Here’s the trailer for the Wall Street: Money Never Sleeps. Does Gordon Gekko still think that greed is good? I guess we’ll have to wait and see.
Synopsis - As the global economy teeters on the brink of disaster, a young Wall Street trader partners with disgraced former Wall Street corporate raider Gordon Gekko on a two-tiered mission: To alert the financial community to the coming doom, and to find out who was responsible for the death of the young trader’s mentor.
As often as I try to encourage amateur individual investors like myself to embrace independent financial analysis and to make their own investment decisions, as a previous commenter with a vaginal problem shows, there are still those who’ll regurgitate what them deem is credible information in an attempt to convince us that someone else has all of the answers.
But, like I’ve said on many previous occasions, it’s important to investigate just whose interests are being served when providing you with such information. Have confidence in your own abilities to assess a situation and don’t let other’s interests keep you from listening to that little voice in your head telling you otherwise. There’s always someone who’ll try to convince you that they are smarter, and can manage your hard-earned money better than you can manage it yourself. Always question their motivations.
Personally, I tend to seek the input of independent sources, people who don’t work for the investment banks and Wall Street and whose interests don’t conflict with mine; experienced individuals who’ve been around for a while and view things from a different perspective.
So I asked Sam, a friend from the past, what he thinks about my bullish view of both the economy and the stock markets. Are my views on the mark or is this all just a sham? What do you see on the horizon? Here’s his reply -
It goes without saying that for many of us, much of the planning, the hard work, the saving and the sacrifice we endure during our young lives is focused towards the goal of achieving a more comfortable retirement. We work, we save, we invest – and then we hope for the best. I say “hope” because realistically, things happen that we have no control over.
I’m pretty sure that what’s occurred in America this past few years cements my point. For lack of a better phrase – shit happens. As such, not all of us will be able to achieve the retirement goals that we expect. It’s not because we didn’t conduct ourselves responsibly, it’s because we can’t always be fully prepared for the unexpected.
Markets crash, jobs are lost, crimes occur, relationships fail, people get sick, governments change the rules.. the list is long. Any or all of these things can leave their mark our personal finances and cause us to take a hard look at our retirement planning.
I think that’s the issue being alluded to in the following Morningstar video about delaying retirement. Morningstar’s Christine Price and Christine Fahlund from T. Rowe Price discuss a few strategies on how to make delaying retirement more palatable.
The strategies being presented in this video are all good retirement planning choices when things go wrong. Christine Benz, Morningstar, T. Rowe Price and Ms. Fahlund have all provided good advice, ideas, and information about managing one’s wealth, and have even helped educate me over the years. So, it’s not my intention to criticize what’s being said in this video.
It’s what’s not being said that I think is important.
As illustrated in this video, we plan our goals with the mindset of supporting a certain lifestyle in retirement. If things interrupt our retirement goals, we then worry about not being able to support that lifestyle, and seek ways to delay retirement while finding ways to make working longer more palatable.
But those aren’t our only choices. While those strategies are good options, it’s only a part of the retirement equation. We could also consider altering the lifestyle that we expect to live in retirement.
Are those expectations too high? We also have the choice of lowering our lifestyle expectations instead of delaying retirement and working longer. There are plenty of ways to cut unnecessary costs, live frugally, and still be happy in retirement. We just have to decide which choice is more important.
There’s nothing that makes both a parent and a child more uncomfortable than having that inevitable and unavoidable talk when they reach that certain age. But there’s also nothing more important than knowing if your kids are doing it regularly.
Investing doesn’t have to be an uncomfortable topic. It’s smart to start early and do it regularly. Learn more about long-term investing now. Get smarter about money.
The Vanguard Group has posted a interesting article in their Insights section on something of concern to bond market investors – the inverse relationship between bond prices and interest rates.
As excerpted from Bonds and rates: The reality behind the headlines:
Moves in interest rates are notoriously hard to predict, but that hasn’t stopped many market observers from declaring that rates are headed up in the near future. If the predictions are right and rates do climb, you’re sure to see headlines about how such an environment is bad for bond investors.
As is so often the case, the headlines won’t tell the whole story. It’s true that a general rise in rates will cause bond prices to fall and thus reduce the returns of most bond funds in the short term. But the higher rates can boost returns for long-term bond investors who stay disciplined about reinvesting their interest income. The reality is that if you’re steadily reinvesting your interest income, rising interest rates can be good news.
While this inverse relationship between interest rates and bond prices is important, Vanguard goes on to discuss how it’s interest income, and re-invested income, which matters most in bond fund; and that it’s in investors’ best interests to remain invested in a bond fund for the long term instead of trying to time the market.
Of course, one could argue that Vanguard is discussing this topic only because it’s in their own best interests to reduce turnover, as fund turnover increases fund costs. But, I believe that Vanguard is also looking out for their investors, and what they say makes good sense.
There’s also another strategy one could use to successfully invest in bonds, without being too concerned about where interest rates are headed.
Figured it out yet? That’s right, investing in I-bonds. I’ve previously written about I-bonds on a few occasions, and it’s the only type of individual bond in which I invest.
For those who aren’t aware of them yet, like other savings bonds issued by the United States Treasury Department, I-bonds are a low-risk, liquid savings product that earn tax-deferred interest and protect you from inflation. The I-bond earnings rate is a combination of two separate rates; a fixed rate and an inflation rate, both which are determined twice yearly in May and November.
Currently, I-bonds are one the safest and highest-yielding bonds available to most individual investors. So, if inflation rates do happen to rise, it wouldn’t be unreasonable to expect I-bonds to yield even higher rates. There are also other intangible benefits of investing in I-bonds, but don’t just take my word for it. See what The Duke has to say.
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America Saves Week
The personal savings rate has risen above 4% recently, but most Americans are still not saving adequately for retirement, and most lower-income households do not have adequate emergency savings for unexpected expenditures like a car repair. But with more societal encouragement and support, more Americans can be persuaded to build wealth, not debt.
For my contribution to America Saves Week I thought I would share a personal story of a simple strategy that I use to save a portion of my income.
My personal checking account is with Arizona Federal Credit Union (AZFCU). Opening a checking account at AZFCU requires first opening a “share” savings account with a minimum of $25.00. One doesn’t have to contribute further savings to this share account in order to keep the checking account open. It’s just a requirement for being a member, and it can also be used for overdraft protection.
I also have a piggy bank at home. When I empty my pockets upon changing my clothes everyday, I feed the pig with my leftover change from that day. When the piggy bank gets full, I rolled up the coins and periodically deposit them into my share account at the credit union.
I’ve been saving my change for approximately five years now. I don’t contribute anything to this account except my spare change, and use this share savings account for the sole purpose of seeing just how much I can save over time with this strategy. It’s not a lot of money, but with time and consistency, I’ve managed to save just under $2000.00.
Now, I know that your probably saying to yourself “$2000.00?!, that isn’t squat”. If so, then you’re right. But it doesn’t take a significant effort on my part and doesn’t cause me undue financial hardship. It also shows that even a few cents here or there can become a significant level over time.
So, what are you going to do during America Saves Week? Take action.