Business, Careers, & Money Articles

Article / Updated 11-30-2022

Factor investing can help you build a portfolio designed for your unique risk tolerance, investment time horizon, and financial goals using characteristics that history shows lead to consistent outperformance. An investment time period is the timeframe you expect to hold an investment, usually short (less than five years), intermediate (five to ten years), or long term (more than 10 years). Factor investing provides a building block that gives you the best odds of reaching retirement and income goals successfully. It helps improve portfolio results and reduces volatility. Factor investing, done right, enhances diversification in a way that lowers risk without sacrificing returns, by placing your investment eggs in many baskets to help ensure positive results! Following a systematic approach In a nutshell, factor investing is about defining and following a set of proven guard rails that keep your portfolio on track. Using a factor strategy not only gives you better returns, but delivers them more consistently while also protecting you from the dangerous pitfalls and mistakes that get other investors in trouble. Leveraging the power of a persistent strategy Investors worldwide have always sought the secrets that would help them invest right alongside legendary investors like John Templeton, Warren Buffett, Jesse Livermore, Benjamin Graham, and John “Jack” Bogle. Investing systems and rules have come and gone over the years, because it turns out many of them worked only in specific markets and just for a few years. These strategies picked up on short-lived trends and rules in stocks that were true only for a limited time due to certain conditions unlikely to repeat. When you’re investing based on factors, you’re interested in a persistent strategy — one that can deliver results in the future. By figuring out the themes, characteristics, and properties common to winning investment, or factors, you can discover a set of rules to create higher-performing portfolios. But how do you even try to comb through the mountains of market data over the last 100-plus years to find what works? Well, it turns out that you’re in luck! In the last few years, financial academics have been hard at work doing just that — distilling these factors into useful sets of rules that you can put to work in your portfolios today. Though nothing works 100 percent of the time, especially over shorter periods, factors are most effective when combined with other factors in a master strategy. This has the effect of loading the dice in your favor. Saving time with factor investing Time is money, the old saying goes, and investors since the ancient Chinese rice traders have always looked for ways to save time by streamlining and systematizing their trading and investing decision processes. We all have busy lives, jobs to get to, kids to take to after school sports, and a million other things. A factor investing strategy can help improve your life by helping you make best use of your time and energy. James used factor investing to save time during the COVID-19 market bottom in March of 2020. He needed an approach that identified resilient stocks and funds most likely to benefit from a market rebound, while also giving clients confidence in the historical reliability of these stocks to survive and thrive the unprecedented economic and market downturn everyone was experiencing as the world rapidly went into social distancing, quarantines, and government-mandated shutdowns. He came up with a multifactor portfolio for new clients using the same principles in this book that was both sophisticated and easy to understand. This strategy gave them the confidence to enter the depressed stock market and stay on board for what turned out to be a profitable 18 months for investing, with many portfolios doubling in value. Using modern advances As investors, you always want to look for ways to take advantage of advances and breakthroughs in the investment field. Two trends that have come together to move investing forward have been computers and history; specifically, better methods of market data analysis and greatly expanded historical datasets to feed those computers. Modern computers and new ways of crunching market data are at the forefront of the growing interest and advances in factor investing. Just as important is the expanding dataset as researchers and archivists have combed through old ticker tapes, micro-fiche and ledgers to complete the historical dataset of stock prices and company data; in some cases, right back to the Buttonwood Agreement that pre-dated Wall Street. What is the Buttonwood Agreement? It’s a single-page document that started the New York Stock Exchange 230 years ago on May 17, 1792, when 24 merchants and brokers met under a buttonwood tree and put their signatures to a set of rules and safeguards for trading. The meeting was necessary to re-establish public confidence in markets after the infamous Financial Panic of 1792 that had caused mayhem earlier that spring. Investing options were limited back then. The only stock available was in the Bank of New York, The First Bank of the United States, some insurance companies, and Revolutionary War Bonds issued by Alexander Hamilton to help pay off the War of Independence from British rule. Today, you can also take advantage of databases, services, and perhaps even pre-packaged investment products such as funds and ETFs that attempt to apply factor methodology in a practical way to select investments based on current stock and