Category Archives: Financial Literacy

Staying Invested in the Stock Market

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“The stock market is the only market where the goods go on sale and everyone becomes too afraid to buy.”  Nerd Wallet

When the market dips even a few percent, as it often does, many retail investors become fearful and sell in a panic, according to Nerd Wallet. Yet when stock prices rise, investors beomce greedy and plunge in headlong which is the perfect definition for “buying high and selling low.”

Here are the three popular fairytales investors tell themselves regarding investing:

  1. Wait until the stock market is safe to invest – This excuse is used by investors after stocks have declined, when they’re too afraid to buy into the market. But when investors say they’re waiting for it to be safe, they mean they’re waiting for prices to climb. So waiting for (the perception of) safety is just a way to end up paying higher prices, and indeed it is often merely a perception of safety that investors are paying for. Fear drives the behavior and psychologists call this behavior “myopic loss aversion.” That is, investors would rather avoid a short-term loss at any cost than achieve a longer-term gain.
  2. Buy back in next week when the stock market is lower – This excuse is used by would-be buyers as they wait for the stock to drop. But as the data shows, investors never know which way stocks will move on any given day, especially in the short term. Both fear and greed drive this behavior. The fearful investor may worry the stock is going to fall and waits, while the greedy investor expects a fall but wants to try to get a much better price.
  3. Bored with this stock, so I’m selling – This excuse is used by investors who need excitement from their investments. But smart successful investing is actually boring. The best investors sit on their stocks for years and years, letting them compound gains. All the gains come while you wait, not while you’re trading in and out of the market. Investor’s desire for excitement drives this behavior.

The key to long term investment success is creating a plan, sticking to the plan and remaining in the stock market through “thick and thin”. Your length of “time in the market” is the best predictor of your investing performance. Unfortunately, investors often move in and out of the stock market at the worst possible times, missing out on performance and annual return.

“The secret to making money in stocks? Staying invested long-term, through good times and bad.”  Nerd Wallet

In a nutshell, more time in the stock market equals more opportunity for your investments to increase in value. The best companies tend to increase their revenue and profits over time, and investors reward these greater earnings with a higher stock price. That higher price translates into a higher total return for patient and disciplined investors who own the stock.

References:

  1. https://www.nerdwallet.com/article/investing/make-money-in-stocks

The Psychology Behind Your Worst Investment Decisions | Kiplinger Magazine

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“When it comes to investing, we have met the enemy, and it’s us.” Kiplinger Magazine

Excited by profit and terrified of loss, we let our emotions and minds trick us into making terrible investing decisions, writes Katherine Reynolds Lewis of Kiplinger Magazine.

Most individual investors allow their emotions to dictate their investment decisions. Effectively, there are two types of emotional reactions the average investor can experience:

Fear of Missing Out (FOMO). These investors will chase stocks that appear to be doing well, for fear of missing out on making money. This leads to speculation without regard for the underlying investment strategy. Investors can’t afford to get caught up in the “next big craze,” or they might be left holding valueless stocks when the craze subsides.

  • Fear of Missing Out (FOMO) can lead to speculative decision-making in emerging areas that are not yet established.
  • Fear of Losing Everything (FOLE) is a more powerful emotion that comes from the fear that they will lose all of their investment.

Acording to a 2021 Dalbar study of investor behavior, Dalbar found that individual fund investors consistently underperformed the market over the 20 years ending Dec. 31, 2020, generating a 5.96% average annualized return compared with 7.43% for the S&P 500 and 8.29% for the Global Equity Index 100.

“As humans, we’re wired to act opposite to our interests,” says Sunit Bhalla, a certified financial planner in Fort Collins, Colo. “We should be selling high and buying low, but our mind is telling us to buy when things are high and sell when they’re going down. It’s the classic fear-versus- greed fight we have in our brains.”

Avoiding these seven “emotional and behaviorial” investing traps will allow you to make rational investments.

