Tag Archives: Financial Literacy

3 tips to avoid locking in losses | Mass Mutual

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By Allen Wastler
Allen Wastler is a former financial journalist with over 30-years of experience, including time at CNBC, CNN, and Knight-Ridder Newspapers.
Posted on Apr 13, 2020

After a huge market downturn and a major loss of value in your investment portfolio, the temptation to do something — anything — may be hard to resist.

But in many ways, the best action may be to take no action. Why? An investment plan is a long-term project and making changes to it based on short-term considerations is often ill-advised. That’s why financial professionals encourage people to stay calm during market sell-offs and think about long-term objectives.

“It is a tough and scary time, and not locking in losses by panic selling is critical,” said J. Todd Gentry, a financial professional with Synergy Wealth Solutions in Chesterfield, Missouri.

But even if you did resist the initial impulse to flee during a market retreat, you still need to keep some discipline about your portfolio as you wait for a market recovery. Here are some traps to avoid….Read more: Avoid Locking in Losses

Markets, as a whole, have historically bounced back from downturns with time, as the following chart illustrates.

Source: Bloomberg. The S&P 500 is an equity index that consists of the stocks of 500 large U.S. companies measured by market capitalization. The results here include the effect of reinvested dividends. You cannot invest directly in an index.

Getting Better at Something

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To Get Better at Something, Ask Yourself These Two Questions

Anyone can get better and improve at anything, including personal finance, with the right mindset and deliberate action. That includes getting better at saving by paying yourself first, investing for the long-term and accumulating wealth.

But in order to get better, individuals need to honestly answer “yes” to two very basic questions. Those two questions are:

  1. Do you want to do or get better?
  2. Are you willing to feel the discomfort of putting in more effort and trying new things that will feel weird and different and won’t work right away? To fail?

If the answer is “no” to either question, then it would be foolish for an individual to believe they can improve and get better by doing things the way they’ve always done it or thinking the same way they’ve always thought. Additionally, it would prove a waste of time and effort for any coach to undertake a client or player to improve their skills who do not answer yes to both questions.

Essentially, getting better, especially at saving and investing, is about wanting to get better by embracing a positive mindset and is about having a willingness to experience discomfort. It is important to know that you can become better at anything if your willing to do what is necessary.

But you will not get better if 1) you don’t believe you can and 2) you aren’t willing to accept the discomfort of doing things differently and do whatever it takes to get better.

Learning anything new means moments of feeling uncomfortable. You will need to act in ways that are unfamiliar and take risks that are new. Try things that, in many cases, will be initially frustrating because they won’t work the first time.

You are guaranteed to feel awkward and possibly experience failure for the first time. You will make mistakes. You may be embarrassed or even feel shame, especially if you are accustomed to succeeding.

The key take-away is that answering these two questions yes are a prerequisite to growth and achieving financial success.

  1. https://hbrascend.org/topics/if-you-want-to-get-better-at-something-ask-yourself-these-two-questions/

Bear Market Strategy

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Billionaire investor Warren Buffett, founder of Berkshire Hathaway, provided sage advice for sustaining wealth and sanity during a bear market in his 2016 letter to shareholders by conveying to “stay in the market and buy at a bargain”. Furthermore, Buffett wrote:

“During such scary periods, you should never forget two things: First, widespread fear is your friend as an investor, because it serves up bargain purchases. Second, personal fear is your enemy.” Warren Buffett

In other words, investors with a long-term perspective, a declining market can be a buying opportunity. Consider buying ownership shares of businesses with superior balance sheets and robust free cash flow when the market has them on sale.

Bear Markets

A bear market is Wall Street’s term for an index like the S&P 500, the Dow Jones industrials, or even an individual stock, that has fallen 20 percent or more from a from the peak. On average, bear markets last 14 months in the period since World War II. The S&P 500 index has fallen an average of 33 percent during bear markets in that time. The biggest decline since 1945 occurred in the 2007-2009 bear market.

One thing every investor needs to know about bear markets is that they always seem like the world is ending when you are in the middle of one. Time and time again, when recessions and bear markets occurred, the same thing always happened, they end.

Additionally, the U.S. has gone through many challenges in the past such as the September 11, 2001 (9/11) attack, and we will get through this current pandemic virus challenge as well. By keeping a positive outlook and focusing on the things you can control, we will get through this together.

