Is NUKU Here to Help or Harrow?

The action in the equities markets over the past four years has left a repulsive taste in our mouths. A major hurdle now is making…

The action in the equities markets over the past four years has left a repulsive taste in our mouths. A major hurdle now is making people comfortable enough to get their feet wet again.  Although individual investors have little effect on stock prices compared to major banks and hedge funds, a new investing platform may be just the thing to kick off a rally that has some staying power…or not.

Seattle-based NUKU seeks to simplify investing so as to meet your short, medium, and long-term financial goals. These can be anything from saving for a child’s college tuition to building up a nice retirement nest egg. The company does so by focusing on high dividend-paying stocks and reliable or high coupon-paying bonds. One great thing about NUKU is that it may serve to lure people into saving for long-term goals at a young age (e.g. a Roth IRA), which the average American needs to learn how to do, now more than ever. NUKU steps in to advise subscribers through its blog, “Fiscology”.
Their latest blog article just about encompasses NUKU’s entire investing strategy through four easy-to-follow steps. This is the sign telling us that after a thorough eye-roll, we should all run for the hills. Not only does this guide leave out precious information, it also does a great job of misleading its members. Step one: Choose Undervalued Companies and Avoid Capital Losses. To some, this might be offensive, as if we’ve never heard about the idea of buying low and selling high. Furthering its point, NUKU basically tells investors to rely solely on P/E ratios and where they think the broader industry might be heading. P/E ratios mean very little when growth isn’t factored in. A good example that NUKU may overlook is Google.  Google’s current P/E is 22, which is higher than average. However, dividing the P/E by its projected five year growth rate gives us the PEG ratio. PEG is obviously more informative, and to put things in perspective, a stock with a PEG of 1.0 is generally considered fairly valued. If the PEG ratio is above 1.0, it’s looked at as overvalued, and undervalued if less than 1.0.  High P/E ratio Google is growing so fast that its PEG is just 0.9. There’s plenty more to valuing stocks, and a P/E alone doesn’t cut it.

The most disappointing suggestion in this four-step guide: Choose Stocks of Companies That are Safe. This is an age-old, clearly unreliable principle. There is no longer such a thing as a “safe stock,” in a general sense of the term. Once considered among the safest stocks on the market, millions of us were burned during the recession by General Electric, which is about as diversified as a company can be. Same thing happened with defense juggernaut Northrop Grumman, which thrives on pre-signed government contracts, not consumer or corporate spending habits. Buying pieces of any individual corporation is to take on a great deal of risk. We’re slowly emerging from the ashes of the Great Recession during which no company was safe. Nobody could hide, no matter how strong their balance sheet was or how much they paid out in dividends. The overall market plummeted, so just about everyone was dragged down with it. This could happen again at any time, especially with companies leaning on the projected economic growth (or regression) of other countries like China and those in the Eurozone. We may finally take control of our own economy, but we can only do so much to support others. Risk is only increasing with globalization, and apparently NUKU doesn’t understand that. Want safety? Buy highly rated corporate bonds instead.

There just appears to be no point of using NUKU when there are so many other advanced, yet simple-to-use platforms already out there. Somewhat subjectively speaking, the two best are Fidelity and TD Ameritrade. Trading is cheap and easy on these sites, but most importantly, they provide a wealth of news, information, and intelligent analysis for us to digest before making investment decisions. With this in mind, we'll see how long NUKU lasts.

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