bond metrics. Luckily, technology has made factor investing far easier and more cost effective than ever, as we detail in later chapters. This enhanced dataset provides a richer and more complete testing ground to ferret out meaningful factors and to test existing assumptions more fully. This is an advance that you can benefit from! Following proven guidelines that work Even a broken clock is right twice a day, and, like a coin toss, any system can come up with a winner or two from time to time. As an extreme example, a rules-based system (factor) that consisted of “sell all U.S. stocks and buy bonds” may have worked very well as a factor from September 1929 until July 1932, but this was only due to the stock market crash that kicked off the Great Depression. Using this factor after 1932 would have been a recipe for disaster and decades of underperformance! The point here is that you’re looking for guidelines that provide a more universal advantage, and are not dependent on a specific set of historical circumstances. The best factors you’re interested in work in many different markets, countries, and decades. They aren't just one-trick ponies that have shown results once or twice in history, perhaps by chance or due to unique circumstances. You want rules that operate more broadly and dependably. Following a disciplined core strategy The most successful investors have a disciplined strategy driving their success. Incorporating factors into your investing adds not just a methodology for investment selection but also discipline to portfolio activity as it helps you determine what to buy, sell, or hold, and gives you the confidence needed to participate in the long term. Protecting against emotional investing The emerging field of behavioral finance says that regardless of how you design your portfolio, the major reason for your success or failure is your emotion-driven actions. In other words, if you want to be successful at investing, you have to protect against emotional investing, which results in buying high and selling low, repeatedly. The long-running DALBAR study, which has been updated annually since the inception of the 401(k) over four decades ago, proves that this problem is widespread and damaging to wealth building. Investors lack discipline (of course it's not you, just other investors). What is DALBAR? Located in Boston, DALBAR is one of the nation's leading independent research firms committed to raising the standards of excellence in the financial services industry. It compiles and analyzes mountains of data on mutual funds, life insurance, and banking products and practices. It has also been behind the nation's leading study on investor behavior for the past 28 years. One of its most followed publications is the annual Quantitative Analysis of Investor Behavior (QUIB) Report, which measures how investors have performed with their actual investment portfolios versus how the funds they hold have performed during the same periods. You might think that investor performance and fund performance are the same thing, but DALBAR consistently demonstrates a devastating investor performance gap due to investors shifting money among their investments (for example, from stock into more conservative bonds or cashing out at exactly the wrong times). Compounded over the years, this performance gap is devastating, costing many investors literally hundreds of thousands — or even more — in retirement dollars they could have enjoyed. For example, its 2021 study shows that this performance gap jumped to a shocking 1032 basis points for 2021. 100 basis points equals one percent, so this represents a lag of 10 percent for investors versus the performance of the average fund they were investing in. Obviously, despite the recovery from the 2020 COVID-19 market lows, many investors bailed (perhaps believing the recovery was too good to be true) and then got back in at higher prices in the fall, only to experience a downtrend and realize they had once again bought high without benefiting from the previous gains. In short, DALBAR's extensive research shows that investors are their own worst enemies. The results, as shown in the chart below, are sobering and hard to dismiss as the researchers used real-time data from millions of investor-directed 401(k) accounts. DALBAR has concluded that as much as two-thirds of the market return investors should have enjoyed were squandered to emotional investing — selling into fear after downturns, and buying into euphoria after upturns. The problem, of course, is that investors end up bailing near the bottom, when they've had enough pain, and buying again near the top of the market cycle, when they can't stand to miss out anymore. These mistakes get compounded over the years, and become even more damaging. The results are similar in every annual update of the DALBAR study. In short, it turns out that most investors are doing exactly the opposite of what they need to do to build wealth. They are buying high and selling low. A factor-based approach helps you avoid becoming an emotional investor. A portfolio strategy based on factors (ideally a diversified combination of multiple factors) can provide discipline, and powerful protection against emotional investing by offering a portfolio with which an investor can feel confident riding through inevitable downturns on the way to new highs. Only historically persistent factors can provide this sort of assurance, enabling investors to achieve their financial goals and helping to make sure their emotions don't cause them to outlive their assets.

