Ponderings For the Week of August 12 to 18, 2019

High Volatility in Investment Markets Causes Jitters

The usually quiescent month of August for the investment markets was undone last week. The week began with a global selloff followed by an explosive comeback. The week as a whole toted up to losses of less than 1% in the major stock indexes, but it didn’t feel that benign. The primary culprits were the ongoing trade war and the new currency war with China that combined to undo any hope for stability in equity prices.

Investors seem to have become more cautious. Big swings in prices over the week are an indication that Wall Street is concerned about growth ahead. This was exacerbated by the sharp decline in bond yields that can be interpreted as less certainty about corporate profits for the rest of the year.
Looking ahead, with quarterly earnings season nearing the end, developments on the trade, interest rate, and currency fronts will receive added attention in coming weeks. Rock bottom interest rates pale in comparison to dividend yields on stocks. Investors with a long investment horizon (that’s most of us) are likely to find much greater potential in dividend-paying stocks compared with bonds.



If You’re Having Trouble Saving, Start Small

Let’s get down to basics for a moment. In order to achieve financial security (assuming you didn’t “marry well” and you’re not going to inherit a bundle of money) you have to save money and invest it wisely. Alas, many of us have trouble with that first step – saving. Yet I need not remind you how crucial it is and the longer you wait to begin saving at a pretty hefty level, the harder it will be for you to achieve financial security. On the other hand, it can get pretty depressing when you hear people like me say you should be saving perhaps 15% of you income, particularly if you’re having trouble saving anything at all or you’re just saving a smidgen.

Don’t despair. Start saving a small percentage of your income right now or if you’re already saving a small amount, increase it a bit. Saving anything, even 1% of your income, will get you started. Chances are that you’ll never miss the money, particularly if you have it taken automatically out of your paycheck or your checking account. On top of that, you’ll like the feeling of saving now for a more secure financial future. You’ll want to do more in the future, so it will be just a matter of time before you’re saving a healthy portion of your income. But you have to take that first step. Do it today.

If you have young adults or even not so young adults in your family who are having difficulty saving, please share these thoughts with them. If you can spare some money, help them jumpstart their savings, perhaps with a modest contribution to a Roth IRA.



Smart Money Tips


  • Do you have enough life insurance?  If you’ve got people in your life who would suffer financially from your demise, then you need life insurance. If you’ve got kids, you probably need a lot of life insurance -- $1 million is not an uncommon need for a breadwinner with a couple of kids. The basic insurance provided by your employer is never enough. On the other hand, if you’re retired or nearing retirement, your life insurance needs may decrease if family members who were previously dependent on you have somehow managed to become self-sustaining.  
  • Never underestimate the value of a debt-free retirement. While accumulating a sufficient stash of investments for retirement is the number one focus of retirement planning, eliminating debt is a close second. In my experience working with individuals and couples, those who retire with considerable debt almost inevitably remain financially challenged until the debt is paid off which may take many years. On the other hand, those who retire debt free almost certainly can look forward to a good financial future.











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