International investing has the potential reward of diversification, but it is coupled with additional risks. Over the last decade, the foreign market underperformed, while the U.S. market was strong. The tide may be turning. Proceed with caution, however.

There are risks in every investment, including cash. Most investors focus on one risk, which is the loss of principal in the moment. There are many risks we must consider as fiduciaries. Inflation, market, sector, credit, interest rate, business, and regulatory are some but not all of the risks associated with investing. We will be doing a video series on these risks on our Facebook group page, Financial Enhancement Group Financial Tidbits.

Foreign investment brings additional risks. Notable are currency risk and political risk. Bear in mind the above risks are also included. There is comfort in knowing your investments, which is often difficult in a foreign environment. Currency risk is the most misunderstood concept for most retail investors.

Similar to a stock, the value of a currency is what another buyer is willing to pay for it. In the case of foreign currency, the price is driven by substantial institutions. For instance, there may be a manufacturer in the U.S. with plants in China, Germany, or Japan. They need to reduce their exposure to currency risk and use institutions to buy and sell various currencies to mitigate that risk.

Foreign governments also enter the currency markets to stabilize their economy when possible. Two issues that commonly confuse onlookers: How can a currency have risk? And, Why wouldnt a government always want a strong currency?

Currency has no immediate risk for an individual unless you travel outside of your country. There are long-term risks for all citizens. You can live your entire life in the United States and never cross a foreign border even to our largest trading partner, Canada. A dollar bill in Indiana is worth the same in New York, but a coffee and hotel stay is likely to be more expensive. You still understand the cost.

People in Germany may be in three countries regularly Germany, Switzerland, and France. The reason the euro currency was created was, in large part, to reduce the complexity of price change in multiple currencies. Currency fluctuation could make something cheaper in one country and more expensive in another. By the way, Switzerland doesnt play that game and retains its own currency.

If you are an exporter of goods to other countries, a weak currency is beneficial. Notice our president is always talking about our dollar being too strong. If you are primarily an importer of goods from foreign countries, you want a strong currency so you can buy cheaper. Sobering nations try to find the right balance, but market forces continue to drive the valuation.

The fluctuation of currency values has been of great magnitude recently. Foreign investing needs to be understood, but start with learning about how currency changes impact your nest egg.

Joseph Big Joe Clark, whose column is published Sundays, is a certified financial planner. He can be reached at bigjoe@yourlifeafterwork.com or

765-640-1524.

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'Big Joe' Clark column: Things to think about when considering international investments - The Herald Bulletin

The year 2020 has already been momentous, and it's not even half over. It's the start of a new decade, sure, but it will be remembered most notably as the year COVID-19 ended the longest period of economic expansion in U.S. history.

Periods of extreme uncertainty lay the groundwork for the next run higher, though, and innovative companies are even now hard at work pushing the boundaries of what's possible. Technological innovators aren't always great investments, so those who are thinking of buying stocks for the long term need to diversify accordingly.

Three stocks worth adding to the list of possible purchases for the decade ahead are Nikola (NASDAQ:NKLA), NVIDIA (NASDAQ:NVDA), and Square (NYSE:SQ).

The NVIDIA EGX processor for small smart devices. Image source: NVIDIA.

I want to start with the most controversial stock here, Nikola, which just completed its public debut via a merger with special purpose acquisition company VectoIQ. The company is being talked about as a potential competitor with Tesla (NASDAQ:TSLA) in the burgeoning electric vehicle (EV) industry and has an equally vocal CEO and founder in Trevor Milton. Oh yeah, there's also the attention-grabbing fact that the stock doubled in a single day on June 8 (for what it's worth, I defend myself by saying I started writing this article before that happened).

What's all the fuss? Though this company has yet to make an official earnings report showing any sales, the company has over 14,000 pre-orders for its battery-electric and hydrogen fuel cell-electric big rig trucks (with some notable names among the pre-orders like Budweiser parent A-B InBev). The orders represent over $10 billion in sales, although that's if all of them are fulfilled. Nikola will be signing firm deals (starting later in 2020) on seven-year sale-lease agreements, so revenue will be recognized upfront but collected over the life of the term. Initial targeted routes will be on the I-10 corridor between Los Angeles and Phoenix (the latter being the location where the trucks will be assembled at Nikola's factory). Also of note (and what sent the stock soaring in a single day) is that pre-orders for its Badger pickup truck will open on June 29.

Milton and company are aiming to end reliance on diesel -- within the next decade if solely up to Nikola -- and will use the $700 million in cash it raised from its merger to complete its assembly facility outside of Phoenix, begin building its hydrogen fueling network, and continue signing partnerships with third-party manufacturers (which will include parts, as well as the Badger pick-up itself, although the automaker partner has yet to be announced). On this latter point, Nikola is unique. Where Tesla has vertically integrated its operations like no other auto manufacturer, Nikola is aiming to partner with as many companies as possible -- all the while controlling the highly profitable technology and licensing aspect of the business.

The Nikola Badger. Image source: Nikola Motor.

