I’ve recently been thinking about the implications of “low-risk safe haven” bond market and bond fund investors losing a lot of money in those investments in the years to come and the bond market (bonds and bond funds/ETFs) losing its “low-risk safe haven” status resulting in substantial increases in interest rates, low confidence in abilities of the U.S. federal government being able to service its debts (perhaps even getting to the point similar to Greece or Italy), high inflation, future hesitancy of investors to buy bonds (government, municipal, and corporate) and bond funds/ETFs after years of losses resulting in still higher interest rates to entice new buyers, and a deteriorating economy and government/corporate finances due to the combination of these factors.

These are some of the dark clouds I’m seeing on the horizon. Lots of things to ponder and position for – especially since the perceived, historical, low-risk investments might actually become high-risk investments in the years to come. Perhaps the best longer term investment strategy will be investments which track longer term interest rates (e.g., shorting the longer-term bond market).

For perspective, take a look at the 10-year treasury rates (prices move in the opposite direction of yields) which have been falling for 40 years. The last time they went up consistently was during the 1960s and 1970s.

The bottom line is that bond prices (and bond funds for that matter) are extremely high right now (and yields extremely low) which means significant losses could be experienced by bond market and bond fund investors in the years to come.

For your reference, here’s an interesting article on debts and deficits: https://finance.yahoo.com/news/national-debt-affects-investments-212804085.html

Here’s another interesting article on bond market risk: https://finance.yahoo.com/news/why-financial-advisors-watch-bond-184731799.html

And here’s another interesting article on inflation: https://www.ally.com/do-it-right/trends/weekly-viewpoint-january-22-2021-inflation-affect-on-portfolio/

You can learn about all of my investing techniques via my “Invest Like a Pro in 10 Minutes a Day!” series of 4 books where you can learn the “end to end” process to investing and gain key investing insights and skills (https://brighterdayslifecoaching.com/published-books…/).

Also, you can read all about my stock market activities here: https://brighterdayslifecoaching.com/stock-market-activities/

I wish you much success in creating a brighter financial future for yourself, your loved ones, and those who follow!

#finance #stocks #investing #stockmarket #success

Even though this is a bit of a lengthy post, please set aside some time to read through it in detail at your earliest convenience. It’s a worthwhile read because it can make a huge difference in how your financial future plays out – both for you, and others, in your life. And some of you might want to participate in this challenge or offer a similar kind of challenge for people in your life or use aspects of this to help yourself (or others).

As many of you already know, anytime something great happens for me – financially speaking (or otherwise) – I’m a big believer in using at least part of the proceeds to offer unique opportunities to others. I create a “Beneficiaries Reserve Fund” for this purpose which I add to over time.

Essentially, the way my Beneficiaries Reserve Fund works is this: I have a financial target to meet and if I exceed the target, then half of the excess amount goes to me for personal use and the other half goes to the Beneficiaries Reserve Fund. It’s just a promise I’ve made to myself and kept over my years of investing since I started back in 1994.

Due to experiencing my record year in the stock market this year, I’ve accumulated quite a sum in my Beneficiaries Reserve Fund. Back in March, I used my previous balance to get a friend of mine, who has struggled with debt for most of his life, completely out of debt. And to date he has kept his credit rating high and kept his promise and stayed away from using his credit cards. So, this appears to have been a worthwhile investment.

I’ve decided I want to contribute this time by addressing the wealth inequality gap by incentivizing and challenging people to invest in creating a brighter future for themselves and their loved ones. One of my favorite kinds of contributions to make in life is giving people gifts of opportunity. So, I think this will be a good way to do this. Here’s the process I’m using:

1) I am providing a small amount of seed money (enough to buy a share or two of certain stocks) to select individuals – particularly younger people who might serve to benefit most – and am making myself available to offer guidance of what stocks to consider buying (or investigate stocks they might have interest in) to motivate their interest in investing. Initiating this challenge by giving a few dollars to allow people to “play” in the stock market without actually losing their own money is my Christmas gift to everyone on my Christmas list this year. I came up with this idea after reading an article that talked about people not learning how to truly invest unless actual money is involved – they had to have actual stakes. Paper trading apparently doesn’t work well. Because people don’t trade or invest the way they would or pay as close attention unless actual money is involved. I am encouraging a Roth IRA be primarily used so that all gains over the years will be tax free (for those who think they can avoid withdrawing money before age 59.5). However, a standard investing/trading account can also be used to augment the Roth IRA even though taxes will have to be paid on all gains. Also, a 529 plan might be of interest if you want to save for your children’s education. It works like a Roth IRA but you can withdraw at any time to support various educational expenses (k-12, college, etc.). There are a lot of sources about this. Here’s one: https://www.savingforcollege.com/…/name-the-top-7…

