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Top Blog Posts for August

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Here are the most-read blog posts for August 2016:

 

Last year’s “flash crash” called into question the safety of ETFs and brought increased scrutiny from regulators and investment professionals.

Many retirees reflexively believe that they can live off of the interest from their investments while preserving principal. But it is virtually impossible today in light of increasing life expectancies and the backdrop of ultra-low rates brought on by the Federal Reserve’s response to the 2008 financial crisis.

What’s the allure of dividend-paying stocks? Dividends provide a segment of return that is always positive. Increases in dividends provide an increased positive cash return and, consequently, increase the value of the instrument producing that return. Positive fluctuations are normal in the world of cash payments to shareholders; negative fluctuations are a rarity. Over time, reinvesting income that increases can result in yield from income alone that’s far higher than anyone can reasonably expect from the total return in the equity market.

About 70% of active equity mutual funds are closet indexers that generally fail to beat the market after fees. On the other hand, the other 30% of funds outperform on average. Thus, the task is to weed out closet indexers and only invest in truly active funds.

Earnings estimates are the profit forecasts made by brokerage firm analysts. The consensus earnings estimate is the average of all published forecasts for a specific company or index. The consensus earnings estimate serves as the basis for two drivers of stock price momentum: earnings surprises and earnings estimate revisions.

 

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