Smart investing requires discipline and due diligence. Understanding the current economic conditions, technology trends gives you an edge and could catapult you into prosperity. Setting aside money, investing in the best stocks, ETFs, and funds that match your goals/objectives, and leaving it put for the long run; that’s smart investing.

If you love researching stocks and making fast trades in search of short-term profits, fine. It’s fun. I just don’t recommend doing it with more than 10 percent of your money.

The key to smart investing is to have an objective and to contribute regularly. It doesn’t matter how much you invest as long as you do. Generally, you want to start early to allow the money to compound over time.
Investing involves risks since it’s based on speculations and assumptions. But if you have a plan, common sense and time, it could make you financially independent. Make sure you assess your portfolio annually. Conduct the necessary adjustments to align it with current market conditions and trends.
A smart investor is a well informed investor. He is proactively involved in re-balancing his portfolio according to his financial goals and investment objectives.

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May the new year bring you happiness and prosperity. Happy investing!!

So why should you invest during shaky economic conditions??  Because your financial strategy should be defined for the long term – that’s the simple answer.  Those blips in the economy will be insignificant 5 years from now.  With the current sprawling globalization, the world is getting smaller.  Events and headlines from across the globe have a more significant impact on the economy because countries are more interconnected than ever before.  While the ebb and flow of these dynamic events can bring about uncertainty, it is important for investors to remember not to panic or make impulsive decisions.
Patience is a virtue. 

It is important to keep focused on the long-term horizon and not be swayed by the vagaries of near-term market and economic fluctuations.  As the old adage says, “This too shall pass.”  The mixed messages do not eliminate the need to save for the future.

The goal of every investor should be to weather the storm of short-term volatility and continue to invest to meet future demands.  This includes financing for important life events, such as purchasing a home, funding a college tuition plan and meeting the fiscal demands of retirement.
Savers should review their investment allocation strategies to ensure that funds are being applied where they will earn the greatest returns.  A down market may also be the best time to add to a portfolio to be in a better position to take advantage of any subsequent swings higher.  Investors should seek the advice of a professional financial planner who can help guide them and provide insights on where to invest during periods of uncertainty.

What’s the definition of middle class and its role in today’s society:

The American middle class by one definition consists of an upper middle class, made up of professionals, salaried professionals and managers – distinguished by exceptionally high educational attainment as well as high economic security; and a lower middle class, consisting mostly of semi-professionals such as skilled craftsmen and lower-level management. The lower middle class needs two income earners in order to sustain a comfortable standard of living, while many upper middle class households can maintain a similar standard of living with just one income earner.

The American middle class commonly have a comfortable standard of living, significant economic security, considerable work autonomy and rely on their expertise to sustain themselves. Those individuals, are characterized by conceptualizing, creating and consulting. Middle class values tend to emphasize independence, adherence to intrinsic standards, valuing innovation and respecting non-conformity. Politically more active than other demographics, college educated middle class professionals are split between the two major parties. Their income varies considerably from near the national median to well in excess of $100,000. They are very influential, as they encompass the majority of voters, writers, teachers, journalists, and editors

Most societal trends in the US originate within the American middle classes

The American middle class IS slowly shrinking. It’s getting short changed in every way – from tax codes being skewed towards the 1%, system loopholes, tax shelters, tax-evasion, big government, to retirement contribution caps.

Fact: The top 5 percent of earners accounted for almost 40 percent of personal consumption expenditures in 2012, up from 27 percent in 1992. Largely driven by this increase, consumption among the top 20 percent grew to more than 60 percent over the same period.

Even more striking, the current recovery has been driven almost entirely by the upper crust. Since 2009, the year the recession ended, inflation-adjusted spending by this top echelon has risen 17 percent, compared with just 1 percent among the bottom 95 percent, (according to the economists Steven Fazzari, of Washington University in St. Louis, and Barry Cynamon, of the Federal Reserve Bank of St. Louis).

The effects of this phenomenon are now rippling through one sector after another in the American economy, from retailers and restaurants to hotels, casinos and even appliance makers.

In response to the upward shift in spending, big stores and restaurants are chasing richer customers with a wider offering of high-end goods and services, or focusing on rock-bottom prices to attract the expanding ranks of penny-pinching consumers.

For example, luxury gambling properties like Wynn and the Venetian in Las Vegas are booming, drawing in more high rollers than regional casinos in Atlantic City, upstate New York and Connecticut, which attract a less affluent clientele who are not betting as much, said Steven Kent, an analyst at Goldman Sachs.  Read full report here.

Take charge of your financial strategies to keep up with current regulations, economic evolution, and tax laws. Open retirement account(s), use tax-exempt funds, save rigorously, contribute religiously.

Vanguard, one of the world’s largest and most respected mutual fund companies, has published an extensive paper on their global growth and assessment, covering topics such as economic growth, inflation, interest rates, stock, and bond return over the next 10 years. I urge to read full report here:

Here are the snippets of their economic growth report:

Global economy. For the first time since the financial crisis, our leading indicators point to a slight pickup in near-term growth for the United States, parts of Europe, and other select developed markets. Continued progress in U.S. consumer de-leveraging, strong corporate balance sheets, firmer global trade, and less fiscal drag indicate U.S. growth approaching 3%. That said, this cyclical assessment should be placed against a backdrop of high unemployment and government debt; ongoing structural reforms in Europe, China, and Japan; and extremely aggressive monetary policy with exit strategies that have yet to be tested.

