The upside of volatility
In case you didn’t get the message when the Dow Jones industrial average fell 9.6 percent during intraday trading on May 6—“volatility is back,” said Jason Zweig in The Wall Street Journal. But as long as you keep your head, you can make big market swings work in your favor. If you’ve been thinking about converting your traditional IRA to a Roth IRA, “you should be rooting for the stock market to drop again.” Remember, you pay taxes on the value of what you convert when you convert it—but you never have to pay taxes on that account again. So if a “flash crash” reduces your portfolio by, say, 5 percent, you’ll save in taxes if you convert that day—even if the market then recovers.
Minding the top line
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Investors have been conditioned to keep a close eye on corporate profits, but focusing too much on the bottom line is “viewing the world through very rose-colored glasses,” said Paul Lim in Money. Not only can profits be “touched up” to look better than they are, they often paint an overly optimistic overall picture. “Earnings are looking good today not because the economy is sizzling (at least not yet), but because companies cut costs so aggressively in the downturn.” You can only pull that trick so many times. To truly make money over the long run, companies must improve sales, and many currently profitable companies are still mired in a sales slump. Fortunately, sales really are increasing for some firms—health-care and consumer-staples firms have already made a comeback, and other sectors may see one soon.
Co-ops for coupons
Group-buying websites have become all the rage among “price-obsessed” consumers looking for local discounts, said Jayne O’Donnell and Rachel Huggins in USA Today. Through sites such as LivingSocial.com and Groupon.com, consumers can sign up for deals from local businesses, “persuade others to do so, then get a cut-rate dinner, haircut, yoga class, or other product or service.” There are now some 80 sites that specialize in this niche. Some sites base discounts on how many fellow coupon-clippers a customer recruits. Others just need “a certain number of takers” for a particular offer before they’ll make the discount official.
