The Personal Finance Geek

A bubble is a situation in which the price of an asset rises rapidly and far beyond its intrinsic value, usually fueled by speculation. Bubbles can occur in any market, but they are most common in financial markets, such as the stock market or the housing market. In the late 1990s and early 2000s, tech stocks were all the rage, before they crashed in 2001-02, in the “dot com bubble.” In 2007-08, it was very easy to borrow money, and so banks gave out mortgages that were much too expensive to people who could not afford the payments-- this was the cause of the “subprime mortgage crisis,” or the “housing bubble” of the time. There are a number of factors that can contribute to the formation of a bubble. One common factor is a period of economic growth or prosperity, which can lead to increased confidence and optimism among investors. This can lead to a rise in demand for assets, which can push prices up even higher. Another factor that can contribute to a bubble is easy access to credit....

Fedspeak is a term used to describe the jargon and acronyms used by the Federal Reserve when it comes to things like interest rates and how much money is in circulation. It can be difficult to understand for people who don't have a lot of financial literacy, but it's important to be able to follow what the Fed is saying in order to make informed financial decisions, because what the Fed says directly impacts, for example, how expensive it is to buy a house or a car because interest rates change as a result of what they say. Here are a few things to keep in mind when trying to understand Fedspeak: The Fed uses a lot of acronyms. Some of the most common ones include: FOMC: The Federal Open Market Committee, which is the group that sets monetary policy. QE: Quantitative easing, which is a tool the Fed uses to buy assets (usually bonds ) in order to stimulate the economy. (and the corresponding selling of bonds in order to "tighten") IOER: Interest on excess reserve...

When you're investing in stocks, you're buying a piece of ownership in a company. The size of the company is one factor that can affect the price of its stock. Here's a look at the differences between small-cap, mid-cap, large-cap, and mega-cap stocks: Small-cap stocks are shares of companies with a market capitalization of less than $1 billion. These companies are typically newer and have less established track records than larger companies. Small-cap stocks can be more volatile than larger stocks, but they also have the potential for higher returns. Mid-cap stocks are shares of companies with a market capitalization of between $1 billion and $10 billion. These companies are typically more established than small-cap companies, but they're still considered to be growth companies. Mid-cap stocks can be a good option for investors who are looking for a balance of risk and potential return. Large-cap stocks are shares of companies with a market capitalization of more than ...

A stock buyback is when a company buys back its own shares of stock. This can be done through open market purchases, tender offers, or privately negotiated transactions. There are several reasons why companies might do stock buybacks. Some common reasons include: To increase the value of the company's stock. When a company buys back its own shares, it reduces the number of shares outstanding. This can increase the demand for the remaining shares, which can lead to an increase in the stock price. To return capital to shareholders. When a company buys back its own shares, it is essentially returning money to shareholders. This can be done in lieu of dividends, or in addition to dividends. To improve the company's financial ratios. Some financial ratios, such as earnings per share, are calculated based on the number of shares outstanding. By reducing the number of shares outstanding, a company can improve its financial ratios. There are both pros and cons to stock buybacks. ...

A bull market is a market that is characterized by rising prices. This means that stocks are generally going up in value. A bear market is a market that is characterized by falling prices. This means that stocks are generally going down in value. Bull and bear markets are named after the animals they resemble. A bull charges forward with its head down, which is similar to the way that stocks go up in a bull market. A bear swipes at its prey with its claws, which is similar to the way that stocks go down in a bear market. The way we typically quantify a bear versus a bull market is fairly simple (and follows a pattern): When the market hits a local low, and then rises 20% or more, relative to that low, this is a bull When the market hits a local high, and then falls 20% or more, relative to that high, this is a bear. Bull and bear markets can last for different lengths of time. Some bull markets have lasted for years, while some bear markets have only lasted for months. It is im...

Retirement planning can be a daunting task, especially if you're not sure where to start. There are a lot of different retirement plans out there, and it can be hard to know which one is right for you. In this blog post, we'll explain the difference between four of the most common retirement plans: 401(k), Roth IRA, traditional IRA, and pension plans. A 401(k) is a retirement savings plan offered by many employers. With a 401(k), you can contribute a portion of your salary before taxes are taken out. This means that your money grows tax-deferred, which can save you a lot of money on taxes in the long run. There are also often employer matching contributions, which means that your employer will contribute money to your 401(k) account, too. The current limit for the amount that an employee can contribute to their 401(k), in 2023, is $22500, which works out to a maximum of $1,875 a month. Contributing to one of these lowers your taxable income when you make the contribution...

Stock indices are some of the most common places people put their money. But what exactly are indices, and why are they such common, trusted places to invest? First, let’s establish something. You may not recognize the term “stock index,” but if you’re reading this blog, you’ve almost certainly heard of things like the Dow Jones Industrial Average or the S&P500. Those are indices. In short, indices are collections of stocks, based on some common characteristic. Here are some of the most common indices and what they have in common: Index name What lands you on the index Dow Jones Industrial Average Being one of 30 large, consistently-well-performing companies weighted by share price S&P500 Being one of the 500 biggest publicly traded companies listed on US stock exchanges weighted by market capitalization Nasdaq composite Being traded on the NASDAQ stock...

 Depending on where you get your investment news and suggestions from, you’ve probably heard one of two sentiments, a lot. Either you’ve heard “buy [this stock you’ve never heard of] right now!!! It’s so cheap and it’ll make you a fortune when it inevitably rises 47x in value over the next month! Put your life savings here!!!” Or you’ve heard “The people who just told you to invest in [the stock you hadn’t heard of until 30 seconds ago] are going to ruin you if you don’t pay attention!!! Run away while you can!!” In the case of penny stocks, I’m in the second camp, but the argument I’m going to make isn’t emotional at all. I’m simply going to log into my brokerage portal, find the “biggest winners and losers” widget (which almost always is filled with these dangerous penny stocks), and show you what would have happened, had you invested in these.   Get ready, because this isn’t going to be pretty. These stocks were on my (real) widget as of the end of the (real) tra...

Dividends are payouts made by a company when it is doing well, to signal its strength to existing shareholders and to convince non-shareholders to become shareholders, pay out a certain proportion of their profits to their shareholders. There are a few things to know about them so that you can better understand what someone says when you're listening to a podcast or TV show about the markets. The "yield" of a stock is the amount of its price it pays out every so often. So if you have a certain stock, which you own 100 shares of, each worth $100, where each share pays you 1% every quarter, then, 4 times a year, you'll get $100, earning you $400 a year. The "ex date" is the date by which you must own shares, in order for them to be counted into the number of shares you own when the dividends payout. If in mid-May, you own 100 shares, there's an ex-date of May 25, and your next purchase is of 100 more shares, but on May 26, then, sorry! The second batch...