock funds may carry bigger rewards, but they also carry bigger risks. “You’re more likely to find a smaller fund that soars, but you’re also more likely to get a fund that flops,” say many experts.

Generally, the specialists divide stock funds into four groups based on their assets, average assets among diversified stock funds being $500 million or so. The results: The very smallest funds – those ranking in the bottom 25 percent in assets – didn’t necessarily generate poorer results each year. In fact, on average the smallest funds come out on top sometimes. But a look at the worst-performing funds in each year for the four different size groups shows a different picture. In 9 of the 10 years, the biggest losers come from the smallest 25 percent of all funds, a group that today would include funds with less than $12 million in assets.

Small funds have a lot of pluses, including an ability to move quickly to gain investing advantages. But, smaller funds also generally carry huge annual fund expenses that cut into investors’ returns. Big funds, though lumbering, have other advantages, including deep research capabilities and more consistent performance.

Risk Assessment. Photo by Elena

Mixing Principles and Profit

You can choose to put your money in socially responsible funds. Investors who want to put their money where their ethics are can choose from about fifty such funds. Socially responsible investing, or SRI, involves screening out companies heavily involved in activities like gambling or weapons production, for example, and picking companies with good records on the environment, treatment or minorities, and other social issues.

Do socially responsible investors sacrifice monetary rewards? Hardly. Many of the largest have turned in fairly respectable returns over the past years. Experts award an A to funds with strict criteria for choosing companies with above-average social profiles. B goes to funds that invest in firms with some share-holder activism and that may emphasize avoiding bad companies rather than finding good ones. C is given to funds with minimal or no shareholder activism.

Staying Ahead of the Curve

Staying Ahead of the Curve

Want to know where bonds are headed? Consult the yield curve

Should you buy a three-month T-bill, a 30-year bond, or something in between? A look at the yield curve, which can be found daily in the Wall Street Journal or Investor’s Business Daily, may provide the answer.

A yield curve is simply a line that plots the interest rate paid by similar bonds with different maturities. The X-axis plots the length of time until the bonds mature. The Y-axis plots the yield of each bond. The average spread between the shortest-term and longest-term Treasuries is usually about two percentage points.

Reading the yield curve can be especially useful for long-term investing. If you have a shorter time frame – say, you’ll need to cash in your bond in three years for a child’s tuition – you should probably buy a bond that matures within that time period. Keep in mind, also, that interest rates and bond prices move in opposite directions: Higher rates mean lower bond prices. Rising interest rates can play havoc on the bond market. This was the case in 1994, when even the highest-quality bond portfolio lost value as interest rates climbed. When rates start heading down, on the other hand, it’s usually a good time to buy long-term bonds as a way to lock in current high yields.

A common misconception is that if a bond’s yield is going up, the investment is worth more. It’s just the opposite; when a bond’s yield rises, its price has fallen because the increase in yield comes at the expense of the bond’s market value. Conversely, if a bond’s yield falls, its market value rises. Another risk: rising inflation, which can cut the worth of bond’s coupon payments and its eventual redemption value.

The yield curve usually slopes upward. That’s because longer-term investments carry more of the aforementioned risks and must pay higher interest rates to compensate. When short and long-term interest rates are roughly the same, the curve is flat. A thin spread means the market sees little difference between the short-term and long-term risks of inflation. So buying longer-term bonds gives you only a slight premium.

Grand Central Railway Station in New York. Photo by Elena

When short-term yields exceed long-term yields, the curve turns downward or inverts. An inverted curve usually means that a recession is coming. The last time the curve inverted was 1989, signaling the slowdown that led to the 1990-91 recession. An inverted curve has predicted all eight recessions since 1950.

Some analysts say that inverted curves also signal a buying opportunity for long-term bonds. In other words, when the economy softens and interest rates come down, you want to be in long-term bonds because eventually the curve will normalize and the value of long-term bonds will rise.

Reading the Yield Curve

Yield curves show how interest rates and time to maturity relate in otherwise similar bonds. A normal, or positive, yield curve moves upward, showing that interest rates rise as maturities increase. When the curve invests, or bends downward, short-term rates are higher than long term rates, a sign of a recession to come.

Activités from Reykjavík

Activités from Reykjavík

Reykjavík and the surrounding area offer plenty of activities as well as standard day tours. Many of these activities can be added onto the tours, making for a fuller day with more than just enjoying the breath-taking nature, while other require a longer time or more dedication. Then there are even a few things that you can do on a whim, and don’t even have to take too much time! » Whatever it is, you can trust that there’ll be plenty of things to do!

