There is no shortage of receptacles clamoring for your money each day. No matter how much money you have or make, it could never keep up with all the seemingly urgent invitations to part with it.
Separating true financial priorities from flash impulses is an increasing challenge, even when you’re trying to do the right thing with your moola — like saving for the future, insuring against catastrophic risks and otherwise improving your financial standing. And while every individual and household is in some way unique, the following list of financial priorities for your next available dollar is a reliable guide for most.
Once you’ve spent the money necessary to cover your fixed and variable living expenses (and yes, I realize that’s no easy task for many) consider spending your additional dollars in this order:
Read the rest of the article on Forbes.
Earlier this week, we took a look at some of the historical evidence on the persistence of the Fama-French momentum factor. Today we’ll examine the momentum premium’s out-of-sample record, as well as its uses in portfolio diversification.
The authors of the 2013 study, “212 Years of Price Momentum,” concluded that the most recent decade-long underperformance of momentum is not unusual, and that the momentum premium shifts with “regime” changes. The study examined the long-term evidence on momentum, merging three known 19th- and early 20th-century data sources into one testable data set from 1800 to 1927.
Read the rest of the article on ETF.com.
Don't get stuck in your own backyard. Investors should consider building globally diversified equity portfolios that avoid the persistent and worldwide phenomenon of home-country bias. That's when you allocate a greater weight to your home-country stocks than their percentage of total global market capitalization.
Among the reasons investors around the world exhibit this bias is that they confuse the familiar with the safe. Unfortunately, Lake Wobegon -- home of the perennially above-average -- exists only in fiction. It cannot be that every developed country is safer than the others.
Compounding the problem is that investors tend to believe not only that their home country is a safer place to invest, but also that their home country will produce higher returns. This belief defies the basic financial concept that risk and expected return are related.
Read the rest of the article on CBS News.