Market High? Time to Lock in Gains?

The DOW, NASDAQ and S&P 500 are at very high levels right now. If we are attempting to always “Buy low and Sell high”, right now is a definitive moment when we should consider locking in gains on certain investments.

Which investments should we consider selling? Look at those investments that have run up rapidly, or are also at record highs simply along with the market, or don’t seem to have much more runway based on their current circumstance. Those investments are likely to go down as the market rotates lower so are good candidates to lock in gains.

Now, in fairness, as small retail investors we should look at our investments over a very long time horizon. I personally am not looking to sell anything right now. However, I am reviewing all my investments to determine if a move needs to be made.

Too often though people get excited when they see the market pushing higher and think that it is never going to end. They don’t even consider selling, if appropriate. But, markets go both up and down, and all too often, when the market turns, people panic and sell during the downturn.

So, what I have found as a more useful saying to remember is “Sell on up days and Buy on down days”. And, if the market is hitting a record, you need to think about making moves.

On another note, if you are looking for a gift for the young reader in your life, you can find some great children’s books on Amazon. Just go to these links The Desert Fairies of Oylara, The Rainforest Fairies of Oylara, and The Artic Fairies of Oylara and order them.

Additionally, check out this very cool podcast on Spotify called Gen X Dad and his Gen Z Teens. Entertaining!

Finally, check out some pretty cool music on YouTube if you have a few minutes: Introduction , Mosh, Smoke, Watch Out , and First Day Out. Enjoy!

Why Saving the First $100,000 is the Most Difficult

Saving money can indeed feel challenging, especially when you’re just starting out. Several factors contribute to why the first $100,000 might be particularly difficult to save:

  1. Starting from Zero: When you’re beginning to save, you’re essentially starting from scratch. You might not have established saving habits or a significant amount of disposable income to set aside.
  2. Establishing Financial Discipline: Saving money requires discipline and sacrifice. It can be difficult to resist the temptation to spend money on immediate wants or desires, especially when you’re trying to build up your savings.
  3. Emergencies and Unexpected Expenses: In the early stages of saving, unexpected expenses or emergencies can derail your progress. Without a substantial savings cushion, you might need to dip into your savings to cover these costs, making it harder to accumulate wealth.
  4. Low Income or High Expenses: If your income is low or your expenses are high, it can be challenging to find room in your budget to save. You may need to prioritize essential expenses, leaving little leftover for savings.
  5. Lack of Financial Literacy: Many people haven’t been taught basic financial principles, such as budgeting, saving, and investing. Without a solid understanding of how to manage money effectively, it can be difficult to make progress toward savings goals.
  6. Debt Repayment: If you’re carrying debt, such as student loans, credit card debt, or a mortgage, you might prioritize debt repayment over saving. Paying off debt can take precedence, making it harder to accumulate savings in the early stages.
  7. Market Volatility: If you’re investing your savings, market volatility can affect the growth of your investments. In the early stages, when your savings balance is relatively low, market fluctuations can have a more significant impact on your overall wealth accumulation.
  8. Delayed Gratification: Saving money often requires delaying gratification. Instead of spending money on immediate pleasures, you have to prioritize long-term financial security. This mindset shift can be challenging for some individuals.
  9. Lifestyle Inflation: As your income increases, it’s common for lifestyle inflation to occur—you may upgrade your living arrangements, purchase nicer things, or indulge in more expensive experiences. This can make it harder to save as your income grows.
  10. Psychological Barriers: Saving money can be as much about overcoming psychological barriers as it is about financial discipline. Fear, doubt, and uncertainty can all impact your ability to save, especially in the early stages when progress may feel slow.

Despite these challenges, saving the first $100,000 is a significant milestone that can set the foundation for future financial success. It requires perseverance, discipline, and a commitment to your long-term financial goals. Once you’ve established the habit of saving and accumulated some wealth, subsequent savings goals may become more achievable.

