Tag: Finance

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Is the S&P500 Index Actually Diversified?

The S&P 500 index, a widely followed benchmark of the U.S. stock market, has long been considered a reliable indicator of the overall health of the economy. However, a closer look at the index reveals a surprising concentration in big tech stocks. This phenomenon is not only a reflection of the growing dominance of technology companies in the market, but also a result of the market-weighted structure of the index. Let’s explore the reasons behind this concentration and discuss the potential risks it poses to investors.

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Five Reasons to not Panic in a Bear Market

2022 has been an extremely bad year for almost every asset class! Stocks and bonds have suffered large losses. And inflation has been high, further eroding the value of investors’ savings. In a bear market, it is absolutely critical for long term investors to avoid panic selling at all costs.

I generated this text in part with OpenAI’s large-scale language-generation models. Upon generating draft language, I reviewed, edited, and revised the language to my own liking and I take ultimate responsibility for the content of this publication.

raccoon businessmen panicking in dusty city experiencing a bear market
A painting of raccoon stockbrokers panicking during a market crash – StableDiffusion v1-4
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Critical Flaws in Binance and Other Crypto Exchanges

For most of 2022, financial news has been filled with stories about big losses across all asset classes. But one of the biggest losers has been cryptocurrencies like Bitcoin and Ethereum. This has led to many investors reconsidering their allocations to cryptocurrency. I don’t recommend cryptocurrencies as an investment for any of my clients, but the topic does come up occasionally. But let’s set aside any recommendation I have about cryptocurrencies themselves. I’d like to bring up a recommendation I have about the various methods of cryptocurrency investing. In short, I strongly recommend against using an online exchange such as Binance to invest in cryptocurrencies.

an example of a mobile investing platform like Binance
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Direct Indexing in Luther Wealth’s Future

In the great divide between active and passive investing strategies, Luther Wealth is definitely in the passive camp. All of my clients are fully invested in low cost mutual funds and ETFs. I use a proprietary asset allocation algorithm, but the securities themselves are just vanilla index funds. But lately I have been considering altering this ETF strategy for certain clients. Not in favor of an active strategy, but rather in favor of a different passive style known as direct indexing.

direct indexing can be implemented in the interactive brokers platform
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Stock Buybacks Aren’t Evil

I have read several articles over the past year that include some harsh criticism of corporate stock buybacks. Most include a version of the argument: “President Trump’s tax cuts went primarily to wealthy Americans and corporations. Corporations squandered this windfall with stock buybacks to pump up their own stock price.” This sentiment is a little off-the-mark, but I understand the impulse. So I wanted to take a minute to work out the details on why stock buybacks are not so bad.

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