It’s the little things you begin with that matter most! The wisdom found in the Tao Te Ching says the long thousand- mile journey begins under one’s feet by taking small steps! If you are hiking and climbing a mountain you take one little step at a time. It is unrealistic to think you can physically run to the top.
With all the hype about the latest Avengers movie, it got me thinking about how we all can become superheroes in our every day lives. You may already be a superhero to your spouse, to your kids, but how can we become financial superheroes? Fidelity did a study a number of years ago. They looked at all of their accounts and they wanted to find out which accounts performed the best: what were the investments? How often did the account trade? How many “tweaks” did the account holder perform over this given time period? What Fidelity found out was very surprising. The clients whose accounts performed the best were the clients who forgot they had an account at Fidelity.
How do we know if we will have enough saved for retirement?
Over the last few decades, more and more workplaces left the traditional pension-retirement, and changed over to a more individually focused retirement plan, with the emergence of 401(k)s. Less responsibility is placed on the employer to ensure their employees have enough for retirement, and more responsibility is put on the shoulders of employees to ensure they are saving enough into their retirement plans to one day be able to replace their income. Recent studies have shown that one-third of baby boomers have no money saved for retirement. On top of that, boomers have more debt than previous retiring generations. They will have to spend more out of pocket on health care.[i] These are scary statistics. Cost of living has continued to climb, with food and housing costs up 60% from 1996. Education costs are rising, and have increased eight times faster than wage growth[ii], and medical and childcare costs have doubled over the same time frame.[iii] It is not merely the fault of the average person for not stashing enough away; people have less money in their pockets to allocate to savings!
The good thing is, with a little forward thinking, there are ways to improve our retirement outlook In this article, we will go over some steps that can help you to prepare financially for your later years.
Investment fads are nothing new. When selecting strategies for their portfolios, investors are often tempted to seek out the latest and greatest investment opportunities.
Over the years, these approaches have sought to capitalize on developments such as the perceived relative strength of particular geographic regions, technological changes in the economy, or the popularity of different natural resources. But long-term investors should be aware that letting short-term trends influence their investment approach may be counterproductive. As Nobel laureate Eugene Fama said, “There’s one robust new idea in finance that has investment implications maybe every 10 or 15 years, but there’s a marketing idea every week.”
It’s easy to see everything that is going wrong in the world. In fact, it would actually be challenging to read through a newspaper or turn on the news without being bombarded by all things terrible: political unrest, global warming, contaminated foods, disease outbreaks; the list goes on and on. On top of that, our brains tend to focus and remember the negative more than the positive. It’s called a “negativity bias”.[i] In this article, we will look at some reasons why this age of fast-paced globalization and unimaginable technology is pretty darn amazing.
Let There Be Light
It’s easy to take for granted the simple creature comforts when we have deadlines, kids, traffic, etc. But did you know that each day, nearly 300,000 people gain electricity for the first time? Another 305,000 get clean water. We are in a transitional state where huge populations are moving into the middle class, and with it comes advances in literacy, infrastructure, and amenities that improve quality of life, health, and infant mortality! For example, in 1960 19% of children died before the age of five and that number is now closer to 4%.[ii]
A quick online search for “Dow rallies 500 points” yields a cascade of news stories with similar titles, as does a similar search for “Dow drops 500 points.”
These types of headlines may make little sense to some investors, given that a “point” for the Dow and what it means to an individual’s portfolio may be unclear. The potential for misunderstanding also exists among even experienced market participants, given that index levels have risen over time and potential emotional anchors, such as a 500-point move, do not have the same impact on performance as they used to. With this in mind, we examine what a point move in the Dow means and the impact it may have on an investment portfolio.
impact of index construction
The Dow Jones Industrial Average was first calculated in 1896 and currently consists of 30 large cap US stocks. The Dow is a price-weighted index, which is different than more common market capitalization-weighted indices.