Stocks Help Build Wealth

When you are looking to build wealth over your lifetime, the more time you have to invest in the stock market, the better your chances of building life-changing wealth.

If you set aside money every month and invested those funds into a diversified portfolio over your working career, you would have benefited from stellar returns on your investments in the stock markets during the last 10, 20, 30, 40 and 50 years.

Try investing a fixed dollar amount on a regular basis into equities. This practice will ensure that you are purchasing when markets are going down as well as going up. This practice is known as dollar cost averaging. Dollar cost averaging will ensure that you realize a better average cost over time.

This too shall pass

This period of uncertainty and challenge will soon pass and life will eventually return to normal. Businesses, places of worship and schools will begin to reopen, and governmental restrictions will be lifted. In the meantime, Americans must remain positive during periods of fear and uncertainty, help others where they can and display fortitude during this unusual period. We all must rely on one another, and we will get through this together.

References:

  1. https://www.berkshirehathaway.com/2016ar/2016ar.pdf, pg 6
  2. https://www.marketwatch.com/story/goldman-sachs-analyzed-bear-markets-back-to-1835-and-heres-the-bad-news-and-the-good-about-the-current-slump-2020-03-11
  3. https://www.kiplinger.com/article/retirement/T047-C032-S014-financial-keys-to-help-weather-coronavirus-crisis.html

Financial Goal Setting

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“If you are bored with life, if you don’t get up every morning with a burning desire to do things – you don’t have enough goals.” Lou Holtz

Research shows that our brains are a goal-seeking organism.  Whatever personal or financial goals we give our subconscious mind will allow it to work night and day to achieve them. However, one goal isn’t good enough for our subconscious minds.

Some goals take longer to achieve than others, like buying a house or saving for retirement. If you spend years working toward only one objective, you’re likely to get discouraged when it doesn’t happen right away.

But when you have multiple goals you’d like to achieve, goals that align with your values and beliefs, you have more to strive for, and more opportunities to check those goals off your list. And the accomplishment you feel every time you complete a goal will inspire you to accomplish even more of them

Actions overcomes fear

Jack Canfield, author of Chicken Soup for the Soul™, states categorically that “the biggest reason most people don’t achieve their goals and realize their dreams is that they don’t take action, and the number one reason people don’t take action is fear.”

“There is a one thing that 99 percent of “failures” and “successful” folks have in common — they all hate doing the same things. The difference is successful people do them anyway.” Darren Hardy

People whom achieve their goals versus those whom fail has everything to do with overcoming the paralysis of fear versus taking action. The people who achieve great success in life are the ones who are willing to take consistent action toward realizing their dreams. They consistently push through their fear and take steps to make their goals happen, no matter what others may think or say about it.

Goal achievers make countless small decisions, they plan and they take deliberate actions every single day that keep them on target toward achieving their dreams. Because without deliberate action, your goals simply are not going to be achieved.

No matter how ambitious the goals or how brilliant the plans, if you’re not prepared to take deliberate action to reach them, they’re not really goals at all—they’re just dreams.

Start with goals you can achieve

Every successful investing journey starts with a set of clear goals.

Appropriate financial goals for an investor should be specific, measurable, attainable, reasonable and timed with a deadline (SMART). Successful achievement of goals should not depend upon unrealistic or outsize market returns or upon impractical saving or draconian spending requirements.

Defining goals clearly and being realistic about ways to achieve them can help protect investors from common mistakes that often derail their progress. Here we show that:

  • Recognizing constraints, especially those that involve risk-taking, is essential to developing an investment plan.
  • A basic financial plan will include specific, attainable expectations about action steps and monitoring.
  • Discouraging results often come from not following a financial plan, chasing overall market returns, an unsound investment strategy that can seduce investors who lack well-grounded plans for achieving their goals.
  • Without a plan, investors can be tempted to build a portfolio based on transitory factors such as fund ratings—something that can amount to a “buy high, sell low” strategy.

Life financial goals

Make a list of financial goals you’d like to achieve in your life. Be as specific as possible. Include details such as when they will happen, where they will happen, how much you’ll make, what model you’ll buy, what size it will be, and so on.

