What Is The VIX Index and What Does It Mean To Investors?

The Chicago Board Options Exchange (CBOE) introduced the CBOE Volatility Index or Vix Index in 1993. It has become the benchmark for stock market volatility and is also refered to as the "investor fear index".

The VIX measures the market expectation of 30-day near term volatility conveyed by stock market option prices. VIX is based on real time option prices which reflects the investors view of future stock market volatility. 

In times of high financial stress, often during hard market declines, option prices as well as the VIX tends to rise. The more intense the fear, the higher the VIX level. As market and investor fear subsides, option prices begin to decline, which causes the VIX to decline. 

This is why the VIX is called the "investor fear index". But also keep in mind that there are variations to this rule. 

It is important to remember that the VIX reputation as the "fear index", doesn't necessarily mean the market is bearish for stocks. But instead the VIX is a measure of "perceived" volatility in either direction, including the upside.


 




An investor can use the VIX to measure volatility. A high VIX corresponds to a volatile market which usually means one headed downward. Also a low Vix usually indicates a stable and usually rising market.

VIX is more than a fear gauge. It's a risk power tool.

Turn Volatility to Your Advantage with CBOE VIX Options and Futures 

With its strong negative correlation to the broad market, VIX provides an effective way to get diversification and protection when you need it most. No wonder investors are trading VIX options and futures in record numbers.

Manage risk, diversify your portfolio and leverage volatility with VIX options and futures, offered only at CBOE and CBOE Futures Exchange.

Betterment.com Review Update: $25 Bonus, Asset Allocation, Fees

Since my previous review of Betterment.com there has been some changes made for the better. What still hasn't changed is the simple process of application, choosing investments, and getting started.

The hardest part of investing is taking that first step. Most people never start investing because they lack the knowledge of where to invest. Today we have so many different investment companies competing for our money. Their advertising can sometimes be confusing and contradictory. Even if you do manage to sign up for an account then you are faced with the choice of what to invest in. All these concerns have been addressed and solved by Betterment.com.

Application

The application process allows you to get started entirely online. They say you can the process only takes 60 seconds. It takes a little longer but couldn't be easier. Enter your personal information, they verify it through information on your credit report. You then enter your bank information so they can link it to set up quick deposit and withdrawls.

Asset Allocation

After answering a few simple questions Betterment.com offers a asset allocation suggestion based on my answers, goals and age. They gave me an allocation of 50% stocks/50% bonds.


Their current breakdown of stocks and bond portions are:

Stock Portion Only

• 25% Vanguard Total Stock Market (VTI)
• 25% iShares S&P 500 Value (IVE)
• 25% Vanguard Europe Pacific (VEA)
• 10% Vanguard Emerging Markets (VWO)
• 8% iShares Russell Midcap Value (IWS)
• 7% iShares Russell 2000 Value (IWN)

Bond Portion Only

• 50% iShares Barclays TIPS Bond ETF (TIP)
• 50% iShares Lehman 1-3 Year Treasury Bond ETF (SHY)

I like it that they are investing with passive index ETFs that are very low in fees. The weighted expense ratio of all the stock ETFs together is 0.16%. The weighted expense ratio of all the bond ETFs together is 0.18%.

What's all this going to cost me? (fees)

When I last reviewed Betterment.com they had a 0.9% annual fee for all accounts with balances up to $25,000. There were no monthly fees, no maintenance fees, no minimum requirements, and no commission charged for any trades. In March, their fee schedule has been changed to lower fees for most users, but also raised some fees for certain smaller accounts.

Here is the new fee schedule:

If your just getting started there is a requirement to have $100 per month added to your account. If you do not they charge a $3 monthly fee. This should not be a problem if you plan on making the $100 minimum deposit every month. If you are not ready to at least invest $100/month do not sign up for this program. 