As always, if you are looking for a gift for the young reader in your life, you can find some great children’s books on Amazon. Just go to these links The Desert Fairies of Oylara, The Rainforest Fairies of Oylara, and The Artic Fairies of Oylara and order them.

Additionally, check out this very cool podcast on Spotify called Gen X Dad and his Gen Z Teens. Entertaining!

Finally, check out some pretty cool music on YouTube if you have a few minutes: Introduction , Mosh, Smoke, Watch Out , and First Day Out. Enjoy!

How Many People Get To 1 Million in Retirement?

I came across this article which asks this very important question, what does the data tell us about how many people actually do retire with 1 million in the bank?

The 1 million sum is great because first off it is a lot of money. Next, it is also a nice round number that is easy to wrap our minds around. It is difficult but also achievable. Therefore, it is a number that makes for a nice goal for most people.

So, what does the data tell us. Well, the news is not great. According to the Federal Reserve’s latest Survey of Consumer Finances, only about 10% of American retirees have managed to save $1 million or more. That is clearly not where so many people want to be.

The numbers are actually even worse thought. The data tells us that the median retirement savings account balance for all U.S. families, including every age bracket, is currently just $87,000. That is a long way off from 1 million. Unless, you are really young you are running out of runway to both add to and grow that money.

Therefore, it is so very important to learn and start practicing a level of patience and discipline to reach your retirement goals. You have to get compounding interest started as early as you can and give it as much time as you can to work.

Otherwise, it just makes everything so so much harder.

As always, if you are looking for a gift for the young reader in your life, you can find some great children’s books on Amazon. Just go to these links The Desert Fairies of Oylara, The Rainforest Fairies of Oylara, and The Artic Fairies of Oylara and order them.

Additionally, check out this very cool podcast on Spotify called Gen X Dad and his Gen Z Teens. Entertaining!

Finally, check out some pretty cool music on YouTube if you have a few minutes: Introduction , Mosh, Smoke, Watch Out , and First Day Out. Enjoy!

Saving Takes Discipline!

Making money is hard. Saving money I will argue is even harder. It absolutely takes a discipline and patience that just does not come naturally for everyone.

If you want to make money one of the most important things that you can do is to work really hard. If you are willing to put the time and the work you can absolutely make money. Often you can make quite a bit of money. It can be great. The challenge comes when you perhaps want more time to yourself, or you exhaust yourself, or you face an injury or health problem. Then it can be challenging to just work more or harder.

Savings on the other hand requires a willingness to sacrifice today for the future and the patience to not interrupt that which you have sacrificed. In other words, you have to be able to take money that you have available right now and put it aside for as long as you possibly can. That is saving.

Charlie Munger famously said that you have to give your savings a long road to let the magic of compounding interest to do its work. By far the most difficult part of this entire process is getting started. Creating the initial nest egg is where it takes the most discipline and requires the most patience as it will not grow quickly at the beginning. You will also have many other things that will challenge you for those resources. You have to have the discipline to put the short-term aside and keep focus on the long-term where the true rewards are!

So, work on being as disciplined as you can and you will be rewarded later when it really matters!

As always, if you are looking for a gift for the young reader in your life, you can find some great children’s books on Amazon. Just go to these links The Desert Fairies of Oylara, The Rainforest Fairies of Oylara, and The Artic Fairies of Oylara and order them.

Additionally, check out this very cool podcast on Spotify called Gen X Dad and his Gen Z Teens. Entertaining!

Finally, check out some pretty cool music on YouTube if you have a few minutes: Introduction , Mosh, Smoke, Watch Out , and First Day Out. Enjoy!

Importance of Demographics

While I absolutely love reading fiction as a primary source of entertainment, I recently have started reading Peter Zeihan’s books. He is a political scientist and demographer and has made and continues to make very bold predictions about the global future. I’m a bit obsessed with everything he has to say as he has been proven correct about some major world events including the invasion of Ukraine by Russia. He predicted it back in 2014!