Keep your goals somewhere you can review them every morning. Put your goals on a poster or piece of paper where you read each night before you fall asleep.

Keep goals at the top of mind, you’ll be more likely to make them a reality. Reaching your retirement savings goals starts with developing a retirement plan. Fidelity Investments has developed a set of retirement guidelines based on 4 key metrics:

  • Yearly savings rate,
  • Savings factor to help you see where you stand,
  • Income replacement rate, and
  • Potentially sustainable withdrawal rate.

“Unsuccessful people carry their goals around in their head like marbles rattling around in a can, and we say goals that are not in writing are merely fantasies.” Darren Hardy

Writing your goals down is the first step in turning your dreams into a reality. If you keep goals in your head you’re not likely to focus and work on them consistently. Thus, it is important to write down all your goals. Whether it’s short-term or long-term goals, it is essential to list every goal in writing.

Writing it down will have a powerful effect on your subconscious mind to help you visualize and achieve your biggest dreams. Remember, a goal is a dream defined and written down.

Make Goals Real by Writing Them Down

Goals are a very effective way to build your self-belief because properly set goals require you to stretch a little outside of your comfort zone; causing you to expand your comfort zone as you achieve the goal.

With clear and measurable goals, investors can create a realistic plan for achieving their objectives within a certain time frame. Make a list of your short-term and long-term savings goals.

If you write down your goals, you’re more likely to achieve them. Think of them as a road map to where you want to go—and make them practical and attainable. Take a simple approach:

  1. Divide your financial goals into three categories: short term (less than one year); medium term (one to five years) and long term (more than five years).
  2. Attach a dollar amount to each goal. For instance, a short-term goal might be a family vacation. How much will it cost?
  3. The more specific you can be, the more motivated you’ll be to work toward that goal.

Goal Attainment Requires Believing in Yourself

Everything you have in your life is a result of your belief in yourself and the belief that all things are possible. According to Jack Canfield, the four most important steps to learning how to believe in yourself are:

  • Believe it’s possible. Believe that you can do it regardless of what anyone says or where you are in life.
  • Visualize it. Think about exactly what your life would look like if you had already achieved your dream.
  • Act as if. Always act in a way that is consistent with where you want to go.
  • Take action towards your goals. Do not let fear stop you, nothing happens in life until you take action.

Incorporate and practice these four steps.

Mistakes Investors Make

One of the biggest mistakes investors regularly make when goals and a plan are absent is to confuse investing with stock picking. Ask many people how their money is invested and they quickly tell you the latest hot stock they’ve purchased and the investment thesis that explains why they think it’s going to take off.

Saving for retirement and building an emergency fund should be the highest priorities, followed by other long-term financial goals, like college, travel, or a house. You can contribute a small amount to each goal or pick a couple to focus on first. Decide how much you need to save to reach those goals.

Sources:

  1. https://www.jackcanfield.com/about-jack-canfield/
  2. https://www.fidelity.com/viewpoints/retirement/retirement-guidelines

Ditch Debt and Start Saving | Fidelity Investments

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Balancing paying off debt and saving can be tricky. Here’s a step-by-step guide.

BY STAFF WRITER, FIDELITY – 06/28/2019

Key takeaways

  • Save for an emergency—consider saving enough to cover 3 to 6 months of expenses.
  • Consider a health savings account if you’re eligible, and contribute to your workplace retirement plan.
  • Pay down debts with the highest interest rate first.

Student loans, credit card balances, car loans, and mortgages—oh, my. You probably have a variety of debt—most people do. So which should you focus on paying off first? And how can you save at the same time?

Of course, make sure to pay at least the minimum required—and on time—to keep all loans in good status. After all, defaulting on credit cards, car loans, student debt, or home mortgages can destroy your credit rating, and risk bankruptcy.

Before you tackle debt, pay yourself first. Make sure you:

  • Use tax-advantaged accounts like a flexible spending account or a health savings account if you have a high deductible health plan. That lets you pay for medical bills using pre-tax money.
  • Save enough in a workplace retirement savings plan to get the match from your employer—that’s “free money.”
  • Set aside some cash for emergencies.

Assuming you are meeting those primary obligations, here’s a link to a guide to help you pay off debt while saving for emergencies and long-term goals like retirement. It may seem counterintuitive, but before you tackle debt, make sure you have some “just in case” money and save for retirement.