Cheat Sheet / Updated 11-29-2022

This Cheat Sheet summarizes two important aspects of data governance: creating policy documents and the responsibilities of a data governance council.

Article / Updated 11-29-2022

One of the advantages of being a first-time job seeker is that employers most likely won’t ask you for references. This is because they know you haven’t had any previous employment. Nonetheless, some employers may ask you for some references. To paraphrase a popular saying, it’s better to have the references and not need them than to need them and not have them. You’re also better off asking for references early on in your job-seeking quest to get this out of the way. This way, you’re not scrambling later on trying to get endorsements on short notice while an employer is waiting for them before it can give you an offer. Start making a list of past employers, teachers, and classmates whom you’ll ask to serve as references or to give you endorsements. Securing past employer recommendations You’ve most likely had internships or a part-time job in the past, or you’ve done some volunteer work. If so, start asking some of your past employers if they can act as references. You can also ask them for recommendations ahead of time, even if you’re not sure your prospective employer will need them. It’s up to you. Past bosses often move on to other organizations. If all your prospective employer needs is to verify past employers, give it the main number for the organization. If you or your employer needs a recommendation or reference, track down your former boss and reach out to her. Writing someone for a recommendation You may have a great relationship with your former boss where it’s easy for you to ask for a reference or recommendation. Either way, be polite and ask early enough. Also, be ready to thank the person for any reference or recommendation, whether or not you get the job. Here’s a simple note you can send to your former employer, via email or via LinkedIn, asking for a good word from him: Hello, _____. I hope you’re doing well. I’m in the process of looking for a job and I’d like to list you as a reference. I had a great experience working with you and learned a lot. I’d like to share your name and contact information with prospective employers. Please confirm this is okay and let me know what email or phone number I can provide as contact information. Thank you very much, and take care, Your Name If you need a reference letter, definitely ask for it early in the process. They take time to write, and you want to make sure you give the person enough time to write you a good letter. Here’s an example of how you can make the request. Fill in the blanks appropriately. Make sure you provide a deadline of when you need the letter, and most important, always be courteous. Also, add details on the job you’re pursuing and a link to the job description if you have one. This will help the person craft the letter. Hello, _____. I hope you’re doing well! I’m in the process of looking for a job, and I’d like to ask you for a letter of recommendation. I know you’re busy, and I appreciate your help. The deadline for the letter is _________ and you can send it to _________. The opportunity I’m considering is a ____________ role with ____________. My job would entail doing _________________. I’ve attached the job description to help you understand the role. A good word from you will definitely help my prospects in securing this job. Your letter can briefly describe the work I did for you, some of my best qualities, and how you think I can do well in this role. If you can do this, please let me know. I really appreciate it! Also, please let me know if I can do anything to make it easier for you to write the letter. Thank you in advance and best regards, Your Name Be ready to provide the writer of your letter with some bullet points of items to include in the letter. This can include some of your strengths and specific contributions. You may also need to write the letter for that person. Approaching teachers for recommendations Professors typically don’t do recommendations unless they know you well enough. If you have a professor you work with or an advisor, she should be willing to write you a letter. You can also approach a faculty advisor of a student group if you belonged to one, especially if you were in a leadership position. Here are some things to remember when asking a professor for a recommendation: Ask early. Do it prior to finals or midterms, when your professor will most likely be inundated with grading papers or exams. Consider teaching assistants. If your professor is unable to write a letter, ask the teaching assistant. A professor is more prestigious, but a teaching assistant’s recommendation is better than no recommendation at all. Write your own letter. In some cases, you may be asked to write the letter yourself, for the professor, and then hand it to him so he can add the finishing touches. If you get asked to write your own letter, don’t be bummed. It’s normal and it just means the individual is busy, but he wants to help you. Crafting your own recommendation letter If you’re asked to write your own letter, here’s a sample letter you can customize and use: To whom it may concern, It is with pleasure that I recommend YOUR NAME HERE for ___________ role at _________. As I understand, the opportunity entails doing ____________________ __________________________________________________________. YOUR NAME HERE is an ideal candidate for this position. While he/she was a student in my _______ class/group, he/she showed great aptitude in _______________ and performed well, obtaining one of the top scores in the class. The work involved working in a group, and YOUR NAME HERE was able to work well and collaboratively as part of a team. His/her fellow team members often went to YOUR NAME HERE for assistance and relied on him/her for feedback. YOUR NAME HERE showed mastery of the subject matter and was always willing to help others. I believe YOUR NAME HERE’s work style, ability to master difficult concepts, and willingness to help others provide him/her with the skills necessary to succeed in any endeavor he/she sets his/her mind to. I would, therefore, appreciate any consideration you can give YOUR NAME HERE for this position. Sincerely, When writing your own letter, provide the document to the person recommending you in a file format where she can easily make edits (such as Microsoft Word). Be sure to include the following components in the letter: Role and responsibilities: Include the job that you’re applying to and details about what the job entails. Organization: Include the organization that you’re applying to. Accomplishments: Include any of your specific accomplishments or results you achieved that the recommender can point to in his letter. Skill sets: Include any skills that are relevant to the job you’re applying to that the recommender will also be willing to write about.

