Compound interest is a subject that you can read about on most personal finance blogs. In fact, I have already talked a little bit about it. But I never delved into it. It is now time to cover compound interest in details.
Many people will tell you that compound interest is like magic! However, I do not consider it magic, it is only math. But how can we calculate compound interest? Even if it is not magic, its effects are really more powerful than it seems at first sight. The effects of compounding are what makes investing in the stock market so interesting. But does the stock market really compounds? Let’s try to answer these questions in this article.
I really think that compound interest is not correctly understood by many people. I hope that this article will help you understand exactly what is compound interest and why it is great.
Continue reading “What is Compound Interest? Is it Magic?”
If you have been following personal finance blogs or the news these recent weeks, you have probably heard a lot about yield curve inversion. But do you know what it really is? Should we panic and sell all our shares? Is a recession starting?
Before we answer these questions, it is important to know what is the yield curve. For this, we will need to review what we know about bonds. Then, we need to understand what does the inversion of this yield curve really means. We can also see what causes such an event to happen. As we are going to see, all of this is actually quite simple. So what is all the fuss about? In the past, the yield curve inversion has accurately predicted the coming of recessions.
And what will happen after such an event? Is the recession already upon us? Should we sell anything and get out of the market? The most important thing is to see what we should do, now that the yield curve in the U.S. is inverted.
Continue reading “Yield Curve Inversion: Should we Panic?”
Deciding on an entire portfolio index portfolio from scratch is no easy task. And, it is a very important thing. If you decide to choose your own index portfolio, you will need to be very careful about what you are going to invest in. Once you have chosen it, you will need to stick with your portfolio. If you plan to invest for the long-term, you may have to invest in your new portfolio for more than ten years. Therefore, it is crucial to do this carefully. You will have to decide on your asset allocation and your international exposure. From there, you will have to find the indexes you want to invest in. And finally, for each index, you will have to find an Exchange Traded Fund (ETF) to invest in it.
Nevertheless, choosing your own index portfolio from scratch may not be necessary. And it may not even be a good idea! In most cases, you should invest a simple, broad portfolio. Doing too many choices in your portfolio is market timing and is unlikely to pay off in the long-term. But I still believe it is an interesting exercise. And you can design a simple three-fund portfolio from scratch and have something quite sound.
So, in this post, we are going to cover in details all the different steps involved in choosing your own index ETF portfolio.
Continue reading “How to Choose an Index ETF Portfolio?”
You have probably heard of the Standard & Poor’s 500 (S&P 500) index. But do you know exactly what it is? Many people actually believe it is a fund. But it is only a stock market index. And there are many funds available that track the performance of this index. There are many interesting facts about this index. If you have chosen to invest in this stock market index, you may want to learn more about it.
For instance, did you know that it does not really track the 500 largest companies in the United States? It tracks 500 large companies from the U.S. stock market, not necessarily the largest. This is due to the fact that the index is not managed by a single formula and a computer. In fact, a committee of humans is taking the decisions of including or removing a company from the index.
In this post, we are going to see exactly what is inside the S&P 500 index. We are also going to see how the committee manages the index and updates it over the years. Finally, I am also going to describe how to invest in this index.
Continue reading “S&P 500 Index – Invest in 500 Companies At Once!”
If you have decided to invest in a precise stock market index, you first have to choose the stock market index. And once you have chosen an index to invest in, you will have to decide through which index fund you are going to invest in this index. For this, you can choose either a mutual fund or an Exchange Traded Fund (ETF). For popular indexes, there will be a large choice of index funds replicating the performance of this index.
Even if you only choose popular funds for a precise index, it will still be difficult to choose. As you will see in this article, there are many things you can take into account when you compare two index funds. The most important remains the price as most people know. But there are other points you can use to compare two index funds. And some of these points are definitely not obvious.
In this post, we are going to see all the things you can look at when you need to choose an index fund, whether it is a mutual fund or an Exchange Traded Fund (ETF).
Continue reading “How to Choose an ETF or an Index Fund”
I had the opportunity of interviewing Patrik Schär, the CEO of Selma Finance. For those of you that do not know, Selma Finance (Selma) is a Swiss-Finnish Robo-Advisor company. It is a young company. Patrik founded it, with three other people, in 2016.