— Read on www.fidelity.com/mymoney/ditch-debt-and-start-saving

Democratic Socialism on the Rise in America

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“The strongest argument for socialism is that it sounds good. The strongest argument against socialism is that it doesn’t work. But those who live by words will always have a soft spot in their hearts for socialism because it sounds so good.” Thomas Sowell

Despite winning the 2020 Nevada Democratic Caucuses by a wide margin, most Americans fail to appreciate that Senator and Presidential candidate Bernie Sanders (I-VT) is not a liberal Democrat or a registered member of the Democratic Party. He is a registered Independent and an unapologetic self-professed Democratic Socialist.

However, as a Senator, he caucuses and aligns himself with the Democrat minority on the floor of the U.S. Senate. And, in the 2020 Presidential primaries, he campaigns and runs as a Democrat in his grassroots attempt to win the party’s nomination.

Additionally, billionaire Democratic Presidential candidate Mike Bloomberg, during a debate stage attack, stated that Senator Bernie Sanders is, “the best known Socialist in America”, and is a multi-millionaire who owns three houses (one in Washington, D.C. and two in Vermont).

According to Roger Altman, Evercore Founder and Senior Chairman, he conveyed on CNBC recently conveyed that under Bernie’s proposed socialist policies:

  1. If you have an employer provided health insurance plan, you’ll lose it.
  2. If you want to decriminalize the southern border, so if individuals are crossing the border illegally, they’ll get the equivalent of a traffic ticket.
  3. If you believe like Bernie that everyone in prison should have the right to vote, then he is your man.
  4. In the important battleground state of Florida, the philosophy of socialism carries very negative connotations and distasteful visceral reminders to many in the Cuban-American, Venezuelan, and Puerto Rican communities within the state.

Only something like ten percent of Americans believe in those Sanders positions. Maybe magic will happen. Record of prediction is unblemished with success.

“Socialism is a philosophy of failure, the creed of ignorance, and the gospel of envy, its inherent virtue is the equal sharing of misery.” Winston Churchill

World history demonstrates that global Democratic Socialists in the Western Hemisphere have often abandoned the “Democratic” part of their byline and replaced it with authoritarian actions like in Venezuela and Nicaragua. Although, this is believed highly unlikely with the many safeguards guaranteed in the U.S. Constitution.

If elected, Americans should not be surprised when a potentially future President Sanders attempts to steer the country down the path of the failed programs and policies common within socialism. But, socialism has been successful in bringing “shared economic misery” to the citizens of countries like Cube, Venezuela and the former Soviet Union and East Germany.

References:

  1. https://www.nytimes.com/interactive/2020/us/elections/bernie-sanders.html
  2. Roger Altman, Evercore Founder and Senior Chairman, CNBC Squawk on the Street

Ideas for Frugal Living | Three Life Lessons | Fidelity

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“The lessons they taught us about money—about not spending more than we have, saving what we can, and splurging occasionally and mindfully”

Three (3) lasting lessons from my frugal parent

Frugal living can help separate the important financial expenses from the not so important. Learn helpful lessons and ideas on frugal living here.

BY JEANNE THOMPSON FROM FIDELITY – 06/07/2019

I’ll never forget my first “real” vacation.

Most of our family vacations were camping trips where we slept together in a tent or a pop-up trailer and my mom cooked for my 4 siblings and me at the campsite. But the summer after fifth grade, my father decided to take me, my mom, and my 2 older sisters with him on a business trip to California.

That trip really stood out. I remember relaxing by the pool in sunny San Diego, sipping Shirley Temples with my sisters. We were fascinated by the elevators in our big hotel and rode them up and down until we were sternly told to stop. Simply put, it was paradise.

This trip was an unusual extravagance for my parents, too. You can’t raise 5 children on a limited income without being very frugal. And my parents, who were both first-generation Americans, were used to getting by on very little. Excess was not an option. At Christmas, my mom would save nice wrapping paper and reuse it; boxes were also recycled for many holidays to come. Folding a little piece of wrapping paper in half, writing a note inside, and taping it to a gift worked just as well as buying a greeting card. She reused everything from tin foil to plastic baggies. Her approach to money and possessions was pretty consistent: “Make do with what you have.”