Article / Updated 11-29-2022

Factor investing is an investment portfolio general strategy that favors a systematic approach using factors or “shared characteristics” of individual stocks (and other assets, such as bonds) that have a historical record of superior risk and return performance. These factors can range from individual characteristics, such as the company’s sales (revenue indicated on the company’s income statement) or debt (total liabilities indicated on their balance sheet), to their performance in macro environments, such as inflation or economic growth. A factor is a trait or characteristic that can explain the performance of a given group of stocks during various market conditions. There are two main categories of factors: style factors and macroeconomic factors. Style factors Style factors take into account characteristics of the individual asset, such as its market size, value and industry/sector, volatility, and growth versus value stocks. Style factors help to explain or identify characteristics that drive that asset’s price performance in the marketplace. These factors are also referred to as microeconomic because they are an individual security or asset that drives its performance as a singular member or participant of the overall market and economy. Style factors include value, size, quality, dividend, growth, volatility, and momentum. We'll go over a few of these here: Value factors Looking at value means typically looking at the company’s fundamentals. The fundamentals are the most important financial data of the company, like the company’s sales and net profits, balance sheet (assets and liabilities), and important ratios, like the price-earnings (P/E) ratio. Looking at public companies (as through their common stock) through the lens of value factors is one of the most important factors because value investing has survived and thrived ever since they were initially codified by the work of Benjamin Graham during the Great Depression years. One of the most important reasons to embrace value as a primary factor (especially for beginning investors) is the emphasis on stocks that are undervalued, which makes them safer than other stocks. Undervalued means that all the key fundamental financial aspects of the company (like book value or the price-earnings ratio) generally indicate that the price of the stock is not overpriced, meaning that you will not pay an excessive stock price versus the value of the underlying company and its intrinsic worth. The reason becomes obvious in market data; overpriced stocks are more apt to decline more sharply in a correction or bear market versus reasonably priced stocks. The bottom line is the fundamentals of a stock mean a safer bet and a better chance at long-term price appreciation. Size factor The size of the asset, in this case, public company, is a reference to its market size based on market cap or capitalization (total number of shares outstanding times the price per share). The most common cap sizes used are small cap and large cap. If you’re seeking growth, lean toward the small-cap factor. Large-cap assets may be safer but typically don’t exhibit the same growth or price appreciation relative to the small-cap stocks. The historical data generally bears this out. Growth factor The growth factor highlights the measure of change in sales and earnings by the company in relation to its group (like in individual industries or sectors). Is the stock growing better than its peers? If so, this factor should be considered. As the historical market data suggests, companies with growing sales and revenue show stronger relative stock price appreciation, since investors notice the growth and buy up the stock. Volatility factor Market research over an extended period of time suggests that low-volatility stocks tend to earn a better return over the long term compared to high-volatility stocks. Given that, this factor will be beneficial. A useful indicator to look at is beta, which is listed at many popular financial websites for a given stock. The beta indicates how much more (or less) a given stock is volatile versus the general market (based on recent market trading data). For beta, the stock market itself is assigned a value of 1. A stock with a beta that is less than 1 is less volatile than the general stock market, while a stock with a beta greater than 1 is more volatile than the general stock market. A stock with a beta of 1.2, for example, is considered 20 percent more volatile than the general stock market. A stock with a beta of, say, .9 is 10 percent less volatile than the general stock market. A good example of a stock that has low volatility would be a large-cap public utilities company. A good example of a high-volatility stock would be a small-cap technology firm. If you’re a retiree, you would most likely benefit from this factor to ensure getting low-volatility stocks. Macroeconomic factors You could compare stocks and the stock market/economy to fish in a pond. You can analyze the fish and choose great fish (using, for example, style/microeconomic factors). But you should also analyze the pond (macroeconomic factors). You could choose the greatest fish in the pond, but what if the pond is polluted? Then even the great fish will underperform (putting it mildly). Shrewd investors will find a different pond. For investors, the U.S. economy and stock market represent the “biggest pond” on the global financial scene. So if you’re going to participate, you should understand the good, the bad, and ugly of this marketplace. Economic growth factor Gross domestic product (GDP) is one of the most watched economic indicators by investors and non-investors alike. It’s a broad measure of the economic output (value of products and services) in a given timeframe (typically a calendar quarter or year) by a nation’s economy. When GDP is growing, companies (and their stocks) are doing well. In fact, when the economy is growing and doing well, the stock market tends to outperform other markets (such as the bond market). Factors tied to economy growth such as GDP offer profitable guidance for investors. Given that, the major investing sites regularly report this and related economic data so that this factor helps investors optimize the returns in their portfolio. Inflation factor Inflation is a key factor. Most folks look at price inflation (the rising price of consumer goods and services). However, price inflation is not a problem. It’s a symptom. Many people don’t understand the cause of inflation (including many government officials and economic policy makers unfortunately). The cause is monetary inflation (the overproduction of a nation’s currency supply) that precedes the price inflation. When too much money is created and when that supply of money is chasing a finite basket of goods and services, then the price of these goods and services will rise. The goods and services didn’t become more valuable the currency lost value (due to overproduction). A complicating factor is the supply shortage issues during late 2021 to 2022 that augurs in cost-push inflation. When shortages occur (supply issues) and consumers contain to purchase the products in question (demand), the price inflation is further exacerbated. In early 2021, when the federal government and the Federal Reserve were increasing the money supply (by spending trillions of dollars), this was the cue for alert investors to consider the inflation factor. This factor would have guided portfolio managers toward securities that would have outperformed in an unfolding inflationary environment. Interest rates factor In early 2022, the Federal Reserve (America’s central bank) is (and likely will be) raising interest rates. Interest rates are essentially the price of borrowed money, and a factor on interest rates is key to making more optimal choices in your portfolio. In general (and all things being equal), low interest rates are good for the economy while high (or rising) interest rates tend to be negative. Because so much economic activity (both business and consumer activity) is tied to credit (business loans, credit cards, home mortgages, and so on), rising interest rates tend to dampen or diminish economic activity while low or decreasing rates tend to do the opposite. Given that, factors tied to interest rates can help you avoid stocks (and bonds) that would be harmed by rising interest rates so that your portfolio can continue to perform satisfactorily.