I have not yet talked about robo-advisors on this blog. However, they are getting more and more popular. The idea is that you can get smaller fees by automating most tasks, hence the robo-name. And it is much simpler than investing by yourself. It provides a good entry point into the investment. And Selma is a great option for those that would choose that route!
First, Selma is different from a bank in that it is almost entirely automated. It has lower fees than a bank. It gives you a personal investment assistant that can assist you all the time. Another cool thing with Selma robo-advisor is that they follow passive investing philosophy, reducing the fees and following the market performance.
But enough from me, Patrik Schär, the CEO, will tell you everything there is to know about Selma!
Continue reading “Interview of Patrik Schär – CEO of Selma, Robo-Advisor”
If you are convinced that index investing is the way to go, you need to choose the indexes you want to invest in. You can create a portfolio that contains several indexes in which you are going to invest.
We have already talked about index investing and the way indexes were replicated. But we have not looked into details how to compare stock market indexes. There are a lot of stock market indexes. In fact, there are now more indexes than stocks. So index picking may become as difficult as stock picking. There are some very special stock market indexes. In this post, we are only going to focus on broad market indexes.
I am not going to go into details into exactly the portfolio you can choose. The post is really about choosing between different indexes. For instance, what is the difference between small indexes and large indexes? Or should you choose a market-cap weighted index or an equal-weighted index? If you already know you want to invest in U.S. equities, how do you choose between all the U.S. indexes?
This post should help you choose between indexes to invest into. There are many different indexes, even for the same country.
Continue reading “How to Choose a Stock Market Index to Invest Into”
(This post was first published on StojFinance. Thanks a lot to Jasper for the opportunity of guest posting.)
We have already discussing index investing in details. There are many stock market indexes. Sometimes, it is very difficult to pick a stock market index to invest in. But we have not covered any index in particular. You have probably already heard of the S&P500 index and the Dow Jones Industrial Average (DJIA) index. But have you heard of the Russell 3000 index? It is not as widely known as other indices. But it is a very interesting index that covers a larger part of the United States stock market than more popular indexes.
The Russell 3000 Index is managed by the FTSE group that also manages many other popular indexes. It contains the 3000 largest U.S. companies in the stock market.
In this post, we are going to see exactly what is the Russell 3000 Index. We are also going to see a few related indexes from the same group, such as the Russell 2000 Index. Finally, I am going to compare the S&P 500 index with the Russell 3000 Index. They are both popular indexes and people often misunderstand the difference between both.
Continue reading “What is the Russell 3000 Index?”
Since I started my journey to a better financial state, I have read many Personal Finance books. I have mostly read books about Investing. I have also read some more general personal finance books that are going all around. I thought it would be interesting to compile the list of all the books I have read so far.
Here, you will find the list of all the best personal finance books I have read. I have put them into several different categories. I will keep this page up to date with the future books I am going to read.
If you have any suggestion of book for me, I would be glad to hear about it!
Continue reading “Best Personal Finance Books”
If you want to invest in the stock market, you will need a broker account. Changing from one broker to another is not an easy decision but is sometimes necessary. In this post, we are going to see two ways of changing to a new broker and how to transfer your portfolio to the new account.
In 2019, I have opened a new broker account at Interactive Brokers. Since DEGIRO does not let me trade in U.S. funds anymore, I decided to stop working with them and change broker. I still like the DEGIRO broker. But I would only recommend it if you only want to invest in European funds. Currently, Interactive Brokers lets me trade in these funds. Moreover, I may also save on some fees by using the Tiered pricing of Interactive Brokers.
However, that means that I currently have two broker accounts. I plan to only finance the Interactive Brokers account. For me, there is no current advantage in having several broker accounts. Therefore, at some point, I will have to transfer my existing portfolio from one broker to the other.
In this post, we are going to see the two main ways to change to a new broker and transfer your positions from one broker to another. And I am going to discuss how to choose between the two.
If you have ever changed to a new broker account, I would really like to hear about your experience!
Continue reading “How to Change Broker and Transfer Your Portfolio”