Some risk-averse investors may want a majority of their wealth in non-equity holdings such as Treasury bills, certificates of deposit, and corporate bonds. But returns from these can be anemic. An alternative is an asset class known as bank loans or senior loans.
Bank loans are a multi-class hybrid asset. They are the short-term equivalent of high-yield bonds but with important differences such as shorter maturities, much lower default rates, and variable interest-rate features. Investors generally get
into this asset through a growing number of bank loan funds. The funds have never lost money in any given year, while averaging 2 percent more than T-bills.
Using standard Markowitz portfolio theory, this article studies the return/risk impact of allocating bank loan funds into a predominately bond portfolio. The study assumes an investor initially invested 100 percent in T-bills, with bank loan funds and other assets added to the mix for return requirements ranging from 5 to 10 percent (for years 1990–2005). As return requirements rise, bank loan allocations rise, and standard deviations fall, until allocations begin falling significantly above 8 percent return requirements, giving way to equities.
Bank loan funds should be the first asset class to consider when desiring to increase returns above standard T-bill rates. Otherwise, higher allocations must be given to high-yield bonds in order to attain relevant return levels. A study of future returns reconfirms the ability of bank loans to deliver returns more than commensurate with their risk.
Full journal
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Showing posts with label Loan. Show all posts
Showing posts with label Loan. Show all posts
By Jean Chatzky
For years, I've been preaching the mantra that boring is better when it comes to your investments. In fact, if you've been reading this column for any length of time, you know that my strategy is to come up with an asset allocation that you can live with and then dollar-cost average into the market on a regular, automatic basis.
Given the state of today's market, you might be thinking that I've changed my tune. But, in fact, this economy has only served to validate my position. If — at the onset — you can't commit to staying in the market despite its ups and downs, you're treading dangerous waters, particularly if you're not an experienced investor. You run the risk of overthinking the situation and making investment decisions that not only aren't rational, but are emotional as well. In other words, you run the risk of losing your hard-earned money. That's why now — more than ever — you need to dial in to your patient side.
Set it and forget it
When I saw "The Gone Fishin' Portfolio," a new book by Alexander Green, I knew I had to talk to him. He's been getting a lot of press these days because the portfolio outlined in his book can be managed in just 20 minutes a year, a strategy that is right up my alley. How did he do it? The key is very careful asset allocation. Green selected a range of asset classes that move independently of each other, so even when part of the portfolio is down, another portion will likely be up. "I tried to put together a blend of assets that will all give a better return than inflation over time, but when mixed together, give you a higher degree of return with less risk," Green explains.
If you have faith in your asset allocation and you're properly diversified, you can rest easy that your portfolio will come out on top without a lot of tinkering on your part. If you're unsure, it's worth seeing a financial adviser for help. These days, there's even a group of advisers that charge by the hour.
Have a plan
It doesn't have to be hugely detailed, but at the very least, you need a few rules in place that govern your reaction to the market. "Most people don't; they invest emotionally," says Green. "But if you're going to have investment discipline, that means sticking with your plan in good times and in bad times. You have to realize that the market has ups and downs."
Here's the deal — if you can't sleep at night, you need to change your asset allocation because you're clearly taking more risk than you can tolerate. I'm not suggesting that you sweat it out to the detriment of your mental health, and neither is Green. But what I am suggesting is that you set your asset allocation to a level of risk you can handle, then decide how much your budget will allow you to save each month. Once you have a figure, whether it's $100 or $1,000, put it on autopilot and continue to invest that amount whether the market is up or down.
Recognize your goal
Ask yourself: Why are you in the market in the first place? For most people, the end goal is a comfortable retirement, and it simply can't be reached without taking a little risk. If you forgo investing and just save in a standard money market account, your money isn't going to keep up with inflation, meaning you'll actually lose money over time. Keeping up with inflation means ceding a little control. "No one likes uncertainty. As a general rule, it's frightening. But what people tend to overlook is that there really is no alternative. The markets are always uncertain," says Jason Zweig, author of "Your Money and Your Brain."
There are, of course, circumstances when a money market is the way to go. If you're saving for a short-term goal — think five years or less; like a down payment on a house or your children's education — you're better off keeping that cash out of the market right now. You don't want to run out of time before you can recover from a big loss.