There are a lot of unknowns here, but the global transportation and logistics industry spends hundreds of billions, if not trillions, of dollars every year. While Nikola and Tesla will rub shoulders once in a while, there's more than enough market share ripe for disruption to go around. As of this writing, Nikola's market cap of $29 billion is on par with Ford's. Thus, I'm not advising an investor to jump in right now after the massive rush in recent weeks to scoop up the stock. However, I don't think the company is a pipe dream either. There is plenty of ultra-long-term (10 years or so, if Tesla is a guide) potential here. At the very least, keep Nikola on your radar, or buy a small position (1% or less of your portfolio) and forget about it.

Moving on to the far less controversial, NVIDIA is already a massive enterprise doing big business. Its graphics processing units (GPUs), and now high-speed networking gear via its recent takeover of Mellanox, are some of the key ingredients powering artificial intelligence and machine learning. In fact, its data center segment is set to pass up its core video game business, and the same tech fueling AI in the cloud has also been miniaturized to power robotics, autonomous machines, and other devices operating outside of data centers in the field.

In fact, while the video game industry is still a very large part of the whole at NVIDIA, this company has transformed itself into an AI and future computing powerhouse. The GPU is quickly becoming an accelerator for special-purpose computing needs and growing into an ubiquitous part of everyday life -- albeit behind the scenes and unknown to most. At its remotely held 2020 GPU Technology Conference, CEO Jensen Huang outlined all sorts of new innovative uses for his company's wares, from AI-powered call center services using conversational language to personally curated and predictive search results to the scaling of its autonomous vehicle tech to cover everything with wheels.

There's no denying that NVIDIA is an innovative chip designer, but it too comes with its own controversy. After rallying 150% in the last year following a cyclical sales slump in 2018 and early 2019, the stock trades for 19 times trailing one-year revenue and 51 times free cash flow (revenue less cash operating and capital expenses). That's some steep pricing, especially for an enterprise already carrying a market cap of over $220 billion.

But there's a good reason for the steep premium. Revenue is expected to grow by 39% in NVIDIA's next quarter, a rate that isn't necessarily out of the question for the rest of the year given Mellanox is now part of the picture (and lapping last year when it wasn't). Over the next decade, though, I think NVIDIA will be larger than it is today. So whether now is ideal timing to buy or not, I think this innovative semiconductor leader is worth a look.

Over the last 10 years, mobility and e-commerce were highly profitable investment themes. Now that mobile devices and online shopping are a part of everyday life, I believe services based on omnipresent mobility and delivered via the web on consumers' terms will be a key place to uncover winning stocks.

On this front, Square has already been a big success. After taking a breather since 2018, shares have more than doubled since the March 2020 market crash and are homing in on all-time highs again. Square's ecosystem of digital payments and online selling services for businesses is proving resilient in the shelter-in-place era, and a permanent bump up in activity could be the result as consumers and organizations adapt to a digital-first age. Its credit services for small businesses have been a lifeline during the COVID-19 crisis too. And Square's Cash App is also innovating new services for its users. Once a simple tool for individuals to send money to one another, the service is turning into a full-fledged mobile banking application.

The latest Cash App service added in the first quarter of 2020 was cross-border payments, giving users the ability to instantly move money between the U.S. and the U.K. It joins other add-ons like the Cash App debit card that links to a customer's digital wallet balance, direct deposit of paychecks and tax returns, and investing (including the ability to purchase partial shares for small retail investors). Between Square for businesses and the consumer-facing Cash App, Square is innovating a new type of banking relationship.

Of the three stocks listed, Square is the least expensive, with a valuation of 8.5 times trailing one-year revenue. On the profitability side of the equation, it trades for 90.4 times free cash flow (though it is still dumping most of its profits back into the business to develop new services and promote new Cash App capabilities). But the rich price tag goes with the innovative company territory. Square grew sales 44% in Q1 2020, and though no specific guidance was provided for the second quarter and beyond (as subscription service fees were temporarily paused to help customers), gross payment volume in the month of April was up 39%. The balance of 2020 will have plenty of turbulence, but it's clear this mobile banking and e-commerce company is making innovative waves and picking up plenty of new business.

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3 Stocks to Invest In for Future Innovation - Motley Fool

You don't know where to start. You hardly have any money. You don't know the financial terms.

Lots of conditions may stop non-investors from becoming investors, says Bola Sokunbi, a financial education instructor and author of Clever Girl Finance.

The intimidation people feel is real, and Sokunbi thinks it stems from a financial literacy gap. The result is thinking you don't have enough money to start investing and believing it's just too hard.

The danger of waiting till you have more cash, aside from the opportunity cost of missing out on time in the market, is that you may never actually get around to it, Sokunbi says.

Time ticks on "and people find other ways to spend their money," Sokunbi said.

First,adjust your mindset. "Investing doesn't have to be complicated, and you don't need to be Warren Buffett," Sokunbi said. "You don't have to have a financial degree."

What you do need is a little education to get a sense of how investing works. "Don't feel intimidated," Sokunbi said. "Instead, pick up a financial investing 101 book, or Google 'investing 101.' This will give you a sense of confidence."

Learn the core principles, Sokunbi says: what's a stock, what's a bond and how fees play a part in your returns. Figure out how much risk you can tolerate, so you'll know if you should stay more conservative. Understand the importance of diversification.

One of the biggest investor mistakes is giving into panic over the market, Sokunbi says.