  1. Fear of Missing Out – Like sheep, investors often take their cues from other investors and sometimes follow one another right over a market cliff. This herd mentality stems from a fear of missing out.  The remedy: By the time you invest in whatever is trending, it’s too late because professional investors trade the instant that news breaks. Individual investors should buy and sell based on the fundamentals of an investment, not the hype.
  2. Overconfidence – Some investors tend to overestimate their abilities. They believe they know better than everyone else about what the market is going to do next, says Aradhana Kejriwal, chartered financial analyst and founder of Practical Investment Consulting in Atlanta. “We want to believe we know the future. Our brains crave certainty.” The remedy: To combat overconfidence, build in a delay before you buy or sell an investment so that the decision is made rationally.
  3. Living in an Echo Chamber – Overconfidence sometimes goes hand in hand with confirmation bias, which is the tendency to seek out only information that confirms our beliefs. If we think an asset holds promise for riches, news about people making money sticks in our minds more than negative news, which we tend to dismiss. The remedy: To counteract this bias, actively seek out information that contradicts your thesis.
  4. Loss Aversion – Our brains feel pain more strongly than they experience pleasure. As a result, we tend to act more irrationally to avoid losses than we do to pursue gains. The remedy: Stock market losses, however, are inevitable.If seeing the losses pile up in a down market is too hard for you, simply don’t look. Have faith in your long-term investing strategy, and check your portfolio less often.
  5. No Patience for Sitting Idly By – As humans, we’re wired for action. That compulsion to act is known as action bias, and it’s one reason individual investors can’t outperform the market — we tend to trade too often. Doing so not only incurs trading fees and commissions, which eat into returns, but more often than not, we realize losses and miss out on potential gains. The remedy: Investors need to play the long game. Resist trading just for the sake of making a decision, and just buy and hold instead.
  6. Gambler’s Fallacy – “This is the tendency to overweight the probability of an event because it hasn’t recently occurred,” says Vicki Bogan, associate professor at Cornell University. Over time, the probability of equities having an up year or a down year is about the same, regardless of the previous year’s performance. That’s true for individual stocks as well. The remedy: When stocks go down, don’t just assume they’ll come back up. “You should be doing some analysis to see what’s going on,” Bogan says.
  7. Recency Bias – Past performance is no guarantee of future results. Yet, our minds tell us something different. “Most people think what has happened recently will continue to happen,” Bhalla says. It’s why investors will plow more money into a soaring stock market, when in fact they should be selling at least some of those appreciated shares. And if markets plummet, our brains tell us to run for the exits instead of buying when share prices are down.The remedy: You can combat this impulse by creating a solid, balanced portfolio and rebalancing it every six  months. That way, you sell the assets that have climbed and buy the ones that have fallen. “It forces us to act opposite to what our minds are telling us,” he says.

It is wise to always keep in mind that the market is volatile as a result of investors’ emotions and behaviors, and thus does not move logically.

References:

  1. https://www.kiplinger.com/investing/603153/the-psychology-behind-your-worst-investment-decisions

by: Katherine Reynolds Lewis – July 22, 2021

Three Pillars of a Fulfilling Retirement

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“Preparation for old age should begin not later than one’s teens. A life which is empty of purpose until 65 will not suddenly become filled on retirement.” Arthur E. Morgan

Key Insights include:

  • Financial Health, Physical Health and Emotional Health…the Three Pillars are all vitally important to the lifestyle one expects to experience during retirement.
  • Just getting by and/or covering basic living expenses is retirees’ most frequently cited financial priority.
  • Social Security remains the cornerstone of retirement income for many Americans.
  • Retirees’ confidence about maintaining their lifestyle exceeds the size of their retirement nest eggs.
  • Most retirees are happy and enjoying life.

In The Three Pillars for a Prosperousand Fulfilling Retirements, the importance of Financial Health, Physical Health and Emotional Health are important aspects of retirement. All three pillars are vitally critical to the lifestyle and contentment Americans expect to experience during retirement.

Many people look forward to retirement because it represents freedom and a new phase of life. You don’t have to get up and go to work every day or do what a boss tells you. But just because your time is your own after you leave work doesn’t mean you have no rules to live by in your later years. In fact, it may be even more important to adhere to some guidelines.

Americans are living longer than ever in retirement, thanks to advances in health care, improved nutrition and diets, and better exercise. About one out of every four 65-year-olds today will live past age 90, and one out of 10 will live past age 95, according to data from the Social Security Administration.

This great news also presents Americans with a significant financial challenge in retirement of how to make sure their money lasts as long as they do. The possibility of running out of money is one of the biggest concerns and biggest risks many retirees will face in the years ahead.

