Your Money

Stocks' investment edge over bonds keeps shrinking....at least by one measure.

This year's stock rally has shrunk this "equity risk premium" to its narrowest in 20 years. The risk premium shows how much investors are compensated for the added risk of owning stocks. It is calculated as the difference between the stock market's earnings yield and the yield on government bonds. It is often used as a measure of value and hasn't been this tight since 2002.

Nevertheless, many investors and analysts agree that an ultralow risk premium doesn't mean this year's stock rally has concluded. They point out that risk premiums have gotten much lower before, like in the dot-com bubble of the late 1990s.

To me, that's not a comforting analogy. With the index returns driven this year by the largest companies, the risk premiums for those stocks are clearly tighter now than where they were nine months ago. The rest of the market, not so much.

At PWM, we build stock portfolios by focusing on fundamentally strong cash flow, reasonable valuations, and geographic diversity.

Low-risk investments outside of the Magnificent 7 (minute mark 3:40)
video source: CNBC, the Exchange

Your Life

Yes, there is a right way to fall safely. In a recent AARP article focusing on older adults (65 years and above), about 36 million falls are reported yearly, and about 3 million wind up in the ER. As a matter of fact, the mortality risk of patients over age 65 with hip fractures is 3x higher than the general population. One example of how to fall correctly when falling sideways is to bend your knees, tuck your chink and keep your head lifted. Keep your arms close to your chest. Allow yourself to go limp and collapse onto the outside of your bottom thigh. Then, roll onto your torse and upper back. Read further to protect yourself from other falls.

How to Fall Safely
by Justin Barnes

Complexity Simplified

Trivia