Article / Updated 11-28-2022

Fear of failure is probably the second biggest cause of failure. The first is fear of the unknown — just watch any horror movie. The easiest way to overcome these fears is to take action. Don't succumb to the common affliction of paralysis by analysis. Simply forge ahead with your plans. If you don't like that approach, following, are several techniques you can use to reduce and perhaps even eliminate the fear that's weighing you down. Fear isn't necessarily bad. It can motivate you to achieve even higher levels of success, if you handle it properly. Let fear motivate you, not defeat you. Researching the viability of an idea or opportunity You may be able to ease into a risky venture through research and planning. If you're afraid of implementing a new plan because of the risks you think are involved or the amount of time, effort, and money it may require, research in books, the Internet, and periodicals. The mere act of taking the initiative to do some research can give you the momentum you need to actually launch your new idea. Don't get in the rut of thinking that research is an end in itself. You eventually have to make a decision and then take action. You won't hit anything if you don't pull the trigger. Following the footprints Success leaves huge footprints that are pretty tough to miss. As you perform your initial research, keep an eye peeled for footprints along the same path you want to take and discuss your ideas with trustworthy colleagues and friends. Many times, simply talking about an idea generates enough buzz to drive the people you really need to talk to directly to your door. After you identify those who've succeeded before you, contact them to discuss your ideas. The most highly successful people are usually the most generous with their time and expertise. After all, that's probably how they became highly successful. Setting achievable milestones When you have a vision that seems overwhelming and perhaps grandiose in the eyes of some, break it down into more manageable units. Then, identify one task and get started. Getting started is often the hardest part. Each little success can spur you on to the next project, and your momentum can carry you somewhere you've never imagined, so just get started and find out the rest later. Focusing on the present When it comes to implementing a new strategy or technology that can boost business, don't let concerns about the future or about costs paralyze you. Jot down a list of tasks you must accomplish to achieve your goal and then run through the list, tackling one task after another. Eventually, you'll discover that you've run out of tasks and have achieved your goal.