Challenges in Retirement

  • There are a plethora of challenges and potential threats to retirement in the United States. Those nearing retirement realize they may have missed out on key saving or investing opportunities during their career, according to results from a new TIAA-CREF survey.
  • Despite all having access to an employer-sponsored plan, more than half of the people (52 percent) approaching retirement (age 55-64) wished they had started saving for the future sooner. In particular, 47 percent wished they saved more of their paycheck, and 34 percent now realize they should have invested their savings more aggressively.  According to findings that come from TIAA-CREF’s 2014 Ready to Retire Survey.
  • The critical importance – during retirement — of “core pursuits” which are hobbies and activities that one pursues with passion and regularity, according to Wess Moss.It’s normal to crave the freedom that retirement brings.  Most people look forward to retirement. But like many other pleasures, it may be bad for your health.  It may even kill you, according to a WSJ article.  Wess Moss has devoted his professional career to helping people retire early and enjoy a happy retirement.
  • Financial Health
    • Americans have put away $18.5 trillion for retirement in 401(k) contribution plans and defined benefit pension programs, according to the report published by the Investment Company Institute. Yet, retirement savings are non-existent or barely exist for many Americans. More than one in five Americans have zero retirement savings and another 10% have less than $5,000 in savings. Pensions have all but disappeared and many of those remaining are underfunded.
    • It is said that money doesn’t grow on trees, however, it can grow when you start early to save and invest, you pay yourself first and develop a system. Knowing how to secure your financial well-being is one of the most important things you’ll ever need in life.You don’t have to be a genius to do it.You just need to know a few financial literacy basics, form a financial system and plan, and be disciplined to stick to it.
    • No matter how much or little money you have, the important thing is to educate yourself about your opportunities and the system of success. No one can guarantee that you’ll make money from investments. But if you get the facts about saving and investing and follow through with an intelligent plan, you should be able to gain financial security over the long-term and enjoy the benefits of managing your money.
  • Physical Health
    • 96% of retirees—and 99% of those age 75 and over—say that health is more important than wealth to live well in retirement. Yet health and wealth are very intertwined. People with financial resources can invest more in their health, and those in poor health have a harder time enjoying what their money can buy.
    • Adults who remain physically active are healthier, feel better, and are less likely to develop many chronic diseases, such as cardiovascular disease, type 2 diabetes, and several types of cancer than are adults who are inactive. Regular moderate-to-vigorous physical activity also reduces feelings of anxiety and depression and improves sleep and quality of life. Even a single episode of physical activity provides temporary improvements in cognitive function and state of anxiety. Adults who are more physically active are better able to perform everyday tasks without undue fatigue.
    • Increased amounts of moderate-to-vigorous physical activity are associated with improved cardiorespiratory and muscular fitness, including a healthier body weight and body composition. Adults who are more physically active can more easily carry out daily tasks like climbing stairs, carrying heavy packages, and performing household chores. These benefits are true for men and women of all ages, races, and ethnicities.
    • Adults gain most of these health benefits when they do the equivalent of 150 to 300 minutes (2 1/2 hours to 5 hours) of moderate-intensity aerobic physical activity each week. Adults gain additional and more extensive health benefits with even more physical activity.  Muscle-strengthening activities and exercises also provide health benefits and are an important part of an adult’s overall physical activity plan.
  • Emotional Health
    • Eighty percent of success in any endeavor, including retirement success, is based on mindset, behavior and habits. The other 20 percent is based on goals and following a plan. Once you cultivate a mindset that gives you the ability to appreciate life despite obstacles and challenges, then you will have the freedom to do the things that matter to you most.
    • Emotional health and well-being are the ability of an individual to successfully handle life’s stresses and adapt to change and difficult times. Emotional Health is more than the absence of mental illness and anxiety; it is a condition that allows people to realize their aspirations, satisfy their needs and to cope with the environment in order to live a long, productive, and fruitful life.
    • Well-being, on the other hand, is dependent upon good health, positive social relationships, and availability and access to basic resources (e.g., shelter, income).  Numerous studies have shown in general, life satisfaction is dependent more closely on the availability of basic needs being met (food, shelter, income) as well as access to modern conveniences (e.g., electricity). Pleasant emotions are more closely associated with having supportive relationships.

    The pyramid is a better way to think about retirement resources because households do not need to rely on each part of the retirement pyramid equally to maintain their standard of living in retirement. The composition of the retirement resource pyramid varies to reflect the resources available to an individual household.

    1. Older Americans report they are struggling with increased financial risks, namely inadequate income and unmanageable costs of healthcare, as they try to deal with reductions to their social safety net.
    2. For an increasing number of older Americans, their golden years are fraught with financial, health and emotional risks.
    • An Investment Company Institute (ICI) study recommends that people use a five-tiered system “pyramid” to build their retirement financial security.
    • Home-ownership,
    • Pensions,
    • IRAs, and
    • Other financial assets supplement their
    • Social Security benefits.
    • This model should carry them through retirement.  Social Security is still the foundation of the pyramid plan, but it has become an increasingly smaller portion for many retirees.

    Social Security provides resources to nearly all retirees, but provides a higher replacement rate to retirees with low lifetime earnings. Because Social Security benefits typically replace a smaller share of earnings for higher-income households, these households rely more on other retirement resources, such as employer-provided retirement benefits, such as pensions and IRAs, and non qualified brokerage accounts.

    Retirement planning, exploring the seriousness of an unhappy retirement through data on critical topics like depression, cognitive decline and even mortality.  The common factor in all of these studies was inactivity, the opposite of adventure, the opposite of social supports, the opposite of caring for you physical health.  In short, if you can stave off inertia, which leads to withdrawal from life, you can reduce the likelihood of an unhappy retirement.

    Reap what you sow

    “Your life mirrors what you put into it or withhold from it. When you are lazy, it is lazy. When you hold back, it holds back. When you hesitate, it stands there staring, hands in its pockets. But when you commit, it comes on like blazes.” Ted Orland

    What a person sows in their early ages as teens, twenties and early thirties, they tend to reap in their later stages of life in their forties, fifties, sixties and beyond.  We are all an accumulation of past decisions and behaviors, of the system or habits that have directed our lives.

    Americans must embrace the notion that it is never too late to change and improve the trajectory and destination of one’s overall retirement health outcome.  Which reminds me of a favorite proverb:

    “Best time to plant a tree was twenty years ago.  The second best time is today”. Chinese Proverb

    What this Proverb confirms is that starting early is important to living a life of contentment and fulfillment in retirement. However, if we have missed the best opportunity or season in our life to plan for financial security, take care of our health and nurture our emotional wellbeing for retirement, it’s never too late to start saving, since…the second best opportunity is today.

