A: Danger, Will Robinson! The U.S. stock market has, over decades, averaged about 10 percent per year in returns. But that’s an average. In some years, it loses money – such as 9 percent in 2000, 12 percent in 2001 and 22 percent in 2002. (This was followed by a 28 percent gain in 2003 and an 11 percent gain in 2004.) Meanwhile, credit cards were recently charging an average rate of about 13 percent to 14 percent. So overall, in the long run, you’re likely to lose more than you gain if you try to make money in stocks while forfeiting money to credit card issuers.
Ask the Fool: What does “UIT” stand for? – Liz, via e-mail
A: It’s a unit investment trust, invested in a relatively fixed portfolio of securities (such as, say, five or 20 stocks or bonds), with no investment manager buying and selling holdings throughout its life. The UIT components are held until the trust is liquidated at a predetermined date in the future – which could be several or many years down the road. Investors who want to trade shares of UITs before they mature can often do so on the secondary market.
Unlike a mutual fund, UIT share prices in the secondary market may be priced above or below the net asset value of the trust’s actual holdings. When you buy shares of UITs, you typically pay a sales fee, or load, of around 4 or 5 percent. But you should note that many mutual funds carry no sales loads at all.
My dumbest investment: Lord, grant me the serenity to accept the things I cannot change, the courage to change the things I can, and the wisdom to know the difference. This means don’t invest in things you don’t know much about. I made a real estate investment in a marginal property and lost hundreds of thousands of dollars. It makes every mistake I ever made in the stock market appear trivial. Blind faith, hunches, and the assumption that there is a solution to every problem are what lead people into financial disasters. You must know your limitations and not fall prey to gimmicks, fads or addictions. – A.M., Honolulu
The Fool Responds: You’re right. Hunches and assumptions can sink us financially. They can sink us in stocks, too, when we blindly act on a hot stock tip or assume that just because a product is popular, that its company’s stock will go through the roof. (The stock might already be overpriced.) It’s best to take the time to learn all about investing before jumping into things that seem too good to be true. You might start at
Foolish trivia: I was founded in Chicago in 1918 by a 22-year-old who rented out a dozen Model T Fords. I was later owned by General Motors, RCA, United Airlines and Ford. Today, I’m the world’s largest general-use car rental brand and the No. 1 airport car rental brand. I had 1,000 locations by 1955, and today they number nearly 8,000 in 145 nations. I now offer hourly rentals, as well as a “Green Collection” line of energy-efficient hybrid vehicles. I operate a top American equipment rental business. In 1994, I stopped using my most well-known celebrity endorser. Who am I?
Answer to last week’s trivia: Founded in 1923, my business stems from the mammal mus musculus, cousin of Speedy, Mighty, Jerry, Danger, Fievel, Itchy and Motor. Many people, especially small ones, think I’m supercalifragilisticexpialidocious. I opened my first park in 1955 and now operate a bunch in the U.S., France, Japan and Hong Kong. I’m the second-biggest media conglomerate in the world, with four major business segments: studio entertainment, parks and resorts, consumer products, and media networks. My brand names include Pixar, Miramax and ESPN. My main TV network is easy as 1-2-3. I built a utopian city in Celebration, Fla.
Who am I? Answer: Walt Disney Co.
The Motley Fool take: The Shanghai stock market, as measured by the Shanghai Composite Index, was recently up a whopping 70 percent, year over year.
China’s market has cooled, but it’s still unquestionably hot. While China’s economic growth is very real, so was the growth of the Internet nearly a decade ago – and that turned out very, very badly.
China will likely have a stronger and more impressive economy a decade from now, but there are signs of inflation as well as signs that the country might have to moderate its growth to conserve one of the most basic resources we all take for granted: water.
In other words, the balance of risk and reward is now better in other developing economies – ones that haven’t seen their markets triple in a few short years. Look at Mexico, Brazil and Chile, for example, as they offer above-average growth potential and plenty of intriguing opportunities.
No matter how bright the future, investors must take a pass when valuations become unfavorable – as they have in China. Fortunately, we have the rest of the world to look to for bargains, and now is a promising time to get going.
The Motley Fool is written by Tom and David Gardner for Universal Press Syndicate. The name comes from Shakespeare’s “As You Like It” and the Elizabethan days, when fools were the only people who could get away with telling the truth to the king or queen.
Born and raised mostly in Omaha, Neb., Buffett was fascinated by the stock market from a very early age. He bought his first shares of stock at the age of 11, making mistakes and losing some money along the way, as every investor does. But he kept learning and applying what he learned. He had $9,000 in the bank when he graduated from high school. (Adjusted for inflation, that’s more than $90,000 in today’s dollars.)
Today Buffett heads up Berkshire Hathaway, a company he built with his partner, Charlie Munger. It has made many people very rich, and it is actually a collection of many smaller companies that Buffett bought in their entirety, such as Dairy Queen, GEICO, Fruit of the Loom, Benjamin Moore, See’s Candies, Executive Jet, FlightSafety, Nebraska Furniture Mart, The Pampered Chef and the Buffalo News (a newspaper company).
He also owns big and small chunks of many other companies, having bought their stock. As of the end of 2006, for example, Berkshire Hathaway owned sizable portions of American Express, Coca-Cola, Procter & Gamble, The Washington Post, Anheuser-Busch, Johnson & Johnson and Wells Fargo.
How has Buffett done? Well, remember that the stock market on average has grown by about 10 percent per year, on average. Meanwhile, Buffett’s company has grown by more than 21 percent per year, on average, since 1965, and is now worth more than $200 billion (a fifth of a trillion dollars). Ten thousand dollars invested with Buffett in 1965 has grown to be worth more than $36 million. Buffett is leaving most of his own tens of billions to charity.
news source : http://www.thenewstribune.com/business/story/298386.html
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