Cheat Sheet / Updated 11-28-2022

Whether you wind up helping as a volunteer, joining a staff, or serving on a board, you connect with a nonprofit organization because, first and foremost, you believe in the work it’s doing. At some point, you realize that the fundraiser’s role is right at the heart of the organization. Without funding, the organization wouldn’t be able to do any of the good work that got you hooked in the first place. Here, you'll discover a fundraiser’s important tasks, the folks who make up a fundraising department, and tips for continued success.

Article / Updated 11-28-2022

As if a fundraiser’s job weren’t hard enough, sometimes the economy takes a tumble, causing contributions to your organization to slow down. You may need to revamp your fundraising message to make it clear that demands on your program are up, but donations are down. It’s also a good idea to take a look at your budget to see what you can live without until funding picks up again. Use the following tips to help you get started: Know what your organization needs, daily, monthly, quarterly, and yearly. Make contingency plans — know when changes in funding will affect programming or staffing. Increase your efforts to add to your annual fund. Be as realistic as possible — and be candid with your board, staff, and constituents. Use the downturn in giving as a prompt for your givers. Maintain an attitude of “we’re all in this together.” Cut costs where you can — by reducing print pieces and increasing e-mail contact, for example. Use your resources — past board chairpersons, engaged donors, fundraising professionals — to help you navigate through challenging times.

Article / Updated 11-28-2022

The backbone of your fundraising campaign is a strong case statement. A case statement outlines what need your agency addresses, how you address it, what makes your organization unique, and how others can help, whether through time or money. Here are some tips to keep in mind as you write your first draft: Make it clear. Be concise and focused in your mission statement, goals, objectives, and program information. Make it urgent. Give your reader a reason to care about your cause today. Make it complete. Address the five Ws — who, what, when, where, and why — and include them in your case statement. Make it interesting. Tell stories. Both success stories and heart-tugging stories stir the emotions of your readers. Paint images in your readers’ minds. Visual words and action words activate your readers’ imaginations and help them remember your mission. Don’t overdo it. Tugging on heartstrings requires an even hand. Resist gushing. Do your homework. Make sure your facts — financials, program design, staff info, and plans — are accurate and well researched. Include a call to action. Give your readers a clear way to help. Reread, revisit, and revise. Write your best draft, take two aspirin, and ask for reviews — from past donors, volunteers, staff, and your board. Figuring out what others think of the case statement helps you communicate more clearly and compellingly, which, in turn, helps your case statement hit its mark.

Article / Updated 11-21-2022

Join our webinar at 11 a.m. ET on December 9 to learn about the power of Dummies Custom Solutions. For Dummies connects with customers in a way no other brand can. We'll show you how co-branded custom content for your business or product can get amazing results. You'll learn: Why custom content from Dummies gets such great results How to get started and how to use the content The possibilities: With over 50 million custom eBook downloads and 25 million books in print in more than 20 languages we know how to reach your audience We're recording this session and will be sharing valuable tools and resources after the event. Register today so you don't miss out!

Article / Updated 11-18-2022

Fundraising is a never-ending task for most nonprofit organizations. Although you may raise money with various campaigns for different programs within your agency, your overarching fundraising strategy requires you to Write your mission statement — make it clear and memorable. Develop a case statement that reflects who you are and what you do. Develop a fundraising plan. Choose dynamic leaders for your fundraising campaigns. Involve your board in various aspects of your fundraising strategy. Continually build, slice, and dice your donor list. Build an online audience with social media. Use all communication avenues — in person, by phone, through social media, the Web, e-mail, newsletters, and print — to connect with your donors. Assess your effectiveness in all campaigns and do more of what works — and less of what doesn’t.