Don’t forget the basics
Save early, save often is a line you probably hear a lot, and it's an important one. Risk and return aside, the amount you stash away plays a big part in the number you'll have when you hit retirement age. "I tell people that there are only six things that will determine the future value of a portfolio," says Green. "The amount of money you save, the length of time you let it compound, what your asset allocation is, the market's annual return, the expenses you absorb and the taxes you pay." Don't get so caught up in the market's waves that you overlook these important rules of thumb.
Control everything else
You have no say over the stock market. But you can control how you spend your money. You can choose to keep your credit card in your desk drawer at home when you go out. You can decide to put a little extra money away each month so you have an emergency fund at the ready. Having a grasp on the rest of your financial life will help you remain calm if (and when) the market takes another dip. Read More..
For years, I've been preaching the mantra that boring is better when it comes to your investments. In fact, if you've been reading this column for any length of time, you know that my strategy is to come up with an asset allocation that you can live with and then dollar-cost average into the market on a regular, automatic basis.
Given the state of today's market, you might be thinking that I've changed my tune. But, in fact, this economy has only served to validate my position. If — at the onset — you can't commit to staying in the market despite its ups and downs, you're treading dangerous waters, particularly if you're not an experienced investor. You run the risk of overthinking the situation and making investment decisions that not only aren't rational, but are emotional as well. In other words, you run the risk of losing your hard-earned money. That's why now — more than ever — you need to dial in to your patient side.
Set it and forget it
When I saw "The Gone Fishin' Portfolio," a new book by Alexander Green, I knew I had to talk to him. He's been getting a lot of press these days because the portfolio outlined in his book can be managed in just 20 minutes a year, a strategy that is right up my alley. How did he do it? The key is very careful asset allocation. Green selected a range of asset classes that move independently of each other, so even when part of the portfolio is down, another portion will likely be up. "I tried to put together a blend of assets that will all give a better return than inflation over time, but when mixed together, give you a higher degree of return with less risk," Green explains.
If you have faith in your asset allocation and you're properly diversified, you can rest easy that your portfolio will come out on top without a lot of tinkering on your part. If you're unsure, it's worth seeing a financial adviser for help. These days, there's even a group of advisers that charge by the hour.
Have a plan
It doesn't have to be hugely detailed, but at the very least, you need a few rules in place that govern your reaction to the market. "Most people don't; they invest emotionally," says Green. "But if you're going to have investment discipline, that means sticking with your plan in good times and in bad times. You have to realize that the market has ups and downs."
Here's the deal — if you can't sleep at night, you need to change your asset allocation because you're clearly taking more risk than you can tolerate. I'm not suggesting that you sweat it out to the detriment of your mental health, and neither is Green. But what I am suggesting is that you set your asset allocation to a level of risk you can handle, then decide how much your budget will allow you to save each month. Once you have a figure, whether it's $100 or $1,000, put it on autopilot and continue to invest that amount whether the market is up or down.
Recognize your goal
Ask yourself: Why are you in the market in the first place? For most people, the end goal is a comfortable retirement, and it simply can't be reached without taking a little risk. If you forgo investing and just save in a standard money market account, your money isn't going to keep up with inflation, meaning you'll actually lose money over time. Keeping up with inflation means ceding a little control. "No one likes uncertainty. As a general rule, it's frightening. But what people tend to overlook is that there really is no alternative. The markets are always uncertain," says Jason Zweig, author of "Your Money and Your Brain."
There are, of course, circumstances when a money market is the way to go. If you're saving for a short-term goal — think five years or less; like a down payment on a house or your children's education — you're better off keeping that cash out of the market right now. You don't want to run out of time before you can recover from a big loss.
Don’t forget the basics
Save early, save often is a line you probably hear a lot, and it's an important one. Risk and return aside, the amount you stash away plays a big part in the number you'll have when you hit retirement age. "I tell people that there are only six things that will determine the future value of a portfolio," says Green. "The amount of money you save, the length of time you let it compound, what your asset allocation is, the market's annual return, the expenses you absorb and the taxes you pay." Don't get so caught up in the market's waves that you overlook these important rules of thumb.
Control everything else
You have no say over the stock market. But you can control how you spend your money. You can choose to keep your credit card in your desk drawer at home when you go out. You can decide to put a little extra money away each month so you have an emergency fund at the ready. Having a grasp on the rest of your financial life will help you remain calm if (and when) the market takes another dip. Read More..