These habits and quirks used to make us laugh. Today, I appreciate the example my parents set. I resist spending money on big-ticket items. My car, for instance, is a 2010 model and has 150,000 miles on it. And most of the furniture in our house is at least a decade old (if not a few decades). I’m not about spending a lot on furniture —with a teenage son, our couch becomes a dumping ground for lacrosse equipment more often than not. I even save nice wrapping paper from time to time, much to the amusement of my kids. And because of the warm memories from that long-ago California trip, I’d much rather spend money on experiences my family can enjoy, like vacations, than on stuff.

Maybe it’s wishful thinking, but I like to believe that my parents’ mindful approach to spending lives on in my kids, who seem to appreciate the value of a dollar on some days at least. My college-age daughter takes pride in her 5-star rating on a ride-hailing app because it entitles her to discounts and coupons. My son, a high school senior, is already savvy about mutual funds and 401(k)s—thanks to conversations he tunes into at home and an intro to business class he takes at school. Both kids know that they need to budget for indulgences beyond the basics and that they’ll have to pay for them with money earned from their jobs.

Both of my parents are gone now, but their frugal approach to working diligently and saving money allowed them to raise kids. And not only that: They put enough away to build a nest egg that funded some retirement travel to Europe, Russia, and Alaska in their golden years. By then my father came around to reasoning: “You can’t take it with you.”

They still managed to leave something behind. The lessons they taught us about money—about not spending more than we have, saving what we can, and splurging occasionally and mindfully—are with all of us. And those occasional splurges they encouraged us to enjoy are as sweet as those long-ago Shirley Temples under the warm California sun.

— Read on www.fidelity.com/mymoney/frugal-living-ideas-and-life-lessons

AT&T CEO Interview on CNBC Squawk Box

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Friday morning from the AT&T Pebble Beach National Pro-Am, CNBC Squawk Box co-anchors Joe Kernen and Becky Quick interviewed AT&T CEO and Chairman, Randall Stephenson.

In this far ranging early morning interview, Randall discussed the current and future outlook of the large cap communications and entertainment company he leads.  Effectively, he stated that he was very bullish on the projected economic output in 2020 for the company.

He stressed that the top priority for the AT&T was to pay down the massive debt incurred from its acquisition of Time Warner.  He commented that the goal was to bring down debt to a ratio of 2.5X debt-to-EBITDA and this past year, they successfully paid off $30 billion in debt.  Additionally, Randall shared that AT&T realized a 45% total shareholder return in calendar year 2019.

Media Business

Overall, he commented that AT&T’s media business, renamed Warner Entertainment, is doing well.  In the short term, they expect to roll-out HBO Max in May 2020 which will feature Warner Bros. extensive inventory of content, including the TV series “Friends” and “The Big Bang Theory”. and content from Turner’s networks.

Currently, premium HBO streaming has approximately 30 million subscribers.  Those subscribers will automatically convert to HBO Max once the it comes on-line. He expects that HBO Max will grow to 50 million subscribers.

Financials

Activist shareholder, Elliot Management, bought a large stake in AT&T back in September 2019 and criticized the management and board leadership, and the direction of the company.  Elliot Management in a letter wrote that AT&T’s stock could potentially surge to above $60 a share by 2021 if the company “increased strategic focus, improved operational efficiency” and “enhanced leadership and oversight.”

Furthermore, Elliot Management questioned the company’s succession plan of tagging Warner Media’s CEO and AT&T COO, John Stankey, as CEO Randall Stephenson’s heir apparent.  They expressed concerns with Stankey’s decision making. his lack of experience operating and communications and entertainment company, and his ability to manage the conglomerate.

Bottom line is AT&T’s financial future appears highly dependent on the success of HBO Max growing paid subscriptions, management paying down the high level of corporate debt on its balance sheet, and developing a coherent strategy that can effectively discover and employ the synergies of AT&T’s diverse assets and enterprises.

Sources:  https://www.cnbc.com/2020/02/07/att-ceo-randall-stephenson-on-promise-to-remain-ceo-through-2020.html?&qsearchterm=randall%20stephenson

7 ways to build wealth today, according to financial planners – Business Insider

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“The very first step to building wealth is to spend less than you make.” Brian Koslow

  • Wealth building doesn’t happen overnight, but financial planners say a few steps can put you on the right path.
  • Start by tracking your cash flow, calculating your net worth, eliminating bad debt, and, making saving and investing a habit.
  • Then, they suggest using high-yield savings accounts or a 401(k) with an employer match to keep those savings growing.

