Terrorism & the Financial Markets

Wall Street has the potential to recover quickly from geopolitical shocks. In the past few months, the world has seen several high-profile terrorist attacks. Incidents in the U.S., Belgium, Pakistan, Lebanon, Russia, and France have claimed more than 500 lives and injured approximately 1,000 people. Beyond these incidents, many other deaths and injuries have been caused by terrorist bombings that garnered less media attention.1,2 As an anxious world worries about the ongoing threat posed by ISIS, the Taliban, al-Qaeda, Boko Haram, and other terror groups, there is also concern about the effect of such incidents on global financial markets. Wall Street, which has had a trying first quarter, hopes that such shocks will not prompt downturns. Even in such instances, history suggests that any damage to global shares might be temporary. While geopolitical shocks tend to scare bulls, the effect is usually short-term. On September 11, 2001, the attack on America occurred roughly at the beginning of the market day. U.S. financial markets immediately closed (as they were a potential target) and remained shuttered the rest of that trading week. When Wall Street reopened, stocks fell sharply; the S&P 500 lost 11.6% and the Nasdaq Composite 16.1% in the week...
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Volatility Is Not Risk

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The two should not be confused. Provided by Rose Greene Financial Services What is risk? To the conservative investor, risk is a negative. To the opportunistic investor, risk is a factor to tolerate and accept. Whatever the perception of risk, it should not be confused with volatility. That confusion occurs much too frequently. Volatility can be considered a measurement of risk, but it is not risk itself. Many investors and academics measure investment risk in terms of beta; that is, in terms of an investment’s ups and downs in relation to a market sector or the entirety of the market. If you want to measure volatility from a very wide angle, you can examine standard deviation for the S&P 500. The total return of this broad benchmark averaged 10.1% during 1926-2015, and there was a standard deviation of 20.1 from that average total return during those 90 market years.1 What does that mean? It means that if you add or subtract 20.1 from 10.1, you get the range of total return that could be expected from the S&P two-thirds of the time during the period from 1926-2015. That is quite a variance, indicating that investors should be ready for anything when...
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Building A College Fund

Do it smartly, without the all-too-common missteps. According to Sallie Mae, U.S. families with one or more college students spent an average of $24,164 on tuition, housing, and linked expenses in 2015. That was 16% more than in 2014.1 Statistics like these underline the importance of saving and investing to fund a university education, but that effort has become optional to many. In its annual How America Saves for College survey, Sallie Mae found that only 48% of U.S. families with at least one child younger than age 18 were saving for college at all. Among those that were saving, the average 2015 amount was $10,040 – the lowest figure in the 7-year history of the survey. It is little wonder that 22% of college costs are covered by either parent or student borrowing.1,2 If you want to build a college fund, what should you keep in mind? What should you do? What should you avoid doing? First, save with realistic assumptions. Outdated perceptions of college expenses can linger, so be sure to replace them with current data and future projections. Consider a tax-advantaged account. Remarkably, Sallie Mae’s 2015 survey found that just 27% of households saving for higher education...
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