From: Credit Info Center
Why do I Care About Credit Unions?
One of the most important part of rebuilding your credit is establishing new credit. An excellent source of easy credit is the credit union. They have more lenient credit guidelines on auto loans, credit cards and second mortgages. However, most people don't know which credit unions they are qualified to join. Here are some tips.
How to Find a Credit Union
The good news: If you want to be a member of a credit union, you probably can. The bad news: They rarely advertise, so if you want a credit union, you'll most likely have to do a little legwork on your own... but the rewards will likely be worth the effort!
A credit union is a cooperative financial institution, not-for-profit, owned and controlled by its members. A credit union's charter defines its "field of membership," which could be an employer, a geographic region, school, religious or professional affiliation, or community. Anyone working for an employer that sponsors a credit union, for example, is eligible to join that credit union.
Whether you choose to entrust your hard-earned money to a bank or a credit union, you will want to make sure that it is federally insured. Where a bank might sport the FDIC logo, in a credit union you want to look for the insignia of the National Credit Union Administration (NCUA). The National Credit Union Administration regulates federal credit unions and insures the vast majority of all credit unions in the United States. Its insurance fund guarantees deposits up to $100,000, just like a bank.
What are the Advantages of a Credit Union?
Becoming a member of a credit union is advantageous because credit unions are non-profit, and exist to provide members with a place to save money. Credit unions typically have lower costs associated with all of their products and services.
Credit unions were created to enable people to pool their financial resources to help themselves and each other, working together as a team to create solutions to meet their financial needs. When you compare credit union information to that of a traditional bank, you'll find lower interest rates when borrowing and higher percentage rates in savings as a credit union member.
Because they are not-for-profit institutions, credit unions offer better rates on credit cards, sometimes up to three percentage points lower than the average bank card rate. Typically, they are more forgiving regarding creditand may even allow people with past bankruptcies to qualify for unsecured cards. Credit unions are an especially good option for people who are building credit for the first time or trying to re-establish good credit, as they are typically smaller organizations which offer personalized service and are more willing to consider factors beyond the "black and white".
Financial education is available to all members. Credit unions assist members in becoming better-educated consumers of financial services.
Your credit union can put you in business with a small business loan. And some credit unions have established a relationship with the Small Business Administration (SBA) to expedite loans to credit-worthy small businesses.
Credit unions are governed through an unpaid, volunteer Board of Directors, democratically elected by the credit union membership.
Finding a Credit Union
Governmental regulatory agencies require that credit unions restrict their membership to defined segments of the population, such as people who live, work, worship, or attend school in a well-defined geographic area; employees of specific companies or trades; members of specific non-profit groups (alumni associations, conservation or other advocacy organizations, lodges, churches, or the like); or a particular occupational group (teachers, doctors, etc.)
Read More..
Why do I Care About Credit Unions?
One of the most important part of rebuilding your credit is establishing new credit. An excellent source of easy credit is the credit union. They have more lenient credit guidelines on auto loans, credit cards and second mortgages. However, most people don't know which credit unions they are qualified to join. Here are some tips.
How to Find a Credit Union
The good news: If you want to be a member of a credit union, you probably can. The bad news: They rarely advertise, so if you want a credit union, you'll most likely have to do a little legwork on your own... but the rewards will likely be worth the effort!
A credit union is a cooperative financial institution, not-for-profit, owned and controlled by its members. A credit union's charter defines its "field of membership," which could be an employer, a geographic region, school, religious or professional affiliation, or community. Anyone working for an employer that sponsors a credit union, for example, is eligible to join that credit union.
Whether you choose to entrust your hard-earned money to a bank or a credit union, you will want to make sure that it is federally insured. Where a bank might sport the FDIC logo, in a credit union you want to look for the insignia of the National Credit Union Administration (NCUA). The National Credit Union Administration regulates federal credit unions and insures the vast majority of all credit unions in the United States. Its insurance fund guarantees deposits up to $100,000, just like a bank.
What are the Advantages of a Credit Union?
Becoming a member of a credit union is advantageous because credit unions are non-profit, and exist to provide members with a place to save money. Credit unions typically have lower costs associated with all of their products and services.