    Retirees are living longer than ever before. Nowadays, the age of sixty is the new thirty-five for many people. Besides living longer, studies also reveal that:

    1. Americans values have changed and they seem to desire freedom over money in retirement.
    2. There are many challenges and threats that must be understood and successfully navigated to achieve the dream retirement.
    3. It is imperative to make sure you don’t run out of money when you’re living on a fixed income as a retiree.

    Success are Financial Health, Physical Health and Emotional Health. All three areas are vitally important. This future guide will provide insights to achieving a better life in retirement, in each of three areas — financially,  physically and emotionally.

    References:

    1. https://www.tiaa.org/public/pdf/3_November_Transitioners_Survey-Executive_Summary_11-12-14_KRCedits.pdf
    2. http://icief.org/blog/19_blog_investing1.html
    3. https://transamericacenter.org/retirement-research/retiree-survey

    7 Investing Principles

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    The fundamentals you need for investing success.  Charles Schwab & Co., Inc

    1. Establish a financial plan based on your goals

    • Be realistic about your goals
    • Review your plan at least annually
    • Make changes as your life circumstances change

    Successful planning can help propel your net worth. Committing to a plan can put you on the path to building wealth. Investors who make the effort to plan for the future are more likely to take the steps necessary to achieve their financial goals.

    A financial plan can help you navigate major life events, like buying a new house.

    2. Start saving and investing today

    • Maximize what you can afford to invest
    • Time in the market is key
    • Don’t try to time the markets—it’s nearly impossible.

    It pays to invest early.  Maria and Ana each invested $3,000 every year on January 1 for 10 years—regardless of whether the market was up or down. But Maria started 20 years ago, whereas Ana started only 10 years ago. So although they each invested a total of $30,000, by 2020 Maria had about $66,000 more because she was in the market longer.

    Don’t try to predict market highs and lows. 2020 was a very volatile year for investing, so many investors were tempted to get out of the market—but investors withdrew at their peril. For example, if you had invested $100,000 on January 1, 2020 but missed the top 10 trading days, you would have had $51,256 less by the end of the year than if you’d stayed invested the whole time.

    3. Build a diversified portfolio based on your tolerance for risk

    • Know your comfort level with temporary losses
    • Understand that asset classes behave differently
    • Don’t chase past performance

    Colorful quilt chart showing why diversification makes long-term sense. The chart shows that it’s nearly impossible to predict which asset classes will perform best in any given year.

    Asset classes perform differently. $100,000 invested at the beginning of 2000 would have had a volatile journey to nearly $425,000 by the end of 2020 if invested in U.S. stocks. If invested in cash investments or bonds, the ending amount would be lower, but the path would have been smoother. Investing in a moderate allocation portfolio would have captured some of the growth of stocks with lower volatility over the long term.

    4. Minimize fees and taxes; eliminate debt

    • Markets are uncertain; fees are certain
    • Pay attention to net returns
    • Minimize taxes to maximize returns
    • Manage  and reduce debt

    Fees can eat away at your returns. $3,000 is invested in a hypothetical portfolio that tracks the S&P 500 Index every year for 10 years, then nothing is invested for the next 10 years. Over 20 years, lowering fees by three-quarters of a percentage point would save roughly $13,000.

    5. Build in protection against significant losses

    • Modest temporary losses are okay, but recovery from significant losses can take years
    • Use cash investments and bonds for diversification
    • Consider options as a hedge against market declines—certain options strategies can be designed to help you offset losses

    Diversify to manage risk. Investing too much in any single sector or asset class can result in major losses when markets are volatile.

    6. Rebalance your portfolio regularly

    • Be disciplined about your tolerance for risk
    • Stay engaged with your investments
    • Understand that asset classes behave differently

    Regular rebalancing helps keep your portfolio aligned with your risk tolerance. A portfolio began with a 50/50 allocation to stocks and bonds and was never rebalanced. Over the next 10 years, the portfolio drifted to an allocation that was 71% stocks and only 29% bonds—leaving it positioned for larger losses when the COVID-19 crash hit in early 2020 than it would have experienced if it had been rebalanced regularly.

    7. Ignore the noise

    • Press makes noise to sell advertising
    • Markets fluctuate
    • Stay focused on your plan

    Progress toward your goal is more important than short-term performance. Over 20 years, markets went up and down—but a long-term investor who stuck to her plan would have been rewarded.

    References:

    1. https://www.schwab.com/investing-principles

    Closing the Black Wealth Gap

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    Black families have one-eighth the wealth of white families as a result of economic discrimination and institutionalized racism.

    This year marks the 100th anniversary of the Tulsa Race Massacres. Over two days, a white mob in the city’s Black district of Greenwood killed an estimated 300 Black Americans and left nearly 10,000 destitute and homeless. The Greenwood area was known as Black Wall Street, an epicenter of Black business and culture.

    The Tulsa Race Massacres is just one many thousands of violent and economic incidents throughout American history that created the wealth gap. As such, the Black wealth gap was created through centuries of institutional racism and economic discrimination that limited opportunities for African-Americans.

    Wealth was taken from these communities before it had the opportunity to grow. This history matters for contemporary inequality in part because its legacy is passed down generation-to-generation through unequal monetary inheritances which make up a great deal of current wealth.