Snorkelling and Diving in Silfra

Snorkelling – it’s not just just for the tropics anymore! Good news for everyone, from experienced divers to novice adventure-seekers; the fissure Silfra is not only a world-class diving location but ideal for snorkelling tours as well. The crystal-clear water offers over 100 metres of visibility. Don’t miss out on floating along the fissure and seeing first-hand the amazing world underneath ours. Silfra is also a world-renowned diving site, for those who want to experience it full-force and have the necessary permits (a drysuit permit is needed to dive in Silfra, but everyone can snorkel). Several tour operators offer day tours in this location all year.

Horseback Riding

Not only is the Icelandic horse a horse of a different colour, it’s a horse of an entirely different genetic makeup. Having been bred in almost perfect isolation for over 1000 years, the Icelandic horse is unique in many respects. They are notably well-tempered and relatively small (you shouldn’t fall off but even if you do, you won’t fall far), though they are probably most famous for their unusual fifth gait : the tölt. Tölt is a way of walking unique to the Icelandic horse, which keeps the rider stable while manoeuvring easily over Iceland’s uneven landscape.

ATVs in All Terrains!

ATVs, four wheelers, quad bikes… whatever you call them, they’re always a fund ride. Just a stone’s throw outside Reykjavík, you can take your road-rage to the lava fields where tense powerful machines eat up the terrain. Quad bikes open another world normally hidden from the average traveller; driving along a black sand beach or on a seldom travelled mountain road is an unforgettable experience.

Geysers approaching. Photo by Olga

Caving

Underneath the mountains and laval fields is an incredible subterranean realm that just begs to be explored. Iceland has 500 known lava caves, but that’s a mere 5% of the estimated total of 10.000. Navigating these caves is a great way to experience first-hand how the land formed from the molten lava, cooling and freezing time forever. It’s a great adventure and everyone should try it.

Whales, Puffins and Sea Angling

The ocean surrounding Iceland is a fantastic place to go whale watching. The most frequently seen cetaceans are minke and humback whales and seeing these giants of the ocean in the wild is an unforgettable experience. You can also take a dedicated puffin watching tour, which takes you out to the puffin colonies on the islands outside Reykjavík in the season, from mid-May to mid-August. Finally, if you’d rather taste the sea’s creatures than look at them, sea angling boat tours from the Old Harbour let you catch your own fish and have it cooked for you right there on the boat!

Iceland’s Volcanoes

Iceland is one of the most volcanically active places on earth with more than 30 active volcanoes. The most famous one is probably Mt. Eyjafjallajökull, which temporarily halted Europe’s air trafic in 2010. Other notable volcanoes include Hekla, widely considered to be the entrance to Hell in the middle ages, and Bardarbunga, which erupted in 2014. Several Super Jeep excursions, scenic flight tours and helicopter tours will take travellers out to these wonders of nature to enjoy their raw power and grotesque beauty. If seeing the volcanoes isn’t enough for you, there is always Prihnukagigur, the only place on earth where you can go inside an empty volcano.

Geothermal Powerplants

The columns of steam rising from the geothermal plants at Nesjavellir and Hellisheidi are a magnificent sight. You can take a tour of the Geothermal Energy Exhibition of Hellisheidi, a state-of-the-art geothermal power plant. The plant shows how geothermal energy is harnessed in a sustainable manner in Iceland, s showcase for the rest of the world. The area is also an excellent hiking and outdoor destination with trails which vary in length and difficulty, and trail maps in place on-site.

Iceland’s Glaciers

Glaciers cover about 11% of Iceland’s surface. Iceland is home to the largest ice cap in Europe, Vatnajökull, in addition to other formidable ones such as Longjökull, Myrdalsjökull and Snaefellsjökull. You can barely go anywhere in Iceland without spotting anywhere in Iceland without spotting one of these ivory behemoths in the distance, but if you want to get up close and personal, take a guided glacier hiker tour, go ice climbing or snowmobiling or even go on a unique tour Into the Glacier, into a man-made tunnel at the heart of the glacier. Don’t try to go on a glacier without a certified guide.

Food & Culture Tours

Iceland’s cuisine is unique and fascinating. Smoked, cured, dried, salted – meat, fish or bread, there are many unusual and delicious combinations to choose from. Take a guided food tour which samples the different flavours of the local cuisine in chosen locations. Smoked lamb is delicious and dried fish chips will surprise you, but the fermented shark and accompanying shot of Brennevin schnapps are an acquired taste. You can also visit one of Iceland’s many microbreweries and have a tasting session.

City Tours

Reykjavík is a fantastic little city, different from other capitals of Europe. Guided tours focus on major sights, culture and history, the city’s less-knows secrets or even good places to party, depending on each tour. There are tours on foot, bike or Segway, to name just a few. Keep your eyes peeled for the tour that appeals to you.

Jeep Tours

Iceland’s rugged and untamed nature can be hard to navigate in a regular vehicle. This is why you will see so many modified Super Jeeps around, capable of traversing unbridged rivers, drive up on mountains and generally get around on rocky mountain roads. It’s easy to take such a tour up onto volcanoes and glaciers, into the untouched wilderness of the highlands, or to caves, waterfalls and other inaccessible natural phenomena.