Credit unions were created to enable people to pool their financial resources to help themselves and each other, working together as a team to create solutions to meet their financial needs. When you compare credit union information to that of a traditional bank, you'll find lower interest rates when borrowing and higher percentage rates in savings as a credit union member.
Because they are not-for-profit institutions, credit unions offer better rates on credit cards, sometimes up to three percentage points lower than the average bank card rate. Typically, they are more forgiving regarding creditand may even allow people with past bankruptcies to qualify for unsecured cards. Credit unions are an especially good option for people who are building credit for the first time or trying to re-establish good credit, as they are typically smaller organizations which offer personalized service and are more willing to consider factors beyond the "black and white".
Financial education is available to all members. Credit unions assist members in becoming better-educated consumers of financial services.
Your credit union can put you in business with a small business loan. And some credit unions have established a relationship with the Small Business Administration (SBA) to expedite loans to credit-worthy small businesses.
Credit unions are governed through an unpaid, volunteer Board of Directors, democratically elected by the credit union membership.
Finding a Credit Union
Governmental regulatory agencies require that credit unions restrict their membership to defined segments of the population, such as people who live, work, worship, or attend school in a well-defined geographic area; employees of specific companies or trades; members of specific non-profit groups (alumni associations, conservation or other advocacy organizations, lodges, churches, or the like); or a particular occupational group (teachers, doctors, etc.)
Read More..
By Jean Chatzky, "Today" Financial Editor
Rewards credit cards: Are they for you?
Whether it's cash back, airline miles or savings for college, reward credit cards have their appeal. After all, who doesn't want to get paid to shop? It's like free money. Unfortunately, reward cards are not for everybody:
Who should avoid reward cards?
If you tend to carry a balance from month to month, reward cards are not all they're cracked up to be. That's because reward cards tend to have higher rates than regular credit cards. The money you pay out in interest will essentially wipe out any of the rewards you earn.
Who should apply for reward cards?
If you pay off your balance each month, reward cards are worth considering.
What’s the difference between a credit card and debit card?
Debit cards and credit cards are not created equal. With a debit card, the money is automatically taken out of your account when you purchase something. In the case of a credit card, you pay at the end of the month. However, the biggest difference is in the legal protection that you have. Unlike with a credit card, you don't have the right to dispute a claim with a debit card. If, though, your debit card is stolen and items are charged to it, most companies will match the $50 credit-card loss limit. However, you may have to wait a while — since the money has already vacated your account, the bank may not be so quick to replace it.
A very expensive student loan?
Most college students have at least one credit card — and the popularity of multiple cards is on the rise. The good news is that the college card-users are fairly responsible with their plastic, but there are still horror stories of undergrads emerging from school with credit-card debt in the high five figures. How can you keep it from happening to your kids? Talk to them about how credit cards work. Chances are, the day they get to campus (if not shortly thereafter), they'll be bombarded by marketers trying to sign them up for a card. Here are a few items to make sure your child understands about credit cards.
* Interest rates: Many student cards now have rates around 15 to 20 percent, which is higher than standard cards. There are bargains out there, but they'll need to hunt around.
* Late fees and penalties: Paying your bill late (even just one time) can result in a much higher permanent interest rate, as well as a $25 to $35 fee.
* Cash advances: Unlike with purchases, the interest on cash advances generally is charged immediately, when the withdrawal is made. In addition, the interest rate may be even higher than that charged on regular purchases.
Consolidating credit-card debt?
One way to lower your credit-card rates is to consolidate your credit card debt into one big home equity loan or home equity line of credit. This can be a very cost-effective way to go. Not only are the rates on home equity products much lower than credit card rates, but they're tax deductible as long as your total mortgage debt doesn't exceed $1.1 million. So what's the difference?
* Home equity loan: A fixed-rate sum you borrow all at once.
* Home equity line of credit: A variable-rate loan that usually floats with the prime rate and you draw upon as needed.
One warning: The home equity approach can also be dangerous. Why? You're putting your home on the line. Default and you could lose it. The other big problem with consolidation is that many people clear the debt off their credit cards only to charge them right back up again. Don’t consolidate in this way if you have even the smallest doubt that a self-imposed moratorium on plastic will work for you.
Read More..
Rewards credit cards: Are they for you?
Whether it's cash back, airline miles or savings for college, reward credit cards have their appeal. After all, who doesn't want to get paid to shop? It's like free money. Unfortunately, reward cards are not for everybody:
Who should avoid reward cards?