I found him because I am very interested in demographics and in particular the Chinese demographics. I found myself getting tired of hearing about China as this 800 lb gorilla that we should be terrified of and I felt that the effect of the one-child policy there was having an overlooked impact. I found that and a whole lot more with Peter. He opened up a whole new way of looking at the globe. He highlighted past trends that have brought us to where we are currently and identifying the trends, heavily demographic, that are influencing where we are going. It is staightforward, intuitive, and very easy to understand.

Having an understanding of demographics can have a meaningful impact on our investment decisions. Based on how a country’s population pyramid looks tells you a lot about that country’s economy. Aging societies like Japan and Germany tell you that consumption is low in their respective areas and that they are facing an available worker crisis. The retiring Baby Boomer Generation here in the U.S. is going to have an upward pull on inflation as those workers leave the workforce and companies have to hire and train new workers. China’s population crisis is driving up costs and causing companies to leave and restore back to the U.S. and Mexico. There are so many impacts to the world that are related to population growth or decline that having a working understanding of demographics is critical.

I highly recommend you check Peter Zeihan out on YouTube and definitely read his books. You can find them in your local library. Most of his presentations end up on YouTube and I watch for new ones constantly. I really have learned a lot from him and I know that you will also.

As always, if you are looking for a gift for the young reader in your life, you can find some great children’s books on Amazon. Just go to these links The Desert Fairies of Oylara, The Rainforest Fairies of Oylara, and The Artic Fairies of Oylara and order them.

Additionally, check out this very cool podcast on Spotify called Gen X Dad and his Gen Z Teens. Entertaining!

Finally, check out some pretty cool music on YouTube if you have a few minutes: Introduction , Mosh, Smoke, Watch Out , and First Day Out. Enjoy!

Are Target Dated Funds For You?

While I am not personally a fan of Target Dated Funds, they do have a place for people just starting out investing or people who are too busy or lack the interest to follow the market on a regular basis. They are definitely better than doing nothing at all.

Target Dated Funds are designed and structured to maximize the investor’s returns by a specific date. They are built with a mix of stocks, bonds, and cash that changes over the target time horizon. The intent is that they build gains at the start and the early years by focusing most of the fund on riskier growth stocks and then move towards a heavier weighting of bonds and cash towards the end of the timeframe to lock in the gains.

The philosophy is sound and the intent is good. These funds have given people an easy to understand product that they can invest in and mostly forget about.

My issue with these funds has to do with their increased cost relative to just doing the exact same thing on your own. In most cases it is very easy to replicate what these targeted funds are doing with other available funds. The best example to me is the U.S. government TSP fund portfolio. There, the Target Dated Funds are literally made up of the individual funds and you can mimic the exact fund makeup, with a lower cost, if you simply spend a few minutes of your time.

I also just think that you will get better returns along with a lower cost if you stick with large cap index funds. There your returns can be maximized to such an extent that you may never need to eventually transition to a much more conservative portfolio. That is my plan. I want my growth to be so high that I never need to put most of my portfolio in bonds or cash. So, Target Dated Funds don’t fit my investment philosophy.

But, as I said above, if you don’t want to spend the time or energy to monitor and track your investments on a regular basis, then Target Dated Funds are not a bad option. But realize that you are giving something up both in lowering your costs and increasing your gains over the long term.

As always, if you are looking for a gift for the young reader in your life, you can find some great children’s books on Amazon. Just go to these links The Desert Fairies of Oylara, The Rainforest Fairies of Oylara, and The Artic Fairies of Oylara and order them.

Additionally, check out this very cool podcast on Spotify called Gen X Dad and his Gen Z Teens. Entertaining!

Finally, check out some pretty cool music on YouTube if you have a few minutes: Introduction , Mosh, Smoke, Watch Out , and First Day Out. Enjoy!

When Will Your Money (or Debt) Double?

Every investor and borrow absolutely must know and understand the Rule of 72.