Thursday's deep plunge is a test for many investors, but investing experts counsel staying the course.

"When there's a decline in the stock market, people rush to sell," Sokunbi said. "Or if it's doing well, people rush to buy." Don't let your emotions shape your investing decisions.

"When you understand it takes time for investments to grow, you start thinking long term," she said.

When you hear about stock market returns of 7% or 8% over time, remember that at times you'll see greater returns, Sokunbi says. Other times you'll see big losses. "Staying in for the long term is how you'll achieve that average return despite the dips and spikes," Sokunbi said.

Follow some basic money management to accumulate some cash to invest.

Frequently, people who say "I don't have any money" are looking backwards, trying to figure out what happened.

Avoid that frustrating look-back bysitting down with your money and creating a plan for each paycheck, Dixon says.

Walk through your day. Say you stop and buy takeout one day. "If you allocated for it, that's fine," Dixon said. "But if you didn't write that down, then you've taken away from another category."

"Tell each dollar where to go," Dixon said.

There's no minimum for saving and investing, says Brent Weiss, a certified financial planner and co-founder at advisory firm Facet Wealth in Baltimore.

"Just because someone says you can put up to $6,000 in an IRA, don't think you have to put in that much," he said.

If you can save $10 a month, save $10 a month.

Schedule regular money dates with yourself and increase your savings by a small amount. "Those small steps will work," Weiss said. "Down the road, you'll be saving more than you ever imagined you would."

Hitting targets like your first $100 or $1,000 is extremely motivating.

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No money? No expertise? Ditch your excuses and start investing anyway - CNBC

Over long periods of time, the stock market has compounded at an annualized rate of somewhere between 9% and 10%, including dividend reinvestment. That's a fast enough rate to turn ordinary people into millionaires if they invest consistently enough throughout their careers. Of course, few people start investing early enough in their careers to make that path easy. Others want a faster way there or to reach a wealth target beyond that million-dollar threshold.

For them, options, margin, and other risky investment practices offer up the potential for faster returns, albeit with lots of strings and risks attached. Those risks could cause you to lose even more than you invested in total. As a result, they're tools that should only be used if you fully understand the risks and limit your exposure to where they won't run your future if and when things move against you. Read on for some of the basics that you'll be facing if you choose to use them.

Image source: Getty Images.

When you invest on margin, you're essentially borrowing money from your broker to buy securities. That leverages your potential returns, both for the good and the bad.

For example, assume you have $1,000 in cash and want to buy $2,000 worth of a stock that trades at $10 a share. You can put up $1,000 of your own money, borrow $1,000 from your broker, buy 200 shares, and you'd own $2,000 worth of that stock. Your net account balance would still look like you have $1,000, but it would show up as $2,000 in stock and a $1,000 margin loan from your broker.

If the stock went up from $10 to $12, that's a 20% increase. At that point, your 200 shares would be worth $2,400, and your account balance would reflect a total value of $1,400 ($2,400 in stock, minus the $1,000 margin loan). That's a 40% increase to your account value on only a 20% increase in the stock price.

Of course, margin cuts both ways. Say that stock instead dropped 20% from $10 to $8. At that point, your 200 shares would be worth $1,600, and your account balance would reflect a total value of $600 ($1,600 in stock, minus the $1,000 margin loan). That's a 40% decrease to your account value on only a 20% decrease in the stock price.

In addition to magnifying the swings in value, investing on margin brings with it other risks. First and foremost, you will pay your broker interest on any money you're borrowing when you invest with margin. At Fidelity, for instance, the recent cost to borrow money on margin on balances up to $24,999 was 8.325%.When you compare that rate to the 9% to 10% potential annual return in stocks, you'll quickly recognize that you're taking the risk, but the broker is getting much of the rewards.

In addition, while you have a margin loan outstanding, your broker may issue something known as a margin call -- particularly if the market moves against you. When you have a margin call, you broker can demand you pony up more cash or sell out positions you currently own in order to satisfy the call. If you can't cover the call, your broker will liquidate your positions to get it covered.

If your broker starts selling out your positions, that broker doesn't care about your tax situation, your view of the company's long-term prospects, or anything else other than satisfying the call. If the market really moves against you -- say that stock you bought on margin declared bankruptcy and became worth $0 -- you're also still on the hook for the money you borrowed.

Image source: Getty Images.

Options are what is known as a derivative security -- which means they derive their value from some other investment (such as a stock). Options come in two flavors, calls and puts. Buying a call gives you the right to buy the underlying investment at a certain price on or before a certain date. Buying a put gives you the right to sell the underlying investment at a certain price on or before a certain date.

Most publicly traded options contracts on stocks cover 100 shares at a time, and the buyers and sellers of those options often create the contracts when they initiate their opening transactions. Because options expire, part of their value comes from the amount of life they have left (time value). The other part of their value (intrinsic value) comes from how far above the contract price the shares are trading if it's a call option or how far below the contract price the shares are trading if it's a put option.

Because of that contract price -- known as the strike price -- options are also leveraged investments that can move far more than the underlying stock. That provides the potential for magnified returns to both the upside and the downside. It's important to understand, too, that thanks to the time value involved along with the options limited lifespan, options sellers get paid up front and thus are willing to take the risk that the market moves against them.

