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Clearly, Not Everyone Is Getting Rich Off The Stock Market

Well, the NY Fed was out today with its Quarterly Report on Household Debt and Credit for Q4 2017. Clearly, Americans are in a lot of debt. Take a look.

Just a couple of quick hits from the report. Total U.S. household debt rose $193 billion in the 4th quarter, to a new all-time peak of $13.15 trillion. That's 17.9% above the most recent trough in Q2 2013. Broken down by segment, what do you suppose was the largest gain in percentage terms? Credit cards, with a 3.2% increase. In the picture above, the widening gap represented by the red arrows reflects the fact that non-housing debt is rising at a faster pace than housing debt.

Here's what's troubling about that. Below is a picture of the stock market, as represented by the S&P 500 index, over that same period; from the most recent credit trough in Q2 2013 to the end of 2017.

And thus, the title of this article. Over that period, the S&P 500 index rose by 75%; from roughly 1,600 to 2,800. Apparently, however, the r…

3 Keys To Creating A Winning Investment Portfolio

When building your investment portfolio, you can choose from many different methods.

One is to chase the latest hot stocks. In this method, you search frantically for "hot tips," whether from an investment analyst on CNBC or your coworker, who's "been in stocks for years" and "really knows what he is doing."

Unfortunately, if through this method you chose British Petroleum back in 2010, here's how your results would have looked.

I am going to suggest that there is a better way.

A key word I used in the title is portfolio. What is involved in building a portfolio whose results might look more like this?

I recently wrote a series of three articles for Seeking Alpha. In that series, I argued that the 3 keys to building a winning portfolio are:
  1. Low expenses
  2. Diversification
  3. Dividends
I would suggest starting with the article that discusses low expenses. If you look closely at the picture above, you will note that it visually depicts the effect of fees on the performance of your portfolio. From there, move to the article on diversification. In this article, I discuss how diversifying your investments reduces risk and volatility, often while still generating higher returns. It is at this point that the final article in the series, on dividends, will make the most sense. It talks about "feeding" your portfolio with a steady stream of income, and how it can best be put to use.

I hope this brief overview encourages you to look more closely at these 3 keys, and how they can help you build a winning investment portfolio.

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