investments

I’ve been asked a couple of times recently about Bitcoin as an investment, particularly as a hedge against the stock market. Here, then, is a primer on cryptocurrency in general and an opinion regarding adding it to your portfolio.

Several people have asked me recently why the stock market is up so much (the S&P 500 is up over 5% on the year) when the economy is doing so poorly (there are 13 million fewer people working now than in February). So, while the movement of the stock market is unpredictable because it consists of billions of trades each day, each motivated by individual investor’s own needs and beliefs, here are 4 broad reasons for the disconnect:

My favorite Bond is James, not to be confused with the ornithologist(look it up) of the same name. And, while I treasure my bonds with family and friends, they are not Treasury bonds. So, while you choose between reading on or scrolling to the next cat video, here is why you should care what a bond is: You undoubtedly own some or parts of them and you should know what they are and what they do. First, let’s talk about you.

The Financial Times reported last week that online stock brokerages, like E-Trade, hit a record number of account sign-ups in March and April. Rich Repetto, senior analyst at Sandler O’Neill (investment banking firm) commented that the stay-at-home mandate plus no live sporting events for bettors to wager on motivated many to trade stocks online. Whoa! Think about that for a minute. These people were so starved to bet on something, they decided to bet on stocks!

My 14-year old client, Wally (not his real name), recently showed wisdom beyond his years when pondering an investment question. For background, four years ago Wally had a few bucks that he’d saved from birthday gifts and mowing his grandfather’s lawn that he decided to invest. The measly interest from a bank savings account wasn’t getting the job done so he chose, on his own, three individual company stocks to buy. Now, we invest our clients in mutual funds rather than common stocks, but occasionally a client will ask to invest a small amount of their portfolio in a company they like and this seemed to be a good way for Wally to learn about the stock market. Here are the companies he chose to purchase:

I have a friend who has been asking me for almost 3 years if we think the stock market is ready to take a dive. My answer is always the same: “What portion of your portfolio is actually invested in the stock market?” Why do I ask such a question? Because the return of the stock market only impacts her stock mutual fund investments. Her overall portfolio return depends on how all her investment types – cash, long-term income funds, stock funds, real estate funds, etc. – are mixed and how they perform together. This is called asset allocation and is an important investment portfolio technique that balances risk among various types of investments. So, here is: 1) A review of 2019 so far; 2) The stock and bond market returns in context and; 3) Our recommendation to focus on asset allocation, not the short-term direction of the stock market:

My parents were children of the Great Depression and, like many people of that era, they were and are careful with money. While extraordinarily generous to their children, grandchildren and to their beloved charitable causes, spending money on a luxury just for themselves still requires breaking decades of money muscle memory. Surveys during the 1960s showed that people who were young during the Great Depression were not only, like my parents, extremely careful with money but also quite risk averse. Not surprisingly, this aversion to risk made this generation much less likely to invest in the stock market.

I refer to those in their 40’s and early 50’s as the “financial sandwich generation.” Many are paying off student loan debt, possibly saving money for children’s education, maybe even helping aging parents – all while trying to save for their own retirement. Talk about a squeeze! Here is some advice to help put a little more jelly on that sandwich.

Now that we’ve passed the mid-year mark, many economists and self-declared financial pundits are reviewing investment performances of the first 6 months and predicting the next 6. The most frequent question seems to be whether we’re headed toward a bear market, followed by a recession. This, despite the fact the economy is strong with unemployment at historical lows and companies reporting earnings growth.

Most of our clients hire Moneywatch because they are consumed with their careers and busy with their families and they want us to plan for their financial independence and manage their investments to achieve that goal. And, for many, words like inverted yield curve and budget deficits make their eyes roll back in their head.  So, if the term zero term premium means you’ve had a bad semester, read here for what you need to know about your retirement investments if the market declines…or doesn’t. 

“Americans are reaching retirement age in worse financial shape than the prior generation for the first time since Harry Truman was president”, says a recent Wall Street Journal article. There are several causes but us Baby Boomers are the first generation left mostly without pensions and with the responsibility to manage our own retirement savings. So, as you can imagine, some have flourished, some have struggled and more than some aren’t quite sure how they’ve done because they’re scared to look. Where do you fall?