IAM Customer Survey Results

2013-05-15We’d just like to let all of the IAM portfolio management software users who responded to our customer satisfaction survey know that we really appreciated their feedback and that we’ve put together a page detailing the survey results. The results were overall very positive, and we are extremely pleased with both the turnout and community feedback which we can use to further improve the quality of IAM software. You can view a summary of our findings on our new Survey Results page.

The Merits of Dollar Cost Averaging

Slow and steady wins the race. Or at least the investing race. Investing inherently involves some risk;  that’s just the way life works. Our job as investors is to figure out ways in which to minimize this risk. One common method that investors use to minimize risk is dollar cost averaging.

2013-05-03Dollar cost averaging involves investing a fixed amount over a predetermined period of time rather than all at once. The rationale behind dollar cost averaging comes from the idea that markets don’t move in a straight line. By investing the same amount, you end up buying fewer shares when the price is high and more when the price is low. Not only that, but it minimizes risk from big market shifts during the entire investment period. If something should go terribly awry with the company you’re investing in, you can always simply stop purchasing shares and less of your investing capital will be affected.

Another benefit to dollar cost averaging is that is helps overcome decision paralysis. It’s natural to be hesitant before investing a large amount of your hard earned money, even in the bluest of blue-chip stocks. However (and especially for new and inexperienced investors), gradually easing in to the market makes it easier to invest.

While dollar cost averaging may be the best idea for novice investors, it by no mean guarantees a return on investment. In addition, new research suggests that lump sum investing may pay off in the long run. However, dollar cost averaging is far less nerve-racking and helps many investors sleep more soundly at night.

Penny Stocks: Risk and (improbable) Reward

News of “penny stocks” has probably invaded the sides of your browser at some point with news of some (supposed) penny stock millionaire. But what, exactly, are these penny stocks, and is it a worthwhile investing venue?

Generally speaking, the SEC classifies penny stocks as stocks that trade under $5 and aren’t listed on major exchanges like NASDAQ or the NYSE. Instead, they’ll be traded on pink sheets or over the counter bulletin boards. One can purchase shares of penny stocks through your normal stockbroker.

2013-05-02The appeal of penny stocks comes in the form of their volatility. Much in the same way prospectors of the old west would pan for specks of gold in the river, investors will pore through penny stocks in the hope of picking out the next big breakthrough company whose shares will jump from .10 to $8. And also like those prospectors, most of them won’t.

Penny stocks suffer from several problems. Typically, little information is available to the investor, and there is rarely performance history to look at. They also don’t have to meet the same standards that companies must meet to be traded on the major exchanges. Selling the stock may also be a problem, since not many buyers may be willing to take the risk.

Aside from general instability and extreme volatility, penny stocks are particularly vulnerable to “pump and dump” schemes set up by scammers. In these setups, people will purchase a more or less worthless stock, hype it to investors who purchase it, in turn raising the stock price, and then selling the stock and leaving the investors high and dry.

So while penny stocks may have made a few folks rich, it’s not likely to be your best investing opportunity. But that diamond-in-the-rough potential is exactly why they’re popular amongst the least risk-averse among us.