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Who is a Millionaire

It seems that more people than ever are millionaires these days -- 1 in 20 households in the United States have investable assets of $1 million or more (excluding real estate).

Most of you realized that inflation means that being a millionaire is not what it used to be. $1 million today is equivalent to only $430,000 in 1983. As Yogi Berra so wisely put it, "a nickel ain't worth a dime anymore."

One of the main reasons we invest is to keep pace with inflation. Otherwise, the purchasing power of our money declines over time.

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Seeing Causality When It's Not There

Just because two events happen contemporaneously does not mean one of them caused the other to occur.  We love to see causality and connect things that are not necessarily related.

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Yucky Tax Stuff

Nothing says stop reading further than the word "tax."  Nonetheless, please take 60 seconds to quickly review the following important information.

Your friends at the IRS have imposed new requirements on the companies that hold your investments (think Schwab, Merrill Lynch, etc.).  These custodians must now report the cost basis for certain stocks sold during 2011 and for other types of investments beginning in 2012.  Because of this, the Form 1099 that you receive each year from custodians will be different than in the past.

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Investment Tricks You Can Do at Home

Watch the video to learn how to analyze investment risk without any real knowledge of the underlying investment.  Impress your friends! 

  

Just remember, 10 year Treasury bonds are currently paying around 2% interest.  So the only reason someone would offer you  a 12% yield is to induce you to take on the added risk.  They are not paying such a huge premium above Treasuries because they love you.

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When Price Doesn't Matter

I occasionally view things differently than my wife, for which I take full responsibility and repent the error of my ways.  For example, I do not fully appreciate a good bargain.  When my wife buys an item for $50 that was originally $300, I do not share her enthusiasm, although I express my pleasure at her good fortune.  To me, either the item was worth $50 or it wasn't -- it's previous price is irrelevant.

With investments, the purchase price can get in your way of clear analysis.  Let's say you bought the XYZ stock a few months ago for $100 per share and it now trades at $70.  Should you sell it?  Well, there are numerous factors that go into such a decision.  Does it make a difference that you bought the stock for $100 per share?  Absolutely not!

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