Inflation. In the near term, reflationary monetary policies will continue to counteract the deflationary bias of a high-debt world still recovering from a deep financial crisis. As was suggested in previous outlooks,
consumer price inflation remains near generational lows and, in several major economies, below the targeted rate. Key U.S. drivers generally point to higher but modest core inflation trends in the 1%–3% range for the next several years. For now, the risk of returning to the high inflationary regime of the 1970s is low despite the size of central bank balance sheets; in parts of Europe and in Japan, the specter of deflation remains a greater risk.

Monetary policy. Tapering of the Federal Reserve’s quantitative easing (QE) program has begun, although an actual tightening is likely some time off. The Fed’s forward guidance implies that the federal funds rate will remain near 0% through mid-2015; the risk that this “lift-off” date will be further delayed is notably lower than it was in prior periods. However, real (inflation-adjusted) short-term interest rates will probably remain negative through perhaps 2017. Globally, the burdens on monetary policymakers are high as they contemplate exiting from QE policies to prevent asset bubbles on one hand and remain mindful of raising short-term rates too aggressively on the other. The exit may induce market volatility at times, but long-term investors should prefer that to no exit at all.

Interest rates. The bond market continues to expect Treasury yields to rise, with a bias toward a steeper yield curve until the Federal Reserve raises short-term rates. Compared with last year’s outlook, our estimates of the “fair value” range for the 10-year Treasury bond have risen; the macroeconomic environment justifies a ten-year yield in the range of 2.75%–3.75% at present. However, we continue to hold the view that a more normalized environment in which rates move toward 5% based on stronger growth, inflation, and monetary tightening may be several years away. We maintain that the odds of a U.S. fiscal crisis and a sharp spike in yields are less than 10% at the moment, although they rise later in the decade based on the expected trajectory of U.S. federal debt.

Global bond market. As in past editions, the return outlook for fixed income is muted, although it has improved somewhat with the recent rise in real rates. The expected ten-year median nominal return of a broad, globally diversified fixed income investment is centered in the 1.5%–3.0% range, versus last year’s expected range of 0.5%–2.0%. It is important to note that we expect the diversification benefits of fixed income in a balanced portfolio to persist under most scenarios. We believe that the prospects of losses in bond portfolios should be weighed against the magnitude of potential losses in equity portfolios, because the latter have tended to exhibit much larger swings in returns.

Global equity market. After several years of suggesting that strong equity returns were possible despite a prolonged period of sub-par economic growth, our outlook for global equities has become more guarded. The expected ten-year median nominal return is below historical averages and has shifted toward the bottom of the 6%–9% range compared with this time last year, a reflection of less constructive market valuations (i.e., price/earnings ratios) in the United States and some other developed markets. A notably wide range of outcomes is possible, even over long horizons, making us hard-pressed to identify market “bubbles.” However, we are uneasy about signs of froth in certain segments of the global equity market. Because the premium compensating increased equity risk appears to have come down recently, we would encourage investors to exercise caution in making strategic or tactical portfolio changes that increase this risk.

Asset allocation strategies. Broadly speaking, the outlook for risk premiums is lower across a range of investments than was the case just two or three years ago. Our simulations indicate that balanced portfolio returns over the next decade are likely to be below long-run historical averages, with those for a 60% stock/40% bond portfolio tending to center in the 3%–5% range, adjusted for inflation. Even so, Vanguard still firmly believes that the expected risk-return trade-off among stocks and bonds leaves the principles of portfolio construction unchanged. Specifically, our simulated mean-variance frontier of
expected returns is upward sloping—it anticipates higher strategic returns for more aggressive portfolios, accompanied by greater downside risk. We believe that a long-term, strategic approach with a balanced, diversified, low-cost portfolio can remain a high-value proposition in the decade ahead.

This was an excellent report; well written, supported with plethora of details. Great Job to the authors (Joseph Davis, Ph.D., Roger Aliaga-Díaz, Ph.D., Charles J. Thomas, CFA, Andrew J. Patterson, CFA)

If you’re confused about the terminology you’re not alone: I was at first! Here are some definitions and guidlines

Cyclical:

Capital gain is a profit that results from investing in a capital asset, such as stock, bond, or real estate. When you sell an asset for less than its purchase price, on the other hand, you incur a capital loss. Several factors determine the nature of your capital gain (or loss), including the type of asset and the duration of ownership.

The term capital gain is used to describe the profit earned from buying an investment or other asset at one price and selling it at a different, higher price. For instance, if you bought a real estate for $350,000 and sold it for $500,000, you would need to report total capital gains of $150,000 ($500,000 selling price – $350,000 cost basis = $300,000 capital gains profit).

Capital gain can be earned on stocks, bonds, mutual funds, works of art, real estate, or virtually anything else that can be considered an investment.

The Taxes on capital gain varies depending on:
1) type of investment,
2) length of time you held the investment, and
3) whether you plan to offset those gains by other capital losses.