    The racial wealth gap is a chasm with Black families owning one-eighth the wealth of white families. According to the Survey of Consumer Finances, in 2019, the median net worth of Black households was $24,000 as opposed to $189,000 for white households. This shortfall in financial wealth creates a cascade of inequalities in education, homeownership, and simply saving for emergencies.

    Historically, Blacks were limited to certain neighborhoods and had more trouble borrowing to buy a home than white home buyers. Additionally, Black workers don’t advance to the top positions in companies at a proportional rate as other groups.

    Moreover, African American families have had fewer opportunities to build generational wealth through home ownership, investments and inheritance. In this century, many Black families were stripped of their wealth and financial security by by both public and private institutionalized racism whether called Jim Crow or redline policies.

    There are other factors: Many African-Americans, particularly older ones, are too conservative as investors. Only 34% of Black families own stocks, while more than half of white families do, according to a Federal Reserve. It is important to help African American investors get more comfortable with owning risk assets such as equity stocks, ETF and mutual funds that build wealth over the long term.

    Do not seek shortcuts to build wealth

    You must build wealth over time. If you’re saving 15% or 20% of your income over 30 years, there’s a good chance you will be wealthy. These methods truly work whether you’re making $50,000 or making $500,000 a year.

    ‘We just had an 11-year bull market. If you didn’t take the appropriate amount of risk, you’re significantly behind,” says Malik Lee, an Atlanta financial advisor whose clientele is more than 90% African-American.

    American Dream for Black families

    The heart of the American Dream for Black families is financial wellness, independence and freedom. There are many ways to express the American Dream, including owning their home, not living paycheck to paycheck, and being able to travel. Today, 69% of African American families are confident the American Dream is still attainable, according to MassMutual’s ‘State of the American Family’ survey.

    Financial wellness for most families is the heart of the American Dream. American families tend to view financial wellness in terms of five common financial priorities:

    • Having an emergency fund
    • Feeling confident in both short-term and long-term financial decision making
    • Not carrying a lot of debt
    • Being financially prepared for the unexpected
    • Not living paycheck to paycheck

    Black families are taking steps to secure their financial future and dreams, but more needs to be done to keep the American Dream alive. The top financial regret across all consumer groups surveyed is “not starting early enough.”

    References:

    1. https://www.barrons.com/articles/this-advisor-wants-to-close-the-black-wealth-gap-accepting-risk-is-key-51625077456
    2. https://www.federalreserve.gov/econres/scf/dataviz/scf/chart/#series:Net_Worth;demographic:racecl4;population:1,2,3,4;units:median;range:1989,2019
    3. https://www.brookings.edu/blog/up-front/2020/02/27/examining-the-black-white-wealth-gap/
    4. https://www.massmutual.com/static/path/media/files/mc1133aa_09248mr-final.pdf
    5. https://www.forbes.com/sites/brianthompson1/2021/06/17/the-key-to-closing-the-racial-wealth-gap-black-entrepreneurship/

    A Wealth of Wisdom

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    “By periodically investing in an index fund, the know-nothing investor can actually out-perform most investment professionals.” Warren Buffet

    Warren E. Buffett, Chairman and CEO of Berkshire Hathaway Inc., and Charlie T. Munger, Vice Chairman of Berkshire Hathaway Inc., provide “A Wealth of Wisdom” in this CNBC video:

    https://youtu.be/rQJWHocG-50

    Berkshire owns American-based property, plant and equipment – the sort of assets that make up the “business infrastructure” of the U.S. – with a GAAP valuation exceeding the amount owned by any other U.S. company. Berkshire’s depreciated cost of these domestic “fixed assets” is $154 billion.

     

    References:

    1. https://berkshirehathaway.com/2020ar/2020ar.pdf

    Health, Financial and Emotional Well-Being

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    “We don’t see the world as it is, we see it as we are.” Anaïs Nin

    Recent survey shows Americans are the unhappiest they have been in 50 years. Pandemic and health concerns, social unrest and economic distress have left Americans feeling tired, and living with a constant state of “brain fog” which are just a few symptoms of stress, anxiety, lack of sleep, and poor overall mental health.

    People will exercise to help their bodies become fit, but when it comes to mental health, most people do nothing. Let’s be frank, the coronavirus has changed many Americans emotional, financial, and physical health circumstances dramatically and quickly. It’s important to take a holistic approach to your health, financial and emotional well-being. We know that planning for your future is about so much more than your finances – you and your family’s physical and emotional wellness are also a priority.

    Time and time again, research has shown that “money cannot buy happiness” and that not only do you need a finite amount of money to be happy, but that prioritizing things like expressing gratitude, friendships, hobbies and family may actually lead to long-term well-being.

    Keep physical, emotional and financial health a priority and in the center of your thoughts and daily life.

    Overall emotional, physical and financial well-being are what your attempting to holistically achieve. It helps you feel more secure and less stressed in all areas. Sometimes the best thing you can do for your health – and your long-term financial security – is to tune it out the constant negative news. Here are some ways to tune out negativity during uncertain times.