Here's an example of how options work. Imagine there's a stock trading at $50 per share, and that stock has call options available for three months from now. If the $50 call option trades for $2, you can buy one contract for $200 ($2 per share, 100 shares per contract). If three months from now, just before expiration, the stock trades at $55 per share, your options would be worth $5 per share, or $500 total.

You can then sell that option, and you would have more than doubled your money in the space of three months. That's an amazing return, particularly when you compare it to the 10% move in the underlying stock. Also note that the options seller -- your counterparty to that trade -- would be out a net $300 ($500 at expiration, less the $200 premium received when setting up the option). In this way, it's possible to lose more than 100% of your investment when trading options.

Of course, that potential return is exceptionally risky. If the stock closes at or below $50 when the option is about to expire, the option is worthless, and you will have lost 100% of your investment. That's despite the fact that you would likely have still had something had you owned the stock, Likewise, if the stock closes between $50 and $51.99 just before expiration, you would wind up losing money on the option. That's despite the fact that you would have made a little money if you owned the stock.

As if the leverage natively embedded in options weren't enough, you can combine the two and use margin to buy and sell options. With that combination, you magnify the potential returns as well as the very real risks you're taking on with your strategies. Unfortunately, that combination brings even risks above and beyond the mere leverage involved.

Remember that options expire and brokers can initiate a margin call if your balance gets too low relative to the amount you've borrowed. That combination means that if the market moves against you in the short term, you can lose everything -- potentially even more than you invested -- because of bad timing, even if the strategy would have ultimately worked out for you in the long run. That risk is real, and it can burn you.

Image source: Getty Images.

Beyond options, margin, and the combination of the two, there are also other high risk, high potential reward strategies, such as speculating in the futures market. Similarly, those alternative investments also carry with them leveraged potential returns, along with the possibility of losing more than you invested when the market moves against you.

All these strategies and tools look tempting on the surface because they offer that potential of faster returns if things go well. In reality, reaching for those potential rewards require you to take on substantial real risks above and beyond the typical risks of ordinary stock investing.

As a result, they should only be considered by very experienced investors who fully recognize those risks. Even then, those investors who want to use them should carefully limit their total exposure so that when the market moves against them, it doesn't jeopardize the rest of their financial position.

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Options, Margin, and Other Risky Investment Practices - The Motley Fool

With markets starting to look expensive it's becoming ever more important to find stocks that look a good long-term value on a risk/reward basis. In other words, if you are going to invest $10,000 right now it's a good idea to do it in businesses you will be happy to hold even if the market has a temporary correction. In this context, let's look at why Raytheon Technologies (NYSE:RTX), PTC (NASDAQ:PTC) and Deere (NYSE:DE) are attractive stocks for long-term investors.

Image source: Getty Images.

The case for buying Raytheon Technologies is based on the fact that 55% of its revenue comes from defense. So, if stocks in the defense sector are currently valued at an average of around 20 times free cash flow (FCF), then Raytheon's defense business should be worth 20 times FCF, too.

Data by YCharts

Based on chief financial officer Toby O'Brien's presentation at a recent UBS conference, the legacy Raytheon businesses (largely defense) remain on track for around $3.5 billion in FCF in 2020. However, the legacy United Technologies businesses (largely commercial aviation) are targeting breakeven in FCF for 2020.

Assuming the Raytheon businesses are worth 20 times $3.5 billion gives a value of $70 billion, and if you subtract this from the market cap of $107 billion it leaves $37 billion for the commercial aerospace businesses, Collins Aerospace and Pratt & Whitney. While that figure is not quite as attractive as it was a month ago, it still looks like a good value.

Collins Aerospace generated $4.4 billion in operating profit in 2019, and Pratt & Whitney $1.8 billion, making a combined figure of $6.2 billion. To be clear, it's going to be a long road back, with O'Brien arguing (at the UBS event) that a full recovery in the commercial aviation market wouldn't take place until 2022 at the earliest. Nevertheless, even if it takes three years to get near 2019 levels of profitability, I'd argue that $37 billion is still too low of a figure for the value of commercial aviation businesses.

The industrial software company is an exciting growth stock set to benefit from strong demand for its core products of computer aided design (CAD) software and product lifecycle management (PLM) software while there's explosive potential for its internet of things (IoT) and augmented reality (AR) solutions.

The following figures were given on a PTC presentation in April, and as you can see below, its traditional CAD revenue generated 54% of revenue in 2019 -- but that's set to fall to 35% in 2024 due to strong growth in IoT and AR.

Software Revenue

2019

Compound Annual Growth Rate 2019-2024

Target 2024

Computer aided design

$5.1 billion

8%

$7.5 billion

Internet of things

$2 billion

26%

$6.5 billion

Augmented reality

$0.5 billion

60%

$5 billion

Product lifecycle management

$1.9 billion

7%

$2.7 billion

Data source: PTC presentations.

In a nutshell, PTC is a play on the so-called fourth industrial revolution or Industry 4.0. These grandiose titles simply refer to use of IoT devices in order to create even more automated fatories. With PLM, customers can use the iterative information gathered via web enabled devices to better manage the lifecycle of a product from creation (using CAD) though to production and ultimately, disposal.

