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Ponderings For the Week of July 15 to 21, 2019

Large Cap Stocks Thrive

The big three large company stock indexes, the Dow Jones Industrials, the Standard & Poor’s 500, and the NASDAQ Composite, closed out the week with all-time records. But other equity categories, including mid-caps, small caps, and internationals reported losses. Put them all together, and the average stock pretty much broke even for the week. But that didn’t stop the pundits from declaring yet another great week for the investor class. It has been a strong run over the first half plus of 2019. How many times over the past decade have you concluded that the party is over and a correction is at hand? Of course, some day you’ll be correct, but in the meantime, there has been and may well be money to be made.

Earnings season is heating up with about 300 of the S&P 500 stocks reporting second quarter profits and future outlooks over the next three weeks. Earnings expectations are muted. But corporate management has been pretty good at tamping down expectations only to deliver positive surprises to Wall Street. We’ll soon find out.  

 
 
   
 

Be Happy with What You’ve Got

I’m often asked by people what is the key to financial success. My work in financial planning over the decades, both in the media and working with families, has led me to believe that, if you have to boil financial success down to a single “thing,” that thing is to “be happy with what you’ve got.” There is far too much preoccupation with money these days. Instead of obsessing over more money, everyone should be thinking of ways to do better with what they have. Too many people think they’ll be happier with more immediate indulgences like a fancier car, an imported kitchen, or a larger house. But if you can be happy with what you’ve got, you’ll find it a lot easier to achieve financial security – and raise financially responsible progeny. Life is a series of choices, and as long as you think you’re deprived of things, you’re going to want to acquire more things. More things won’t make you happier, but more things could put a dent in your financial future. Think back to when you were growing up. Your parents were probably pretty happy with what they had, and they probably had a lot less than you do now. So be happy with what you’ve got. That’s an attitude that transcends the generations. 
  

 

   

Smart Money Tips

 

  • Simplify your financial life. There are many things you can do to simplify your financial life, starting with cutting down on the number of bank and investment accounts you have and opting to receive your bank and brokerage statements online rather than on paper. But there’s a lot more you can do to simplify your financial life, like opting for straightforward investments rather than the exotic investments that end up being a debacle for many investors. Exchange-traded funds, index funds, and target date funds offer simplicity, as do straightforward, old-fashioned insurance policies. So whenever you need to make a financial decision, look for simpler solutions.
  • Pay off your mortgage sooner rather than later. One of the best things you can do for your financial wellbeing is to pay off your mortgage before or soon after you retire. Owning a mortgage free home will so improve your retirement budget that it will be hard not to be able to afford to retire. The problem is, many homeowners used their homes as personal piggybanks in years past by refinancing or home equity loans. But even if you have large balances, you can still shorten the time it takes to pay off the loans. For example, consider someone who has a $200,000 mortgage with 25 years to go. Adding an extra $200 a month on top of the regular mortgage payment will shorten the mortgage payoff by a decade. In other words, it will be paid off in 15 years, rather than 25.

 



 

 

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