Remember that to open an account and receive the $25 bonus you must have an initial deposit of $250. Add that to the monthly deposit of $100, at the end of the year your balance should be $1,450. With a 0.35% annual fee you will be paying about $5 of annual fees. Compare that to a discount brokerage that charges from $9.99/trade to $3.95/trade. Using Betterment,com keeps fees low and more money working for you.

$25 Bonus Offer For New Accounts

The $25 bonus offer for opening a new account, with a $250 initial deposit is a sweet way to try the process out.

4 Reasons a Business Should Pay Their Bills On Time

When a business is having good cash flow the subject of paying bills late never comes up. The time when business is slow and the money is just not there to pay bills, is the time when mistakes get made.

Why should a business pay their bills on time? Paying slow allows you to keep more of your money for your own use. Paying early or on time seems a loss of opportunity. I have known many business men who believe paying one month behind is a good way to keep their own money in their pocket for a little longer. This attitude is totally wrong and not only does damage to your businesses reputation but also the reputation of the business owner.

1. Reputation.
If the reputation of your business means anything to you there is no quicker way to malign it than by not paying your bills properly. Paying late or not at all gives you time to use the money for other things. It also damages your credibility as a trusted business owner. It damages your reputation in the community and gives your company a reputation of being a bad payer.

2. Saving Money.
Many vendors give a discount when paying your bills early. It may be even possible to negotiate an even deeper discount from a supplier on larger and future production needs. Establishing you good paying record shows the vendor you can be trusted. This relationship could come in handy for future discounts and patience when one month you can't pay your bill.

3. Building Necessary Goodwill.
Having the reputation of being a company who doesn't dodge it's bills, shows people you can be trusted. This trust translates into sales. No one will recommend a company who is a deadbeat when it comes to paying bills. Your future customers not only come from word of mouth from you customers, they also come from recommendations of the vendors you buy from.

Everyone you write a check to is part of your marketing team. From your reputation of paying your vendors, landlords, insurance brokers, and even the people that clean your office, they all can either recommend you to future customers or just shoot you down. Your reputation with these people is critical.

4. Your Credit Rating.
When you are a new business, a companies credit rating doesn't really exist yet. The company owners are using there own personal credit rating to stand up for the debt burden of the company. As the company grows and the need to expand calls for a larger sum of money to borrow, the credit rating and reputation of the company is vital. Where will the lender go to establish your ability to pay the loan back. Will you want the bank to talk to your vendors or will you be afraid of what they will tell your banker.

Your reputation and rank in the community is something that takes years to build but only an instance to destroy. It's an asset just as important as any other asset that your company owns.

These and many other great business ideas are in Bill Weirsma's book The Power of Professionalism: The Seven Mind-Sets that Drive Performance and Build Trust

Heritage and Service Still Exist In Financial Services

In today's financial environment, people find it hard to know who they can trust with their hard earned money. Many financial institutions we trusted all our lives, have let us down. Many people have lost faith and do not know who to trust. Finding a company, for your financial and investing needs can still be done, but you must be able to cut through the hype and find the truth of what a companies core really is.

One financial company that did not let its customers down was Perpetual, one of Australia's oldest financial institutions. They have been helping their customers manage and invest their money for over 120 years. They are not only a wealth manager but a leader in the trustee business. 

During Perpetuals long history they have been a leader in philanthropy. When Australians form charitable endowments, Perpetual is there to manage these funds and act as trustees over them. Today, these funds are helping sustain the efforts of charitable and non-profit organizations. Perpetual believes so much in philanthropy they have established their own in house "Perpetual Foundation" to help improve the life of others.

Perpetual also provides many types of investment products, financial advice, and corporate services to individuals, families, financial advisers, and organizations. Fitting the customer to the right investing style comes from knowing that customer well. Providing trustee and fiduciary services to help people protect and manage assets, is the goal of Perpetual.

There are still companies that believe in serving their customers. There are still companies that deserve your trust. Perpetual's experienced and award winning team manages over $200 billion dollars of clients money. In today's world, finding a company that has a heritage and core of serving the customer's needs is rare. Perpetual is one company that has the trust of so many, why look anywhere else?