IoT will help industrial companies digitize their production by using web enabled devices to monitor, analyze, and guide their physical assets, and AR will allow this process to be carried out remotely. So for example, IoT will encourage companies to invest in robotics and automation on a production line, and AR will let a skilled engineer inspect it without being on-premise.

Image source: Getty Images.

In this context, it's not hard to see why PTC chief executive officer Jim Heppelmann said on a recent earnings call that "We expect that the new normal that follows this crisis will create stronger tailwind to the already high-growth IoT and AR markets, and will make PLM more relevant than ever."

That's good to hear. Management had to reduce its full-year guidance for average recurring revenue growth in 2020 from 12% to 15% to 9% to 12% as a result of the COVID-19 pandemic. However, Heppelmann's comments imply that the company play catch up in 2021 and get back on track for its long-term aim for $730 million to $930 million in FCF in 2024. Given that the current market cap is only $9.7 billion, anything within that range would make the stock look like a great value in the future.

The agricultural equipment maker has faced a number of hits in recent years. The collapse in key crop prices (wheat, corn, soybeans, and cotton) in 2014 hurt farmers' income, while the trade war created ongoing uncertainty around the prospects for U.S. farmers to export soybeans to China. Throw in the COVID-19 pandemic, and the list of headwinds gets even longer.

Note the drop in farmers' cash receipts from crops in 2014-2016 and the decline in Deere's income.

Data source: Deere presentations, USDA.

It's going to be a difficult year for Deere, but there's reason to believe that it's likely to prove a trough year in a multi-year recovery. There are some early indications that grain demand is up as a consequence of the phase 1 trade deal with China.

Food demand will recover with an overall economic recovery. Moreover, as the chart above shows, U.S. farm income from crops has been recovering in recent years, and according to Deere's management the aged fleet of farming equipment in the U.S. is in need of replacement. Finally, Deere has been making substantive progress with its precision agriculture solutions (smart farming).

Wall Street analysts have Deere's earnings recovering from $6.07 per share in 2020 to $8.57 in 2021, putting it on 19 times 2021 earnings. That's a decent value provided the multi-year recovery thesis holds.

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Where to Invest $10,000 Right Now - Motley Fool

As the COVID-19 pandemic spread across California, the states public universities and colleges transitioned from bustling campuses to virtually empty ones sending their costs soaring and revenues spiraling.

University of California and California State University systems reported losses totaling more than $1.4 billion since the outbreak, mostly from the increased costs of online instruction and lost revenues from shuttered dorms, dining halls and other programs. California Community Colleges estimate they will lose $1 billion over the next year.

Gov. Gavin Newsom, faced with a $54 billion budget deficit, proposed a 10% cut in public higher education funding in his May budget proposal. The Legislature is considering a budget next week that will replace most of the higher education funds the governor cut. But the Legislatures replacement funding is contingent upon the state getting billions in federal funds to offset its COVID-19 revenue losses.

Failure to get those federal funds and any further reductions in public higher education threaten to rob a vital engine of the states economy of the fuel it needs to help California overcome the pandemics economic devastation. The states public higher education system is a key driver of the states economic success and essential to its ability to respond to COVID-19 and future pandemics, as well as other disasters.

One in every 10 employees in California is a graduate of CSU, with more than half of alumni staying in California and contributing to the states economy. UC is the states third-largest employer and is responsible for sparking statewide innovation, with an average of five inventions per day. UC is also the worlds largest public research university system, providing a health care system that is saving lives and a research enterprise that is seeking cures and a vaccine for COVID-19.

California Community Colleges educate those on the frontlines of the battle against COVID-19. They train 70% of the states nurses and 80% of Californias firefighters, law enforcement personnel and emergency medical technicians.

Before COVID-19 destroyed lives and eliminated jobs throughout the state, public higher education was just beginning to emerge from the financial tsunami of the Great Recession.

From 2008 to 2012, state investments in public higher education plummeted, leading UC and CSU to double tuition, lay off and furlough staff and defer new construction and maintenance. Californias Community Colleges also sustained $1.5 billion in funding reductions, which resulted in about 600,000 students losing access to higher education.

State leaders had sought to restore funding in recent years. But Californias per-student funding is still far behind where it was in the mid-1970s. At the same time, California is estimated to be about 1 million college graduates short of what state employers will need over the next decade if it doesnt produce more college graduates.

Now, with COVID-19 ravaging their finances, UC reports it lost $1.1 billion in March and April alone. CSU, which has lost $337 million already from COVID-19, recently announced that most of its fall semester classes will be online, meaning more losses of revenue from dorms, dining and its other enterprise programs. UCs and Community Colleges may be mostly online as well.

When California adopted the Master Plan for Education in 1960, it made a promise to make higher education accessible to all. The state is at risk of breaking that promise, if it cannot provide the revenues to make up for the devastating financial losses COVID-19 is creating in our states public higher education system. The states recovery from COVID-19s economic destruction will also be slower, and the future health of Californians will be at greater risk.

As alumni of our states public higher education system, we call on our leaders to invest in Californias future by investing in its world-class institutions of higher education. Doing so will keep public higher education accessible to Californians looking to improve their economic well-being. It will hasten our states recovery, and it will ensure we are ready to respond to future pandemics and disasters.

