Vita Nelson's Blog

Equities Are Dead (Tuesday, January 1st, 2008)

At least, that's what Business Week magazine proclaimed in its famous (notorious?) cover story in 1979. Three years after that headline was published, stocks took off on a bull market that lasted about 18 years. Read More

Panic Attack? (Friday, February 1st, 2008)

Did investors worldwide panic over a possible economic slowdown by overreacting and selling off the stocks of sound companies? Did the Fed panic by sharply slashing short-term interest rates? Read More

Turning Losses Into Wins (Saturday, March 1st, 2008)

As of this writing, the S&P 500 is down nearly 15% from the record levels of 2007. Such conditions tend to make investors nervous. Read More

Risk Rumbles (Tuesday, April 1st, 2008)

The gist of an ad that we created a while back is that DRIP investing reduces market risk and removes broker risk. Read More

Fear and Greed (Thursday, May 1st, 2008)

A recent article in the Financial Times by Benn Steil (director of international economics at the Council on Foreign Relations) deals with the issue of the falling dollar and the resulting diminution of American dominance on the international scene. His point is that the increase in the money supply (which dilutes the value of U.S. currency) will result in inflation here and the perception overseas of an unstable dollar. Higher interest rates will be required to attract lenders--even American lenders. He cites the fact that American investors have lately been pouring money into foreign bond funds at record rates. Investors are moving to currencies that they think will hold value better than the U.S. dollar. Some diversification is good for any portfolio, but lately, the herd has been pouring its funds into foreign markets. Read More

What Goes Around Comes Around (Sunday, June 1st, 2008)

A study produced by Merrill Lynch (as part of its marketing presentation) charts how various sectors have fared over the past 10 years. The results are interesting because they shed light on why our diversified, patient investors do well--consistently building wealth in both "good markets" and bad ones. The study identifies 13 market sectors. What emerges is a checkerboard of performance. This year's winner is just as likely to be next year's loser. REITs were at the bottom of the board in 1998 and at the top of the board in 2000, whereas International was at the bottom of the board in 2001 and near the top in both 2005 and 2006. There's nothing to learn from the various placements, except that the marketplace is fickle. Read More

Raising A Roth Child (Tuesday, July 1st, 2008)

Someone I know very well suggested funding a child's college education through an IRA rather than through a 529 plan. In her view, an IRA might provide more flexibility and have fewer fees. Read More

"Playing" the Market (Friday, August 1st, 2008)

une was a brutal month for investors and July is producing its share of pain. The S&P 500 is now down by more than 20% from its peak reached last October and we may not have seen the end of the bad news. Read More

Squeezing Back (Monday, September 1st, 2008)

For many people, the squeeze is on. Food and gas prices are up. Raises and bonuses may be harder to come by. And the bottom line might be fewer dollars available for investing. Read More

The Sky won't Fall (Wednesday, October 1st, 2008)

Ten years ago, we were wondering what to do with the "peace dividend." With the Berlin Wall down and the Cold War behind us, we could cut military spending and use the money for other purposes. Al Gore's idea, which was ridiculed at the time, was to put the surplus into a lockbox where it is to be saved and use it case we needed it in the future! Read More

Anatomy of a Crime (Saturday, November 1st, 2008)

If you were to turn the events of the recent collapse of the stock market into an episode of "CSI: Wall Street," you'd start with a tangled web of greed, misjudgment, and deception that stretches from Congress to Main Street, and back again. Read More

Fear, Itself (Monday, December 1st, 2008)

The current financial crisis may be real enough, but its full extent was brought on by the outrageous measures taken to deal with the bursting of the housing bubble--that is, the authorization of a $700 billion cash infusion for Wall Street. The market tanked after that "rescue" because Main Street understood that the health of the U.S. government was being compromised in the name of providing liquidity to banks "so they could lend and keep the economy going." Read More

Silver Linings (Thursday, January 1st, 2009)

The S&P 500 index fell over 40% from the October 2007 peak to the (so far, at least) November 2008 low. We saw similar declines in 2000-2003 and in 1973-74. We also had a 30% drop in three months in 1987, including a one-day crash of more than 20%. Read More

Seeking safety (Sunday, February 1st, 2009)

It seems as though Treasury bonds are the preferred securities in today’s rough investing climate. In 2008, funds specializing in Treasury bonds were among the few that made money. Long-term Treasury bond funds returned over 27%, according to Morningstar, whereas the average domestic stock fund lost about 38%. Read More

What Gives (Sunday, March 1st, 2009)

What’s this bailout supposed to do? We’ve heard about making credit more available, but what does that really mean? Read More

Lemon Aid (Wednesday, April 1st, 2009)

You may be wondering what, if anything, you can do to take advantage of the current investing environment--the decline in the value of stocks and the likelihood of a tax hike. Read More

Educated Returns (Friday, May 1st, 2009)

You may have noticed the picture of my grandson, Axl, on the home page of directinvesting.com. If you click on the “More Information” link, you’ll come to a “landing page” where we offer a Growth Calculator to help you anticipate how much wealth a routine DRIP investment would accumulate based on your assumptions about the rate of growth and the number of years over which you will invest. Axl will be three years old this month, and the text, accompanying my illustration assumes that we are investing for his eventual retirement in 62 years. As little as $25 a month (a total investment of about $18,000) compounding at 9% over the 62 years produces close to $1 million of wealth. Time and the growth rate are the important variables. Read More

Social Security as a Bond Portfolio (Monday, June 1st, 2009)

Social Security’s trustees issued their annual report in May, a report that was greeted with widespread dismay. By 2016 (by the time today’s pre-teens are in college), Social Security will pay out more money in benefits than workers will pay in Social Security taxes. Read More

Raising A Roth Child (Wednesday, July 1st, 2009)

Someone I know very well suggested funding a child’s college education through an IRA rather than through a 529 plan. In her view, an IRA might provide more flexibility and have fewer fees. Read More

The Case for Bonds (Saturday, August 1st, 2009)

Long-term, there’s little question that stocks provide the best results for investors. Morningstar’s Ibbotson subsidiary has data that go back to the start of 1926. Read More

Diversification Pays (Tuesday, September 1st, 2009)

In 2008, the S&P 500 Index lost 37%, while the DJIA lost 34%. What’s more, virtually every other investment category lost similarly. In the first half of 2009, the S&P recovered and posted a gain of more than 3% and other investment categories moved up, as well. These parallel results included virtually every sector here and abroad. It seems clear that the U.S. economy and stock market influence the rest the world. This may lead some people to conclude that portfolio diversification does not do the job as advertised. Read More

Staying on Track (Thursday, October 1st, 2009)

Developing and maintaining a system to control your investing decisions is the most important ingredient for success. A plan, virtually any plan, is better than trusting your instincts to guide you. Read More

Hedging Risk (Sunday, November 1st, 2009)

When market prices gyrate as they have over the past several years, hedging your stock investments begins to make a lot of sense. Read More

Act Now to Save on Taxes (Tuesday, December 1st, 2009)

If this is December, it’s time for year-end tax planning. The best way to begin is to determine whether your transactions so far will result in a net gain or loss. Read More

Immediate vs. Deferred (Friday, January 1st, 2010)

Though still unsettled at year-end, odds are that the federal estate tax exemption will remain at $3.5 million and excess assets will be taxed at 45%--an extension of existing law. Read More