The Rule of 72 is a simple math shortcut that can be used to quickly figure out the amount of time it will take for money to double at a fixed rate of interest. The way it works is easy. All you have to do is divide 72 by your interest rate and the result is the number of years it will take your money to double. For example:

72/1 = 72 years, 72/3 = 24 years, 72/6 = 12 years, 72/9 = 8 years

It is easy to see that you always want your money to grow at a higher interest rate. But the Rule of 72 shows how even just 1%-2% make a huge difference in how quickly that money will grow. Just going from 1% to 3% made the money double 48 years earlier!

So, shopping around for the very best interest rate that you can get for your savings is absolutely worth the time and effort. Simply sticking money is a low rate savings account as your primary savings investment is a dead end. A typical savings account that is paying 1% interest will take 72 years to double. That is not where you need to be!

But, there is more good news about the Rule of 72. It works in the reverse as well to tell you how much a higher interest rate is hurting you when you borrow. To find out how much your debt will double over time you simply divide 72 by the interest rate that you are paying. With the national average interest rate for credit cards in the ballpark of 20% your debt will double every 3.6 years (72/20=3.6). So, again, work just as hard at finding the lowest interest rate you can for your debt as you do for finding the highest interest rate that you can for your savings!

Finally, the Rule of 72 has one more useful feature. It can help you figure out the interest rate that you will need based on the number of years that you have left to save. You simply do this by dividing 72 by the number of years left to save. For example, consider if you are 30 and have $50,000 in savings currently. If you are planning to have $1,000,000 to retire at 65 the interest rate required for you is 2.05% (72/35 = 2.05%). So, the Rule of 72 is a pretty awesome thing to know!

As always, if you are looking for a gift for the young reader in your life, you can find some great children’s books on Amazon. Just go to these links The Desert Fairies of Oylara, The Rainforest Fairies of Oylara, and The Artic Fairies of Oylara and order them.

Additionally, check out this very cool podcast on Spotify called Gen X Dad and his Gen Z Teens. Entertaining!

Finally, check out some pretty cool music on YouTube if you have a few minutes: Introduction , Mosh, Smoke, Watch Out , and First Day Out. Enjoy!

Work on Your Credit Score!

Having a good credit score is something worth fighting for. And, while there are different scoring companies which means you can have more than one credit score, you know at a base level if your score is good or bad.

The easiest way to tell is if you pay your bills on time and pay off your credit card(s) each month. If you are doing that consistently each and every month your will have a good credit score. I do that every month and so I never worry or stress about credit or my credit score.

If you are not at this point, it is completely worth the time and effort first to avoid letting things get out of control. Then, if you are currently carrying balances, to put a significant effort into getting those balances to zero.

What are the benefits of good credit? Here are a few:

  • Get better rates on car insurance
  • Qualify for lower credit card interest
  • Get approved for higher credit limits
  • Have more housing options
  • Get utility services more easily
  • Get a cell phone without prepaying or making a security deposit
  • Look better to potential employers

All of these things are very good things. Again, these are things that are worth the effort it takes to keep credit under control and make it work for you.

But you have to be patient and disciplined to put off things that can be put off and do the work to stay within your means.

You can absolutely do this!

As always, if you are looking for a gift for the young reader in your life, you can find some great children’s books on Amazon. Just go to these links The Desert Fairies of Oylara, The Rainforest Fairies of Oylara, and The Artic Fairies of Oylara and order them.

Finally, check out some pretty cool music on YouTube if you have a few minutes: Introduction , Mosh, Smoke, Watch Out , and First Day Out. Enjoy!

Planned Rate Of Return

As you sit down and start working through long term savings calculators, what should you use as a long-term rate of return? Every percentage point makes a pretty big difference over a thirty to forty year time period.

The short answer up front is you should use 8% if you have a portfolio primarily made of stocks.

The historical average yearly return of the S&P 500 is 9.26% over the last 150 years, as of the end of December 2023. This assumes dividends are reinvested. Adjusted for inflation, the 150-year average stock market return (including dividends) is 6.93% (TradeThatSwing).