Scenic Flight Tours

There’s nothing like taking scenic flights by plane or helicopter over the grand vistas of Icelandic nature. You get to experience natural wonders that aren’t easily accessible by land, get the bird’s-eye view of mountains, glaciers and waterfalls, all in just a fraction of the time it would take you to make the trip by car. Whether you take a scenic flight or a helicopter tour, it’s going to give you a unique sense of the scale and power of this wild and untamed land.

Snowmobilling

For those who aren’t content to just look at this island’s magnificent nature, one of the most exciting ways you can experience it first-hand is snowmobiling on a glacier. These adventure excursions will take you on an adrenaline-filled ride while allowing you to experience the glacier landscapes in a unique and wonderful way

Where to Get Good Paper

Where to Get Good Paper

Brokers, funds, and Uncle Sam all offer an on-ramp to investing

Once you’ve selected from the variety of available bonds – government bonds, U.S. Savings bonds, Treasury bills, Treasury notes, municipal bonds, and corporate bonds – how do you go about buying them? Depending on the type, you have a few choices.

Municipals and corporate bonds are bought through brokers. You can buy Treasuries through a bank, a broker, a mutual fund, or through a government program called Treadury Direct.

The advantage of buying through the government is that there is no commission. For more information, wirte Department of the Treasury, Bureau of the Public Debt, Washington, D.C. 20239.

You also can open an account and learn about scheduled bond auctions. Two- and three-year bonds are available for a minimum $5,000 investment. Five0an 10-year notes require a minimum $10,000 investment.

For greater diversification, you can turn to bond funds (see table, below). They are convenient – you can invest in small amounts and a professional manager runs the show. A drawback: Bond fund constantly trade bonds and don’t hold them to maturity, so you lose the guarantee that you’ll get a bond’s face value at a certain date.

When investing in bond funds, also be sure to scrutinize fees and other expenses. After all, the return on bond funds is so low, why dish out 4 percent or 5 percent? To find the true return, find out the yield and subtract the fund’s annual expense ratio.

New York Art Nouveau Decor. Photo by Elena

Choosing a Bond Strategy

The determining factor is when you expect to cash in

Time frame: Less than 1 year. Type of bond: Any. You may want to consider a money market fund for stability of principal.

Time frame: 1 -2 years. Type of bond: Short-term bond. If interest rates are stable or fall, you could get higher than money market fund yields as well as potential capital appreciation. If interest rates rise, this fund could still be a good choice. Unless rates rise substantially, the income you get may make up some of the fosses to principal and may still put you ahead of where you’d be in a money market fund.

Time frame: 2 – 4 years. Type of bond: Federal or state tax-free bond, mortgage bond, government bond, investment grade bond. If you are counting on the fund to supply you a stream of income, keep in mind that higher yields can compensate for some of the drop in the value of your account. If you invested to diversify a stock portfolio, keep in mind that the long-term price volatility of bonds is typically lower than that of stocks.

Time frame: More than 4 years. Type of bond: Aggressive bond. Although interest rates can affect these funds, they tend to benefit a healthy economy. Over the long term, income provides the bulk of total return in bond funds. If you are comfortable with the quality risk, aggressive funds provide the highest income.

Business and Commerce

Business and Commerce

The purpose of the present essay is to briefly overview key points of business from an academic perspective. Many an undergraduate student has completed their studies only to realize that they have acquired a non-marketable degree. For example, stories of graduate students, who have been studying for nearly a decade with nothing much else to show for it than student debts and loans are surprisingly common. Furthermore, some PhDs even run into the problem of being overqualified!

However, not all fields are equally unlikely to land a good job straight out of college. For instance, all other things being equal, a professional degree (such as one in law or medicine) is much more likely to be a lucrative return on investment than one in arts history. Although whether liberal arts degree holders and those majoring in the social sciences have a harder time landing a better job than their less educated counterparts remains highly debated.

Beauty is in the eye of the beholder. Image: Megan Jorgensen (Elena)

Conversely, students majoring in commerce, or business students, are usually looked at as those who gain most of the skills employers look for today. Indeed, with the ubiquitous sales and consumption phenomenon, it is only logical that most job postings on online job boards such as Monster or Workopolis refer to some element of academic background in business, or the equivalent. Obviously, experience is now more often than not a prerequisite in even the most entry-level jobs or unpaid internships.

But what majors can the potential bachelor of commerce (BComm) or bachelor of business administration (BBA) study? Finance, economics, accounting, marketing, international business and organizational behavior (similar in scope to industrial psychology) are popular choices. Certainly, one's mathematical abilities seem likely to determine whether one chooses to major in financial econometrics or business communication and international marketing... Thus, the aim of this paper was to briefly go over some of the main points in the business work from a the point of view of commerce students.