Financial statements are supposed to be straightforward summaries of what actually took place in a corporation, understandable by all. Right? Not quite. The balance sheet, income statement and a summary of cash flow are only summaries of the numbers. Much more detail is found (or hidden) in the footnotes to these statements.
This Sunday, the Red Carpet at the 83rd Annual Academy Awards (alright, the Oscars) will drip with diamonds from the likes of Fred Leighton and Neil Lane. Diamonds can also be a good bet for investors, especially in a market fraught with geopolitical turmoil. Diamonds are considered by many to be a store of value similar to gold; as global demand for diamonds increases, prices will pick up.
Every year, the White House makes public a document officially known as a “public financial disclosure report,” or Form SF 278, that details the assets and income of the President currently in office. Form SF 278 is a wealth of information and curious facts, including where the President keeps a checking account, retirement savings and even 529 plans — and, of course, their balances.
Ever notice how nobody ever says “bonds and stocks”? In fact, ever heard anyone bring up bonds at a party and seen his listeners stick around? The more animated conversations always tend to revolve around stocks. Today, we’re putting the supposedly safe-and-boring part of your portfolio in the spotlight.
Any study of financial statements includes basic tests in two areas: profitability (and the growth trends that includes) and working capital, or the availability of liquid assets needed to fund current operations.
Here are the sorry facts. First, most investors behave so badly, we make Lindsay Lohan look like a choirgirl. Every year, DALBAR publishes a study showing the performance of investors compared to their mutual fund investments. And every year, investors earn much less than they should, because we’re like jittery chihuahuas jumping in and out of the hot asset class of the moment.