Since none of use are going to live 150 years inflation is not going to take as big a bite out of our portfolio so 8% is a realistic balance of growth and inflation.

If you are paying attention, doing some research, and continuing to educate yourself (like reading this blog!), you should actually do a bit better than 8%. I’m approaching 30 years in my investment history and I’m at just over 10% annual average return and I’ve experienced some pretty significant down markets like the DotCom bubble burst, 9/11, the housing crash, and COVID just to name a few.

In fact, some of the biggest down markets were my biggest opportunities. I’ve invested in quality companies that survived the downturns and the subsequent market recoveries have been some of the biggest drivers of growth.

For a period of time while the FED has kept interest rates artificially low, there was a push to get folks to use 6% as a planning rate of return, but that is too conservative unless you have a very conservative portfolio with a significant percentage of bonds. So, 8% has been the recommended advice for a very long time and the historical returns of the S&P have shown that is a good bet.

On the other hand, be wary of going much above 8% in planning and don’t believe anyone that tells you that they can guarantee anything above that. They are probably running a Ponzi scheme.

Educate yourself, don’t be inpatient or greedy, and work with a realistic number. Going above 8% as a planning assumption is very aggressive and may skew your expectations. Rather, enjoy when things are good and your doing better and don’t sweat those time when your doing a bit worse. It is a long trip!

On another note, if you are looking for a gift for the young reader in your life, you can find some great children’s books on Amazon. Just go to these links The Desert Fairies of Oylara, The Rainforest Fairies of Oylara, and The Artic Fairies of Oylara and order them.

Additionally, check out this very cool podcast on Spotify called Gen X Dad and his Gen Z Teens. Entertaining!

Finally, check out some pretty cool music on YouTube if you have a few minutes: Introduction , Mosh, Smoke, Watch Out , and a brand new addition First Day Out. Enjoy!

What Opened My Eyes To Investing

When I was 22 and about to graduate from college I attended a seminar about where to place investment money. A table was shown early in the presentation that I can say literally changed my life. It has been the defining philosophy of my approach to money.

The table was made up of five columns. The first column was the “Age” column starting at 18 and going all the way down to 65. The next two columns were “Annual Investment”. The last two columns were “Investment Return Total”.

Overall the columns represented two people. The first person began investing $2000 a year starting at age 18 and stopping after 10 years at age 27. From that point, after an overall investment of $20,000, that person never put in another dime.

The second person starts their investment of $2000 at age 27 and invests every year until age 65 for a total of $78,000.

With an average of an 8% return the person with the most money at age 65 was the first person who started at age 18.

In fact, despite all the money that the second person puts in every year, they are never able to catch person number one.

That is the power of compounded interest.

I remember seeing that and being completely blown away. I had absolutely zero money saved or invested at that point, but I resolved at that moment that I was going to get started immediately because I was already four years behind.

I also understood from the table that the absolute most important money was the money that was put in early. As many of those dollars that I could put in were the ones that were going to be supercharged and make the difference 40 years down the road.

I can say that overall, by any measure, it has been successful. I’m not quite 65 yet but I’m well ahead of that table and if what I read online is correct I’m ahead of most of my peers.

You can find the table that I talked about online or it is easy enough to create it on your own with a spreadsheet program. I actually encourage you to do it.

If you are behind, don’t get down. It is never to late to start saving. You do what you can. But pass along lessons, especially to those who are younger. You won’t become fabulously wealthy, but you will have security and peace of mind.

As always, if you are looking for a gift for the young reader in your life, you can find some great children’s books on Amazon. Just go to these links The Desert Fairies of Oylara, The Rainforest Fairies of Oylara, and The Artic Fairies of Oylara and order them.

Additionally, check out this very cool podcast on Spotify called Gen X Dad and his Gen Z Teens. Entertaining!

Finally, check out some pretty cool music on YouTube if you have a few minutes: Introduction , Mosh, Smoke, Watch Out , and First Day Out. Enjoy!

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