The key to accumulating wealth isn’t always simply to make more money. Sometimes, it’s about using what money you have more effectively or using what you financially control to your advantage. Maybe it’s as simple as moving your savings into an account with higher interest rates, spending less than you earn, or taking advantage of an employer’s 401(k) match.

Most importantly, experts say one of the most important elements to building wealth is to believe that it is possible and simply give it time. The best ways to start building wealth today, according to financial planners, are straightforward and simple.

The seven (7) ways, according to Business Insider, to build wealth are:

  1. Figure out your net worth
  2. Start saving automatically
  3. Take advantage of your employer’s 401(k) program
  4. Look at your cash flow
  5. Don’t just let money sit — keep it growing
  6. Make your savings, investing and accumulating wealth a priority
  7. Be patient and think long term

Financial Milestones

One rule of thumb for building and monitoring wealth says that by the time you turn 30, you should have the equivalent of your annual salary saved (that’s all savings, not just retirement assets); double your salary saved by age 35; three times the amount by age 40, and so on. If you fall short, don’t fret, it’s never too late to increase your savings rate and it never hurts to aim high—

Take full advantage of your employer match, if one exist. For example, with a $50,000 salary from an employer matching up to 6% of your contributions, you’d be turning down $3,000 each year. Most people’s pay consists of a package that includes salary and employer benefits. You wouldn’t accept a $3,000 pay cut without a fight; by letting your employer match go to waste is kind of the same thing.

Build an Emergency Fund

Each year brings economic uncertainty to many and, even for the financially secure, life happens in the form of medical bills, domestic catastrophes and other unplanned expenses. As a general rule, it’s good to maintain an emergency fund that would cover three to six months of living expenses in case you find yourself unemployed. And, once you’ve calculated how much you should save, set aside a certain amount from each paycheck to set you on your way.

Retire Bad Debts

It imperative to eliminate or reduce bad debts. We all know which ones they are: the loans used to pay for a wedding; the credit card with the sky-high interest rate whose balance keeps rolling like a Sailor at an open bar. And, making only the minimum monthly payments on credit card and consumer debt. It is recommended set a deadline for repayment and getting rid of the growing interest and debt.

Benefits of a Budget

Money is often stretched in many directions. Daily expenses, entertainment, life events and long-term goals—all competing for the same dollar. Budgeting can help ensure you’re covering the essential monthly expenses, saving for the future and, with some discipline, have some extra cash to reward yourself for your good work.

— Read on www.businessinsider.com/best-ways-to-build-wealth-starting-today-2019-8

https://www.tiaa.org/public/learn/personal-finance-101/5-must-have-financial-goals

A Penny Saved is a Penny Earned | Financial Literacy

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”One penny may seem to you a very insignificant thing, but it is the small seed from which fortunes spring.”

Orison Swett Marden

“A penny saved is a penny earned” is a way of saying that one should not waste money but should save it, even if the amounts are small. Over decades, even small amounts of money saved regularly and if invested wisely, have the potential to add up thanks to the magic of compounding.

This well-used financial idiom is often attributed to Benjamin Franklin.

When money is saved instead of spent, you end up ahead in your financial total net worth by the amount saved instead of down by the amount spent. It means that you are two steps ahead of where you would have been financially.

“Too many people spend money they earned..to buy things they don’t want..to impress people that they don’t like.”

Will Rogers

So when you save your hard earned money, it will be there when it might be needed, especially in emergencies or retirement. This fact makes money saved similar to money earned. Thus money saved creates the same financial benefit as money earned (trading time for money) through work, thus, a penny saved can be viewed as the same as a penny earned.

The suggested amount of pennies saved should be at least 10 to 15 percent of your monthly income. But, if 10 to 15 percent is not currently possible, even small amounts of money are better saved than spent.

“The real cost of a four-dollar-a-day coffee habit over 20 years is $51,833.79. That’s the power of the Compound Effect.”

Darren Hardy

If you’re patient and disciplined, your pennies or money can work for you and make a real difference in your account balance over time.