The Grumpy Economist
Bloomberg has a story on the University of Chicago’s big debts expansion. Obviously, it’s a subject around faculty lounges too. If borrowing is such a big deal, why not merely spend the endowment on new buildings? Answer: universities can borrow at municipal rates, free of federal tax to the lending company, if they are building something. Borrowing at tax-free rates makes financial sense, you merely stuff the marginal dollar into endowment even. Obviously the endowment is not committed to Treasuries — universities don’t do simple tax arbitrage.
Generally speaking, the sooner you’ll need your cash, the wiser it is to keep it in investments whose prices remain relatively stable. You want to avoid a situation, for example, where you need to use money quickly that is tangled up within an investment whose price happens to be down. Therefore, your investment options should consider how soon you’re intending to use your cash.
- Yeo Hiap Seng
- 3% Vanguard Emerging Mkts ETF (VWO)
- Deals with stringent professional specifications of the venture capital environment
- The Faraday Challenge, to drive the development of new battery systems
If you’ll need the money within the next one to three years, you may want to consider keeping it in a money market fund or other cash option whose purpose is to protect your initial investment. Note: Before purchasing a mutual fund, consider its investment goals, dangers, charges, and expenses, which are discussed in the prospectus, available from the account.
Consider the info carefully before investing. Remember that an investment in a money market account is not covered or guaranteed by the Federal Deposit Insurance Corporate or any other authorities company. 1 per talk about, it is possible to lose cash by investing in the fund. Dollar-cost averaging is a method of accumulating shares of an investment by purchasing a fixed money amount at regularly planned intervals over a protracted time.
When the purchase price is high, your fixed-dollar investment buys less; when prices are low, the same dollar investment will buy more stocks. A normal, fixed-dollar investment should lead to a lower average price per share than you would get to buy a fixed number of stocks at each investment period. A workplace savings plan, such as a 401(k) plan that deducts the same amount from each salary and invests it through the plan, is one of the most well-known types of dollar cost averaging doing his thing.
Remember that, just like any investment strategy, dollar cost averaging can’t ensure you an income or protect you against a loss if the marketplace is declining. To maximize the potential ramifications of buck-cost averaging, you should also assess your ability to keep investing when the market is down even.
Unless you plan to rely on luck, your portfolio’s long-term success depends on periodically researching it. Maybe economic conditions have changed the potential clients for a particular investment or a whole asset class. Also, your position change as time passes, as well as your asset allocation will need to reflect those changes. For instance, as you get closer to retirement, you may decide to increase your allocation to less volatile investments, or those that can provide a reliable stream of income.