One day in 1884, Charles Henry Dow averaged the closing prices of 11 stocks he considered representative of the U.S. economy in a paper that preceded The Wall Street Journal.
There is the Nasdaq Index that includes over 3,000 companies – more than most other stock indexes -many of which are in the technological field. Of course, The NASDAQ Stock Market isn’t restricted to technology issues. Many other well-known companies, such as Starbucks and Amgen, are listed there. The NASDAQ Stock Exchange was established in 1971 as the world’s first electronic stock market. Started in 1972, the Russell 2000 Index gauges the performance of 2,000 “small cap” stocks that are often omitted from large indexes. This market capitalization-weighted index serves as a benchmark for small-cap U.S. stocks and is useful for tracking small companies with growth potential.
If your portfolio lags substantially behind a corresponding index, it may be time to reevaluate and reallocate assets. Be sure to select an appropriate index as your benchmark. For example, comparing a small-cap stock portfolio to the Dow Jones Industrial Average may not be very meaningful; comparing it to the Russell 2000 Index would be more appropriate. When selecting stocks, it’s prudent keep an eye on promising long-term performance based on certain fundamentals that may or may not be subject to market trends.
Employer-sponsored retirement plans are more valuable than ever. The money in them grows tax deferred until it is withdrawn at retirement. And contributions to a 401(k) plan actually reduce your taxable income. But figuring out how to manage the assets in your retirement plan can be confusing, particularly in times of financial uncertainty.
If you’re participating in an employer-sponsored retirement plan, you probably have the option of shifting the money in your plan from one fund to another. You can reallocate your retirement savings to reflect the changes you see in the marketplace. Here are a few guidelines to help you make this important decision.
Diversification is a basic principle of investing. Spreading your holdings among several different asset classes (e.g., stocks, bonds, etc.) lessens your potential loss in any one investment. Do the same for the assets in your retirement plan. Keep in mind, however, that diversification does not guarantee against investment loss; it is a method used to help reduce investment risk.
A guaranteed interest contract offers a set rate of return for a specific period of time, and it is typically backed by an insurance company. Generally, these contracts are very safe, but they still depend on the claims-paying ability of the company that issues them.
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