XIRR, or Extended Internal Rate of Return, is a formula used to calculate the annualized return on investments with multiple cash flows that occur at different times.
XIRR is used to evaluate the profitability and performance of an investment by taking into account the timing and amount of each individual cash flow in a given period.
XIRR reflects the actual return based on their specific cash flows and accommodates for irregular, non-periodic cash flows.
Goldilocks Economy refers to an economic environment that is not too hot (overheating with high inflation) and not too cold (recession or stagnation), but "just right"—allowing for stable growth with moderate inflation.
This term is derived from the children’s story "Goldilocks and the Three Bears," where Goldilocks prefers things that are neither too extreme in one direction nor the other.
A Goldilocks economy is often characterized by: • Steady economic growth • Low to moderate inflation • Low unemployment • Accommodative monetary policy (e.g., low interest rates)
This environment is typically favorable for financial markets, as it supports earnings growth without leading to overheating or the need for restrictive monetary policy. Markets tend to perform well in these conditions since both bonds and equities may rise due to balanced economic expansion.
I’ve recently read an interesting and frequently hilarious book by Richard Thaler: “MISBEHAVING: The Making of Behavioral Economics.” In this 2016 book he describes his efforts, and that of others, to challenge the entrenched belief that traditional economic theory is a reliable and accurate tool to explain human economic and market behavior. From his work with psychologists and other economists, he developed the now accepted field of behavioral economics. This article shares a few key concepts from his book and the related mental exercises are fun and reveal a bit about ourselves and the markets.
Thaler, an economist and the Charles R. Walgreen Distinguished Professor of Behavioral Economics at the University of Chicago Booth School of Business, was awarded the Nobel Memorial Prize in Economic Sciences for his contributions to behavioral economics in 2017. Incidentally, he is also a partner in Fuller and Thaler, a California-based investment management company.
Thaler uses the name “Econs” for the hypothetical beings assumed to behave as economic theory predicts. Not surprisingly, he calls the rest of us who “misbehave,” relative to economic theory expectations, “Humans.”
Thaler: “The core premise of economic theory is that people choose by optimizing. Of all the goods and services a family could buy, the family chooses the best one it can afford. Furthermore, the beliefs upon which Econs make choices are assumed to be unbiased.” (Remember this last point when we get to the confirmation bias discussion below.)
A bit later he writes, “This premise of constrained optimization, that is, choosing the best from a limited budget, is combined with the other major workhorse of economic theory, that of equilibrium. In competitive markets prices are free to move up and down, those prices fluctuate in such a way that supply equals demand. To simplify somewhat, we can say that Optimization + Equilibrium = Economics.”
As part of National Cybersecurity Awareness Month, it's crucial to focus on proactive ways to protect your personal and financial information. A credit freeze, also known as a security freeze, is one of the most effective tools to prevent identity theft. It restricts access to your credit report, making it difficult for fraudsters to open new accounts in your name.
What Is a Credit Freeze?
A credit freeze locks your credit file so that creditors cannot access your report unless you temporarily lift the freeze. This prevents new lines of credit from being issued in your name, helping protect you from potential financial fraud.
How to Place a Credit Freeze
To place a credit freeze, you’ll need to contact each of the three major credit reporting bureaus (Equifax, Experian, and TransUnion). You can do this online, over the phone, or by mail. You’ll be required to provide personal information, including your Social Security number, and create a PIN or password to lift the freeze when needed.
Why Place a Credit Freeze?
A credit freeze is especially useful if you suspect your personal information has been compromised or if you’re concerned about identity theft. It doesn’t affect your credit score, and it’s free to both freeze and unfreeze your credit. While it prevents new accounts from being opened, it does not affect your ability to use existing credit accounts.
By taking this simple step, you can strengthen your cybersecurity defenses and help safeguard your financial future.
