Making money: What the experts say
Is that pricey stock promising?; Reverse mortgages are back; True values investing
Is that pricey stock promising?
Deciding whether an expensive stock is worth buying takes some research, said Jack Hough in The Wall Street Journal. Investors should look at three factors: “robust growth, sustainable growth, and underappreciated growth.” Robust growth is easy to spot: “Just look at earnings per share.” For sustainable growth, consider a company’s return on invested capital. Returns “in the 13 to 16 percent range are ordinary,” while those above 30 percent “are excellent,” and some companies, such as travel broker Pricelineâ€‹.com, are doing even better than that. The trickiest part is determining whether the stock price is still reasonable. One option is to compare price-to-earnings ratios with projected growth; the closer they are, the better the deal. A company selling for 21 times earnings with 23 percent projected growth is a better buy than one selling for 66 times earnings and 35 percent growth.
Reverse mortgages are back
Baby boomers are embracing the reverse mortgage, said Dan Kadlec in Time.com. People ages 62 to 64 now make up 21 percent of reverse mortgage applicants, according to a new MetLife study, up from just 6 percent in 1999. It seems boomers are “turning to reverse mortgages earlier to pay off debt or improve their lifestyle.” But that can be a dangerous move, since the amount of money they get is determined by remaining life expectancy; the younger they are, the less they’ll be able to pull out of their housing equity. Maligned in the past for high fees and excessive risk, reverse mortgages “are now far more consumer friendly,” but they still aren’t for everyone. A reverse mortgage calculator can help you compute whether it’s smarter to sell the house and downsize instead.
True values investing
More Americans than ever are investing according to their moral principles, said David K. Randall in Reuters.com. Financial advisers managed more than $3 trillion in assets in 2010 using so-called socially responsible strategies, up from $600 billion in 1995. Research firms like MSCI screen stocks for environmental impact and corporate ethics, and others pursue a “more specific niche”: Amana Funds, for instance, chooses stocks according to Islamic principles. GuideStone Funds, a line of Christian-based mutual funds, has one fund that returned 18.4 percent over the past year.