If you tend to carry a balance from month to month, reward cards are not all they're cracked up to be. That's because reward cards tend to have higher rates than regular credit cards. The money you pay out in interest will essentially wipe out any of the rewards you earn.
Who should apply for reward cards?
If you pay off your balance each month, reward cards are worth considering.
What’s the difference between a credit card and debit card?
Debit cards and credit cards are not created equal. With a debit card, the money is automatically taken out of your account when you purchase something. In the case of a credit card, you pay at the end of the month. However, the biggest difference is in the legal protection that you have. Unlike with a credit card, you don't have the right to dispute a claim with a debit card. If, though, your debit card is stolen and items are charged to it, most companies will match the $50 credit-card loss limit. However, you may have to wait a while — since the money has already vacated your account, the bank may not be so quick to replace it.
A very expensive student loan?
Most college students have at least one credit card — and the popularity of multiple cards is on the rise. The good news is that the college card-users are fairly responsible with their plastic, but there are still horror stories of undergrads emerging from school with credit-card debt in the high five figures. How can you keep it from happening to your kids? Talk to them about how credit cards work. Chances are, the day they get to campus (if not shortly thereafter), they'll be bombarded by marketers trying to sign them up for a card. Here are a few items to make sure your child understands about credit cards.
* Interest rates: Many student cards now have rates around 15 to 20 percent, which is higher than standard cards. There are bargains out there, but they'll need to hunt around.
* Late fees and penalties: Paying your bill late (even just one time) can result in a much higher permanent interest rate, as well as a $25 to $35 fee.
* Cash advances: Unlike with purchases, the interest on cash advances generally is charged immediately, when the withdrawal is made. In addition, the interest rate may be even higher than that charged on regular purchases.
Consolidating credit-card debt?
One way to lower your credit-card rates is to consolidate your credit card debt into one big home equity loan or home equity line of credit. This can be a very cost-effective way to go. Not only are the rates on home equity products much lower than credit card rates, but they're tax deductible as long as your total mortgage debt doesn't exceed $1.1 million. So what's the difference?
* Home equity loan: A fixed-rate sum you borrow all at once.
* Home equity line of credit: A variable-rate loan that usually floats with the prime rate and you draw upon as needed.
One warning: The home equity approach can also be dangerous. Why? You're putting your home on the line. Default and you could lose it. The other big problem with consolidation is that many people clear the debt off their credit cards only to charge them right back up again. Don’t consolidate in this way if you have even the smallest doubt that a self-imposed moratorium on plastic will work for you.
Read More..
Money problem always there. The biggest challeging is how to make our financial freedom. But of course to get in financial freedom we really want to build new business or expand or existing business. And if we have problem to financing our business plan how we solve that ? Or, how if we need to access cash quickly for emergencies?
Here you can think about making some Payday Loan. It is very quickly and easy process. You can get cash advance to allows you to avoid expensive overdraft fees, bounced checks, late payment charges and allows you to maintain a good credit rating. You can trust one name to loan money: Payday Loan Maxx. You can get $100 -$ 1500 loans within 24 hours so you can pay rent, fix car or pay late fees. Yes, you with Payday Loan Maxx you can get Guaranteed Payday Loan.
Why you should make loan to Payday Loan Maxx?
Go to website of Payday Loan Maxx and see the list where Payday Loan Maxx in your state. Check the website to get Alabama cash advance or Texas paydal loan. Read More..
Here you can think about making some Payday Loan. It is very quickly and easy process. You can get cash advance to allows you to avoid expensive overdraft fees, bounced checks, late payment charges and allows you to maintain a good credit rating. You can trust one name to loan money: Payday Loan Maxx. You can get $100 -$ 1500 loans within 24 hours so you can pay rent, fix car or pay late fees. Yes, you with Payday Loan Maxx you can get Guaranteed Payday Loan.
Why you should make loan to Payday Loan Maxx?
- Fast. The process is about Minutes!
- Easy. The process is Quick! You can apply online.
- Guaranteed. 90% Of all People Are Approved!
- Secure. Online but secure.
Go to website of Payday Loan Maxx and see the list where Payday Loan Maxx in your state. Check the website to get Alabama cash advance or Texas paydal loan. Read More..
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