_____

Dick Ackerman and Mel Levine co-chair the California Coalition for Public Higher Education. Ackerman is a Republican and former California state senator and Assemblymember from Orange County, [emailprotected]. Levine is a Democrat and a former member of the U.S. Congress and state Assemblymember from Los Angeles, [emailprotected]. They wrote this commentary for CalMatters.

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Commentary: California's economic recovery depends on investing in higher ed - CALmatters

Warren Buffett, famous investor and fourth-richest person in the world, has some investing advice for you. And it doesn't involve ratios, valuations, or any nonsensical acronyms that have something to do with cash flow. Nope, Buffett's recommendation is far more straightforward: He says you should be buying index funds.

An index fund is a mutual fund or exchange-traded fund (ETF) that mimics the behavior of an underlying index. When you invest in index funds, your goal is to keep pace with the market. That's very different from the approach taken by stock pickers and active mutual fund managers -- people like Buffett himself. Stock pickers don't want to ride along with the market; they want to beat the market.

Image source: Getty Images.

The trouble is, few people can consistently pull that off. Buffett, as CEO of Berkshire Hathaway, had an amazing run of outperforming the S&P 500, but even he's been less successful recently. And according to S&P Indices Versus Active (SPIVA), 80.6% of actively managed large-cap mutual funds underperformed the S&P 500 over the past five years. In other words, beating the market is hard for anyone -- let alone the part-time investor.

As an investor, you have to choose your battles. You can try to beat the market by picking stocks or by investing in actively managed funds. Unfortunately, it's likely you or your fund manager will underperform. Alternatively, you can opt for moving with the market via index funds. Considering that the S&P 500 has shown average annual growth of 7% after inflation since its inception, riding those coattails isn't a bad deal at all.

As the first quarter of 2020 has reminded us, the long-term trends of the S&P 500 can be quite different from what's happening in the market right now. The average growth may be 7%, but in any given year, the index might be up 30%, down 30%, or somewhere in between.

When you invest in an S&P 500 index fund, you're signing up for the good and the bad. That's why it's important to invest only in funds you don't need for seven years or more. That way, you can ride out the inevitable downturns calmly, without having to liquidate at a low point.

Take a look at a handful of S&P 500 index funds and you'll quickly see that they don't track exactly with their index. There are several reasons for this. Some funds achieve index-level performance by replicating the index exactly; others use a representative sample that behaves like the index, often to keep costs low. Changes in the composition of the index also have to be replicated by the fund after the fact, which can affect performance. But the biggest drag on the fund's performance relative to the index is the fund's expense ratio.

Expense ratio is the fund's operating costs as a percentage of total assets. Since fund expenses do reduce shareholder returns, you should make a practice of choosing index funds with very low expense ratios. That essentially allows the fund to produce returns that are more in line with the underlying index. As a point of comparison, Vanguard S&P 500 ETF (NYSEMKT: VOO) has a very low expense ratio of.03%.

Buffett is a proponent of S&P 500 index funds in particular, because the portfolios are naturally diversified across 500 large, reputable companies. But holding only a single, large-cap equity fund may not match your risk tolerance or timeline. That's a problem easily solved, however. You can tailor the risk level in your portfolio by holding -- you guessed it -- other index funds. For example, you could add a bond index fund to reduce your reliance on equities or an international equity index fund to reduce your reliance on the U.S. economy.

If you do hold multiple index funds, pay attention to how the composition of your portfolio changes over time. Generally speaking, your equity funds will grow in value, while your bond funds will throw off cash, but remain fairly stable. Since equities are riskier than bonds, letting that trend go unchecked will add risk to your portfolio.

The solution is to rebalance your holdings every year. Rebalancing is the process of adjusting your portfolio composition back to where you want it to be. You'd do this by selling off some of the funds that are over-weighted and using the proceeds to buy funds that are underweighted. In practice, this usually means reducing your equity positions and increasing your bond positions.

You don't have to spend your days poring over financial ratios and earnings reports to make money in the stock market. Index fund investing is an alternative that's simple, accessible, and -- importantly -- reliable over the long term. In Buffett's own words, "I think it's the thing that makes the most sense practically all of the time, and that is to consistently buy an S&P 500low-cost index fund."

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This Is How Warren Buffett Says to Invest - The Motley Fool

Rajesh Cheruvu

Due to higher inflation, India will always have a depreciating bias against hard currencies such as the greenback. The Indian Rupee (INR) has depreciated at an average rate of around 4.5 percent per annum against the US Dollar for the last 45 years.

In addition, a risk of larger, disorderly depreciation due to geopolitical issues remains a potential drag. Consequently, the currency alone can be a strong driver for pushing offshore investments.

Secondly, with rising income levels, significant direct and/or indirect expenses incurred by an Indian is actually dollar or foreign currency denominated.

For instance, many HNIs send their children for higher studies abroad, global travel is on the rise for affluent India as is the demand for global healthcare. Investing in foreign assets generating foreign income can act as a hedge for these expenses.

Thirdly, investment markets abroad are much wider and deeper. Innovations such as EV (electric vehicles), Emerging Tech., AI (Artificial Intelligence), ML (Machine Learning), etc. are much more rapid abroad.