    1. Put down the smart phone and turn off the news. Allow yourself just one hour of news time each day, preferably in the middle of the day. This ensures you don’t start or end your day anxious. It’s important to stay informed, but once a day should suffice.
    2. Stay positive and focus on an attitude of gratitude. List the top five (or more) things you’re grateful for each day. Your list may be the same from day to day or it could change based on the past day’s experience. It could be as simple as being thankful for the roof over your head or a smile from a stranger as you walk your neighborhood.
    3. Get physical and eat healthy. You’ve probably heard it before, and that’s because it’s true – physical activity is just as healthy for your mind as it is for your body. This doesn’t mean you have to participate in high intensity interval training. Start small. Simply going for a walk or doing basic stretches can help keep your mind and body at their best. Additionally, eliminate process foods, refined sugars and saturated fats from your diet. Eat more plant based foods and whole grains.
    4. Connect with family and friends. Having a strong support system is important during good times, but even more so during challenging ones. Reach out to someone you haven’t talked to in a while to see how they’re doing. Send a text or card or give them a call. If your family is spread out across the country, use digital apps to connect and play games.
    5. Stick to a schedule. When you’re stressed, it often takes a toll on your sleep schedule. Keeping a consistent routine can help. Get up and go to bed at the same times each day, even on weekends. Know your stress triggers and pay attention when you notice them flaring up.

    While it’s important to be aware of what’s going on in the world, focusing on the bad news won’t help your financial strategy, your emotional well-being or your physical health. Remember, you’re in it for the long term.

    During the current coronavirus pandemic, instead of ‘social distancing,’ our focus should be on ‘physical distancing’ and ‘social connection.'”

    Maintain mental health and emotional well-being

    Focus on the now. Worrying about the past or the future isn’t productive. When you start chastising yourself for past mistakes, or seeing disaster around every corner, you’re only creating more stress and anxiety in your life.

    It’s important to stop and to take a breath and ask yourself what you can do right now to succeed. Find something to distract you from destructive thoughts and reset your attitude.

    Achieving a healthy frame of mind can seem more challenging than in years past.

    Having a daily moment of intentional quiet can go a long way toward a better outlook.

    Try this five-minute meditation routine that combines both yoga and balance to steady the mind, utilize the breath to become more mindful, and reduce stress.

    Mindfulness meditation does, in fact, decreases anxiety and improves self-esteem, studies have shown.

    As you move through Mindfulness meditation, focus on deep breathing. Inhale and exhale through the nose, and start by filling up your lungs with air. Then feel the air rise up into the chest. As you exhale, empty the chest first and then feel the stomach deflate like a balloon. This slow, conscious and specific breath pattern aids in focusing the mind to the present moment.

    Finally, if your mind wanders easily during this sequence, you can focus on a one-word mantra to recite silently to yourself. Choosing a word like “serenity” or “peace” or “confidence” and syncing your movement with your breath can help transport you to a different world that quiets distractions from the past and future.

    References:

    1. https://www.synchronybank.com/blog/millie/money-and-happiness/https://www.synchronybank.com/blog/millie/money-and-happiness/
    2. https://apple.news/Am_LnLhs1Q22oltXhOLcRLg
    1. https://www.edwardjones.com/market-news-guidance/client-perspective/your-health-your-finances.html
    2. https://www.edwardjones.com/market-news-guidance/guidance/tune-out-stressful-times.html

    Saving for the Future

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    “Saving is about putting aside money for future use. Investing is about putting your money to work for you with the goal of growing it over time.”

    Saving money isn’t the easiest thing to do, especially if you’re one of the many of Americans living paycheck to paycheck. But saving for the future remains vitally important — not just to enable you to make large discretionary purchases such as a big screen television or a luxury vacation, but for emergencies, retirement, or buying a home.

    • Saving involves putting aside money for future use.
    • Investing involves putting your money to work for you with the goal of growing it over the long term.
    • To build your financial future, you need to do both, save for the future and invest for the long term.

    Unfortunately, many of Americans aren’t where they should be financially. A 2019 Charles Schwab Modern Wealth survey found that about 59 percent of American adults are living paycheck to paycheck.

    If you’re having a hard enough time paying the bills and putting food on the table without racking up debt, saving for the future is probably the last thing on your mind. Only 38% of people have an emergency fund, according to Charles Schwab, and one in five Americans don’t have a dime saved for retirement, according to a survey from Northwestern Mutual.

    But, being a good saver certainly puts you ahead of the game. And having solid savings’ habits are an important step toward financial security. But saving by itself is not enough. While saving is about accumulating money for the future, investing is about growing your money over the long term. And that can make a huge difference in your financial future.

    Begin your savings journey today for a better tomorrow

    The hardest part about saving is getting started.

    Basically, saving is putting aside money for future use. Think of saving as paying yourself first or an essential expense. From your earnings, you should take out what you intend to save for taxes first, if you’re a freelancer, and then take out 10% to 15% for savings. In other words, before you spend your first dollar on monthly expenses, first you should set aside 10% to 15% of income for your savings.

