Stocks rising and falling
Q: Why do stock prices go up and down from day to day? — K.W., Hendersonville, North Carolina
A: Over the long run, a company’s stock price will generally rise or fall in accordance with changes in the value of the company’s underlying business. As Netflix, for example, adds more subscribers and rakes in more money over time, its share price will rise.
From day to day, though, stock prices fluctuate based largely on what investors think the stock is worth. They might react to a variety of developments, like the company reporting a strong (or weak) quarter; its management changing; being upgraded (or downgraded) by a Wall Street firm; it launching new products or services; the company acquiring another company or being acquired; being involved in a scandal; signing (or losing) a big contract; or changes in supply or demand for its offerings.
Sometimes stocks will rise (or fall) on rumors, or simply on investor enthusiasm — perhaps because many other stocks are rising. Aim to be a long-term investor, and don’t pay too much attention to short-term moves.
Time to refinance?
Interest rates are poised to rise soon, so if you’re considering refinancing your mortgage, you might want to act quickly.
Refinancing involves getting a new mortgage, which pays off your previous loan and leaves you with new, typically lower, monthly payments to make. A rule of thumb is that when prevailing interest rates are at least a percentage point lower than the current rate on your mortgage (such as 4.25% vs. 5.25%), it’s worth looking into whether refinancing is a good move for you.
You can refinance through your current lender, and that can make the process easier — but you don’t have to. Shop around to see which lender will offer you the best rate.
One option is to take another kind of loan. For example, if you have a 30-year mortgage, you might refinance into a 15-year one in order to pay off the loan sooner and pay less in total interest. Payments are higher with shorter-term loans, but if interest rates have fallen, they might not be too much higher than what you were paying.
Refinancing isn’t free — as you’ll be taking on a new home loan, there will be closing costs and other fees to be paid. Make sure that you plan to stay in the home at least long enough for the total cost of refinancing to be worth it. For example, if refinancing costs $3,000 and your monthly payments will be $200 lower, divide $3,000 by $200 and you’ll get 15, which means you’ll break even in 15 months.
Some people pursue a “cash-out” refinancing, where they take out a new loan for more than they owe on their home. That gives them extra cash, which they may need or want. But be careful with cash-outs, because a bigger loan can mean bigger monthly payments — and if home values fall, you might end up owing more than your home is worth, which can make it harder to sell.