Governance of businesses is much more transparent and efficient in developed markets. Debt markets are tremendously vast, liquid, and not myopically focused on only the 10-year G-Sec instrument like in India.

Certain emerging markets growth can be quite eye-catching. India is not the only country with potentially higher real growth.

China, Indonesia, and a few other economies too represent niche investment opportunities. Lastly, the volatility of developed markets is markedly lesser on account of lower macro, currency and political risks.

This would help to reduce an Indian investors largely domestically titled portfolios overall beta as correlations (and volatility) resulting from the inclusion of offshore assets would go down.

Net-net, implementing a top-down approach starting with geographic exposure, then progressing sectorally and finally bottom-up-wise via individual securities would be the most pragmatic way to systematically develop a strategic asset allocation for ones offshore investments.

(The author is CIO, Validus Wealth)

Moneycontrol Ready Reckoner

Now that payment deadlines have been relaxed due to COVID-19, the Moneycontrol Ready Reckoner will help keep your date with insurance premiums, tax-saving investments and EMIs, among others.

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Time to diversify: Three reasons why investors should look at investing abroad - Moneycontrol.com

In a recent column, you mentioned carrying forward a capital loss from a previous investment. I was told you cannot do this, so would appreciate your viewpoint. I hold a power of attorney for my son, who is Australian and has worked overseas for more than 20 years for an arm of the United Nations. He has five investment properties in Melbourne and, before the outbreak of COVID-19, decided to sell three. One, held for 20 years, should make a healthy profit but the other two, held for eight and nine years, respectively, would be lucky to sell for a loss of $50,000. If one or two are sold in this financial year at a loss, could those losses be carried into a following financial year to offset the profit of number three when sold? What is the tax rate for a non-resident? F.C.

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If your son generates a capital loss in 2019-20, it can be carried forward indefinitely and can offset future capital gains, but not income. A realised capital gain is taxed in the year the property is sold.

Good tax planning would therefore suggest that you either take your losses first, or sell all three in the same financial year. Note that a Capital Gains Tax event generally occurs when you exchange contracts, not when you settle.

As a non-resident, the first $87,000 of taxable income is taxed at 32.5 per cent, with no Medicare Levy, while the excess, up to $180,000, is taxed at 37 per cent, then rising to 45 per cent.

Dont tell your son that United Nations pensions are taxed in Australia. He might be disinclined to return!

I have a five-ounce gold ingot which I have had for many years, put aside for a rainy day. With the gold price quite high now, the rainy day has come, as I need some maintenance work on my house. There is a stamp on it for the Australian Bullion Company, the percentage of gold, and the weight. Can you please advise the best and safest way to sell the ingot? V.P.

ABC should buy back your gold bar. The company has offices in capital cities, excluding Adelaide. Call them on 1300 361 261.

You have done well. At the time of writing, gold in Australian dollars is up 12 per cent in 2020 and has almost doubled in the past decade, although it has been drifting down since March, as the US dollar weakens and our dollar strengthens accordingly.

If you have a question for George Cochrane, send it to Personal Investment, PO Box 3001, Tamarama, NSW, 2026. Help lines: Australian Financial Complaints Authority, 1800 931 678; Centrelink pensions 13 23 00. All letters answered.

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Beware being too heavily invested in overvalued property - Sydney Morning Herald

Innotech Profile

Date started:2013

Founder/CEO: Othman Al Mandhari

Based: Muscat, Oman

Sector: Additive manufacturing, 3D printing technologies

Size:15 full-time employees

Stage: Seed stage and seeking Series A round of financing

Investors: Oman Technology Fund from 2017 to 2019, exitedthrough an agreementwith a new investor to secure new funding that itunder negotiation right now.

When the coronavirus outbreak spread quickly from China to the rest of the world, triggering a global shortage of medical equipment and a race to secure supplies, Omani entrepreneur Othman Al Mandhari proposed a solution to the health authorities: Go local.

The 30-year-old engineer's Muscat-based start-up, Innotech, specialises in 3D printing services that produce parts for oil and gas companies, industrial businesses and research and development labs. As the Covid-19 pandemic paralysed international trade, disrupted supply chains and hit manufacturing bases globally, Innotech switched gears and began providing life-saving ventilators and masks for those on the frontline of the Covid-19 response in the sultanate.

"Before Covid-19 business was a bit slow, it was really tough, people didn't believe in the technology and we had to do many experiments to show customers," Mr Al Mandhari says. "Now, with Covid-19, people see the technology works. If you cannot import from China, you're forced to manufacture locally. If you want masks or ventilators, you have to manufacture locally and 3D printing is the best way."

For the former Schlumberger engineer, who left his job in 2016 to focus on growing his business, local manufacturing using 3D printing technology is one answer to Oman's economic diversification efforts to help reduce reliance on imports, create jobs for nationals and build new industries.

"Now people are thinking: what happens if you can't import from China? Worldwide, everyone will start to invest in manufacturing hubs," he says. "Why dont you invest in young engineers thousands are looking for jobs in Oman educate them, start to manufacture and export?"

Much like Innotech, 3D printing businesses in other parts of the world are modifying their production to meet increasing demand for medical equipment during the pandemic. For months, manufacturing companies, start-ups, research and development labs and major corporations have been busy 3D-printing face shields and ventilator parts for healthcare professionals and hospitals.

