investments

I am not a betting man. Now, I do enjoy perusing the betting lines on college and NFL football games and making some bets in my head, but my abysmal record helps me keep my money in my pocket. Similarly, I often get asked how I think the stock market will perform this year. When I answer that I have no clue how it will fare in the short term, I often receive a squinty-eyed stare in return. If I could read minds, I assume that look means, “Isn’t that your job?” Answer: No, the reason I can’t predict the market is that NO ONE can! Witness:

I’ve been asked several times recently if gold should be a part of one’s portfolio to hedge against uncertainties such as inflation, a pandemic economy, high federal debt or a contested election. If you think the U.S. is ready for imminent and complete collapse – think France in WW II – and you and your family will have to flee with only the belongings you can carry, then sure, gold will always have value to someone and is relatively easy to smuggle across a border. As a hedge, however, my personal preference would be boxwoods. Here are my thoughts:

The day after the 2016 election an acquaintance sold about 30% of the stock mutual funds in his $750,000 retirement account and put it in cash. After the market jumped up over the next six months, he estimated he’d lost out on gains of about $35,000 due to his emotions ruling his decision making, he later told me. This year’s presidential election is heating up and many are worried how a contested election might affect the stock market. In fact, daily volatility – ups and downs – is rising in anticipation of the election, which isn’t unusual during pre-election months. As evidence, the S&P 500 was down 3.9% in September even as its 3rd quarter return was up 8.5%. 2020 year-to-date the index is up almost 4%. So, with things getting hotter by the day, what should investors do to prepare themselves – other than stay off Facebook and Twitter – to help avoid the mistake my acquaintance made four years ago?

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.