    You can think of it as money you have left over once you’ve covered your essential expenses. Essentially, you should make saving a line item on your monthly budget, so that saving becomes one of your essentials. And, having money tucked away will help you pay for the things you want above and beyond your daily expenses, and also cover you in case of emergency.

    Having more month left then money

    A savings account is an interest-bearing account that helps you save money and earn monthly interest. Separate from your checking account and long-term investments, savings accounts can grow with regular deposits and compounding interest that you can use for your future, large purchases or emergency funds.

    Having a sizeable savings account can help you stay out of debt and give you the cushion you need should you face an unexpected illness, job loss or expense. Plus, when you want something special like a week’s vacation, you’ve got the money.

    Building a “cash cushion” is an important step towards financial freedom. In a cash cushion, or emergency fund, you want enough cash on hand to cover three to six months’ essential expenses.

    Additionally, a well-rounded savings strategy should focus on both short-term and long-term goals, says personal financial expert, Carrie Schwab-Pomerantz CFP® major moves in order to save money — Those extra dollars are being used in two ways: to pay off debt (credit cards and student loans) and to save for a new home.

    Most people keep their savings in a bank account. The upside is that it’s easily accessible and safe; the downside is that it won’t earn very much. Money in savings accounts is not likely to keep pace with inflation. Which means the money you have saved today can actually lose buying power over time. That’s why just saving isn’t enough.

    Investing creates the action

    Investing, on the other hand, is about putting your money to work for you with the goal of growing it over time. Here’s an example. If you put $3,000 each year in a savings account and earn 1 percent, at the end of 20 years you’d have about $67,000. If you invested that same amount of money and got an average 6 percent return over the same time period, you’d have nearly $117,000. The sooner you start saving the less you may need to save because your money gets to work that much sooner. The more you save, the more you have to invest—and the more those returns can add up.

    Nobody knows, especially the talking heads in the financial entertainment media, if the stock market is going up or down tomorrow, much less six months or 12 months from now. Moreover, it should not matter if the market meltdowns one day and melt-up the next. When it goes down, you should invest. And, when it goes up, you should invest. In other words, you must consistently invest in the market. Do not let volatility and market moving news faze you, or cause a bout of investing paralysis.

    Investing involves risk

    Of course, investing involves risk. And the stock market particularly will have its ups and downs. But there are ‘tried and true’ ways to mitigate that risk. The key to mitigating risk is to diversify by choosing a broad range of investments in stocks, bonds, and cash based assets that aligns with your financial plan asset allocation, risk tolerance and time horizon and never put all your money in one particular stock or asset.

    One other important factor is time. To protect yourself against market downturns, a long-term approach is essential. At your age, you have time to keep your money in the market and ride out the inevitable market lows. The trick is to stick with it through those lows, keeping your focus on the potential for long-term gains.

    Beginning with your next paycheck, commit to paying yourself first. Develop a budget, evaluate your spending needs, and understand your long-term goals.

    References:

    1. www.schwab.com/resource-center/insights/content/youre-saving-should-you-be-investing-too
    1. https://www.bustle.com/life/3-women-share-how-theyre-saving-for-their-big-life-goals
    2. https://content.schwab.com/web/retail/public/about-schwab/Charles-Schwab-2019-Modern-Wealth-Survey-findings-0519-9JBP.pdf
    3. https://news.northwesternmutual.com/2018-05-08-1-In-3-Americans-Have-Less-Than-5-000-In-Retirement-Savings

    Time in the Market

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    Time in the market, not timing the market

    Investors have a bad tendency to do the wrong thing at the wrong time with regards to investing decisions. They want to panic sell when the market is getting hit really bad (sell low) or they fear that they’re missing out on the market rally and buy when markets start to go up (buy high). Successful investors know that it is impossible to predict a stock’s outcome. Any stock can result in a potential profit or loss, but the hope of “hitting it big” in the markets has led plenty of investors to try and time the market. Instead, it’s importance of investors to have a clear idea of their goals, as well as the time frame for their financial plan.

     Focus on time in the market – not trying to time the market

    Timing the market involves trying to predict the future price trend of a stock and the market. As a result, there is a high probability of failure with this strategy, because no consistently predict the future of the markets. Although it sounds ideal to buy stock at a low price and sell it shortly after at a higher price for a profit, it’s often too good to be true. There are always people who get lucky, but that’s exactly what it is: luck. Essentially, someone may have luck with one stock, but lose it all on the next trade.

    “The idea that a bell rings to signal when investors should get into or out of the market is simply not credible. After nearly 50 years in this business, I do not know of anybody who has done it successfully and consistently. I don’t even know anybody who knows anybody who has done it successfully and consistently.” John Bogle

    It can be tempting to try to sell out of stocks to avoid downturns, but it’s nearly impossible to time it right.  If you sell and are still on the sidelines during a recovery, it can be difficult to catch up. Missing even a few of the best days in the market can significantly undermine your performance.

    The most important course of action for investors is patience and maintaining a long-term mindset. History has repeatedly demonstrated the value for investor to stay invested in the market, even during a market sell off. Going back to 1930, if you had stayed exposed to the equity market, your returns would have been around 15,000%.

