Word: portfolios
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Dates: during 2000-2009
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...took out an adjustable-rate loan two years ago to buy an investment property near Bangalore, but his monthly payments have jumped because of tighter credit and rising interest rates. He has abandoned plans to get an M.B.A. because student loans are now too costly. The couple's stock portfolio has lost more than half its value since markets began melting down. "I feel scared, actually," Rege says of his crumbling finances. "You're sure for right now. But if things don't stabilize, then what...
How/why is this situation different from investors simply losing their money because of bad judgment about what to invest in? Can I get bailed out when my portfolio tanks? It's a variant on the old saw (often attributed to J. Paul Getty, although I'm sure somebody must have said something like it before him): "If you owe the bank $100, that's your problem. If you owe the bank $100 million, that's the bank's problem." Leveraged financial institutions (banks, investment banks, hedge funds) make investments with lots of borrowed money, so when their portfolios tank they...
...orderly isn't the same as cheap. To get Citigroup to absorb Wachovia, the FDIC agreed to share the risk on a $312 billion portfolio of loans (Citi has to eat the first $42 billion in potential losses; anything above that hits the FDIC fund...
ACTION: As ever, focus on the long term and stay invested in a diversified portfolio...
...Trying to mimic a portfolio we can’t actually follow is a bad idea,” wrote portfolio manager Roger Nusbaum on TheStreet.com, “but learning from people who are smarter than us is a good idea...