Innotech secured contracts with Oman's Ministry of Health to provide masks and ventilators when it became more difficult to import supplies from China, he says. Now it produces 300 to 400 masks daily in its workshop of 22 3D printers.

"Our 3D printers are running 24/7 ... we are working day and night to keep up with the demand," he says.

So far, Innotech has supplied more than 6,000 masks to the Ministry of Health, which in turn distributes to hospitals and has supplied 2,000 masks to the World Health Organisation in Oman, according to Mr Al Mandhari. It sells each mask for 2.5 Omani riyals (Dh23.87/$6.50), roughly the same amount as the cost of production.

"We are not looking to profit from these products. We are working to help our country in this crisis," he says.

Innotech was established in 2013 and was self-funded. In 2017, venture capital firm Oman Technology Fund invested $100,000 in its sister business, Innobox, which makes educational kits used to teach children aged eight years and older about electronics and programming.

Now Mr Al Mandhari is in talks with local venture capital firms to raise $2 million (Dh7.34m) to $3m in a Series A funding round to expand his businesses and expects the deal to close within six weeks, he says.

We are not looking to profit from these products. We are working to help our country in this crisis, Othman Al Mandhari,

founder, Innotech

The investment will fund plans for a 3D printing factory, which will allow clients from around the world to access the platform, upload a file with the technical specifications for their product, have them manufactured through Innotech's 3D printers and shipped.

The factory will span 3,000 square metres in the first stage, with plans to expand in future phases.

The current round of finance will also see Innotech fund plans for concrete 3D printing that will allow it to fabricate buildings initially two-to-three storeys before going on to larger construction projects, he says.

Mr Al Mandhari is also looking to finance the other part of the business, Innobox, which has already sold 800 units, but is embarking on a redesign of its product, to manufacture in-house and expand into the other Gulf and Middle East markets.

The engineer admits that the various branches of his start-up, from 3D printing to education, have prompted investors to see the business as "scattered". However, he insists that this diversification has been an advantage during the Covid-19 pandemic.

For example, the education part of the business stopped generating revenue during the pandemic as schools and educational centres shut down to curb the spread of the virus, which led to the switch in focus to 3D printing.

"Thanks to other services, we survived because of multiple revenue streams," he says. "The mentality of investors is starting to change and they're starting to see it as an advantage."

Getting its Series A funding to open the new factory will be "critical" for the business to focus on demand for parts from all sectors.

"Right now we see huge demand and we can't cover it because we're limited by the number and type of 3D printers," he says.

Oman, which relies on oil revenue for economic growth, is home to major international and local oil and gas companies that currently import parts for their facilities from others countries.

Innotech aims to add value by supplying the parts locally, which would cut costs and delivery times, according to Mr Al Mandhari.

"If we can do this service in Oman we can save time rather than months, it can take weeks for parts to arrive save costs, and help companies meet their quota for contracts to local firms," he says.

The company has doubled revenue between 2017-2019 but expects the coronavirus crisis to put a dent in that growth trajectory this year.

"The target for 2020 is to double revenue, but with Covid-19, our expectations are a bit lower," he says.

Growth this year will come from the 3D printing business once the investment is secured and the factory is set up.

"Now we can't target too many clients because the capacity of our printers is limited, but when we get the investment, we can target new customers," he says. "Once we have this factory up and running, we can definitely increase our revenue."

The start-up aims to hire another 12 employees once its secures new funding, as it looks to grow the current team of 15 people.

Future growth targets include expanding the 3D printing business to include metal, concrete and plastic production, he says.

"We are open to any investors from the Middle East," he says.

Q&A with Othman Al Mandhari, chief executive of Innotech

Who first invested in you?

Oman Technology Fund, a local venture capital firm, invested $100,000.

What already successful start-up do you wish you had started?

SpaceX! I am an engineer and engineers are in love with solving challenging problems and space is the most challenging problem you can imagine! I have always been inspired by anything related to space.

What is your next big dream to make happen?

Launch our factory, grow to become the world's number 1 online 3D printing platform and construct the first 3D-printed building in Oman.

What new skills have you learnt in the process of launching your start-up?

Dealing with people! Something we are really bad at, as engineers, is dealing with people because we are dealing with machines most of our time! Being an entrepreneur helped me shape my skills and learn how to deal with people, from customers and employees to family and friends.

How has the Covid-19 pandemic impacted your business?

Our 3D printing and R&D services are positively impacted because the government and the private sector could not import technology from China and other countries because of the lockdown, so we had a massive increase in R&D and 3D Printing services. In our EdTech department, we struggled in the beginning by losing many contracts, but later on we managed to shift into online learning platforms and got back to the track.

Updated: June 14, 2020 01:32 PM

Innotech Profile

Date started:2013

Founder/CEO: Othman Al Mandhari

Based: Muscat, Oman

Sector: Additive manufacturing, 3D printing technologies

Size:15 full-time employees

Stage: Seed stage and seeking Series A round of financing

Investors: Oman Technology Fund from 2017 to 2019, exitedthrough an agreementwith a new investor to secure new funding that itunder negotiation right now.

More here:
Generation Start-up: Oman's Innotech seeks $3m investment to expand 3D printing business - The National