    If you missed the top 10 performing days of each decade since 1930 because of mistiming the market over that period, your returns would be a mere 91%. And missing even a few days as the market rebounds can significantly diminish your returns, research from JP Morgan shows.

    Keep perspective: Downturns are normal and typically short

    Market downturns may be unsettling, but history shows stocks have recovered and delivered long-term gains. Over the past 35 years, the stock market has fallen 14% on average from high to low each year, but still managed gains in 80% of calendar years, according to Fidelity.

    Investors must ignore the urge to panic and sell off their investments. Perspective is what is important during days like these and long term perspective is key. No one can consistently time the market and one of the most important factors in building wealth is time in the market.

    Essentially, you don’t want to sell off your stock positions when the market has a bad day. Instead, ride it out. Research indicates that over the long-term, you reap the rewards of the power of compounding by staying invested in the market.

    Rather than give in to emotion, stay the course. The wealthy are in the market for the long term. The headlines are scary, but there’s always going to be a new threat to investors, whether it’s election fears or whatever the Fed will do next.

    References:

    1. https://www.cnbc.com/2020/03/31/bofa-keith-banks-warns-investors-against-trying-to-time-the-market.html
    2. https://www.prnewswire.com/news-releases/the-importance-of-time-in-the-market-vs-timing-the-market-301113822.html
    3.  The hypothetical example assumes an investment that tracks the returns of the S&P 500® Index and includes dividend reinvestment but does not reflect the impact of taxes, which would lower these figures. There is volatility in the market, and a sale at any point in time could result in a gain or loss. Your own investing experience will differ, including the possibility of loss. You cannot invest directly in an index. The S&P 500® Index, a market capitalization–weighted index of common stocks, is a registered trademark of The McGraw-Hill Companies, Inc., and has been licensed for use by Fidelity Distributors Corporation.
    4. https://www.fidelity.com/viewpoints/investing-ideas/six-tips

    Financial Security Begins Within

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    Mindset matters.

    With the right mindset and hard work, achieving your financial goals are possible. However, you have to start by understanding and eliminating your negative thoughts. If you believe there’s no point trying to achieve your financial goals and to go for the life you want, then you’ll never achieve them. Therefore, you might be tempted to make choices that make your financial position worse.

    Achieving a positive mindset can be difficult, but there are some proven techniques that’ll help you:

    • Take care of yourself physically and emotionally
    • Know where you stand financially
    • Set achievable financial goals
    • Make small changes
    • Try to see the positive and maintain a positive attitude

    Your financial security and well-being are determined by your mindset. Financial security gives you the time and opportunity to do the things that might make you happy. Taking control of your financial life and changing the way you think can make a huge difference.

    With a positive and determined mindset, you can set goals and make plans to achieve them. You’ll remain focused on your goals and create the extra money to save and invest toward achieving those goals.

    For example, if you want to retire early, the way to do so is to make more money, spend less, and invest more. You’ll need to resist temptation to spend what you have or to not spend what you haven’t got.

    Even with a positive mindset, you won’t achieve your goals overnight. But it’ll put you on the right track to take more control over your finances. 

    There are three ways to take control and have more money to invest and accumulate wealth.

    • First is to make more money.
    • Second is to spend less.
    • Third is to invest for the long term and grow your money.

    You’ll need to combine financial literacy with a plan and self-control. And when life throws you a financial curve ball, you’ll need to stay positive – remaining focused on your goals and not make excuses.

    Financial security

    Safety and security are incredibly important human needs. And, people must feel secure before they’re able to address their “higher-level” needs of belonging, esteem, and self-actualization according to Maslow’s Hierarchy of Needs.

    Security expert Bruce Schneier states, “Security is both a feeling and a reality.” But feeling and reality can be quite different. “The reality of security is mathematical,” says Schneier. It’s all about the probability of risks and the effectiveness of corresponding countermeasures.

    Most of people try to achieve financial security mathematically. We consider all the potential financial risks we face – unemployment, illness, unexpected costs, etc. – and try to determine reasonable countermeasures for each of those risks. You might not consider yourself financially secure until you have adequate emergency savings to last being unemployed for 6 months.

    Security is a feeling on your psychological reactions to both risks and efforts to reduce risks. You can create a reality of security and still not feel secure. Similarly, you can feel secure and yet not really be secure in your current position.

    When it comes to finances, you can stable employment, be in great health, and have money saved up – and still not feel secure with your money.

    Financial goals are great, but if your fears and worries about money are holding you back, there’s a lot to be said for simply trusting in yourself and your abilities.

    Build your savings. Find the ideal job. But also give yourself the proper credit for being able to make due when the unexpected happens.

    Having a positive financial mindset is the foundation for taking control of your money and becoming more financially stable. Setting yourself goals, addressing and eliminating bad habits, and learning how to get a handle on your thought processes will help you to manage your finances and put you in a better position with all aspects of your life. 

    References:

    1. https://www.moneymanagement.org/blog/what-does-it-mean-to-be-financially-secure
    2. https://www.dollarbreak.com/wealth-creation-mindset/
    3. https://www.credit.com/blog/why-financial-productivity-begins-with-w-positive-mindset/