2) I am challenging these individuals to get in the practice of automatically saving 20%+ of all future earnings (income, bonuses, tips, cash gifts, etc.) and am making myself available to offer guidance on how they might achieve that. It needs to be at least 20% (or perhaps even more due to the fact that employee pensions no longer exist much and Social Security might not be around at some point in the future – I actually saved 40% for many of my working years). And this savings can never be touched until they achieve their financial goals. Because ideally they’ll want to take advantage of compound interest in growing their financial investments to a critical mass over the years so that it can then be invested in such a way as to provide a lifetime of income (this source explains compound interest and the value of starting early: https://www.moneyunder30.com/power-of-compound-interest). Incidentally, the compound interest issue is why debt is so problematic. It does the opposite in that people instead end up creating the critical mass in financial assets for lenders while depleting their own. So, people must get in the practice of saving 20%+ of everything they earn – even if they don’t know what their financial goals are or what they might use the money for. Because doing this gives people options in life. And having options is much better than the alternative. Now, before doing anything, everyone needs to check with their employers to see if they offer matches on any contributions for retirement accounts (some employers will match 5% or more). If they do, then max this out first. Because it’s free money.

3) In 5 years (starting Jan 2026), I will follow-up with each of those I provide the seed money to and see if they’ve successfully executed this challenge. If they have then I will add a sizable lump sum to their investment account and will probably repeat this process every 5 years until my Beneficiaries Reserve Fund is fully depleted.

In the first few years of investing, the amount saved matters much more than the actual gains or losses experienced in the stock market. People can even just save and wait for a stock market drop to invest if they want and will probably do pretty well. Once savings have been accumulated for a few years or so then the gains and losses matter increasingly more over time.

For those who don’t have one already, please go ahead and open an investment account at an online broker. I presently use fidelity.com but have also used Ally and Robinhood in the past. All of these have $0 fees for trading/investing but Fidelity has, in addition, more options for fixed income – something some people might have interest in later in life once they’ve accumulated a considerable sum. It’s helpful having just one online broker for all of your accounts so that you don’t have to go back and forth across brokers and keep track of multiple statements and tax documents. So, take some time and choose wisely. Two types of investment accounts need to be opened:

1) Roth IRA Investment Account: Max out what is put into this account every year because all gains earned are tax free. The downside is that funds cannot be withdrawn until age 59.5 without a huge penalty. So, this account needs to be used solely for the long term future. Here’s one source outlining the Roth IRA rules:https://www.investopedia.com/…/basics-roth-ira…. The max contribution and income limits tend to adjust upwards every year so check every year to see what they are before making annual contributions. Also, a 529 plan might be of interest if you want to save for your children’s education. It works like a Roth IRA but you can withdraw at any time to support various educational expenses (k-12, college, etc.). There are a lot of sources about this. Here’s one: https://www.savingforcollege.com/…/name-the-top-7…. Fidelity has this option available. Probably some of the other online brokers have this available also.

2) Standard Trading/Investment Account: Any additional funds can be placed into a standard trading/investing account. These funds can be withdrawn at any time – even though it serves people best to leave it there until they reach their financial goals – but taxes have to be paid on all gains earned (a 15% tax for gains on everything held longer than a year – or a tax based on income tax bracket for gains on everything held less than a year before selling: https://www.nerdwallet.com/…/taxes/capital-gains-tax-rates).

I recommend maxing out the Roth IRA every year first and then placing any excess funds available in the standard account.

I believe the above challenge might help address the wealth inequality gap for those who save and invest in their future. It would really mean a lot to me if I could make a difference and have a positive influence towards creating a brighter future for everyone who participates in this challenge.

Consider also, at some point, offering a similar kind of challenge to others in your life who might benefit. As a minimum, young people would especially benefit from the practice of automatically saving 20%+ of everything they earn because this financial discipline would be deeply ingrained from an early age – resulting in accumulating financial wealth and achieving financial freedom at a much younger age than most people do. And this would serve to not only benefit them, but you as well since you won’t have to worry so much about their finances and they won’t have to rely on you as much in the years and decades to come. So, living with a sense of financial discipline is key to living a happy, stress-free life – both for you and for others in your life. Also, a lot of people who become highly disciplined in one area of their life tend to become highly disciplined in other areas of their life as well including work, health and fitness, education, and goals. So, a whole host of future benefits can be realized just from starting the practice of financial discipline. All of which will benefit not only themselves but also everyone who surrounds them – including you! So, get started today!

Those who complete this challenge will be amazed at how wonderful and confident they’ll feel about their finances in 5 years. And if they keep this going beyond that point they’ll see huge increases at the 10-year, 15-year, and 20-year marks because that’s the power of compound interest.

I came up with this idea because I came to the realization that simply giving people money doesn’t really help much (aside from recovering from immediate emergencies) or offer permanent solutions. But if you help them strengthen financial discipline first, then giving people money does help. So, this is why I’m waiting 5 years to do the lump sum payouts.

Also, those that develop this financial discipline will not only greatly improve their own lives but of those who surround them. I mean, imagine a child who grows up with the mentality that “20% of everything I earn automatically goes to savings (or perhaps even more), stay clear of debt (aside from a mortgage or car payment), and never touch savings until financial goals are reached.” What a wonderful life full of opportunities will that create for that child!

Lastly, in case it might be helpful, you can learn about all of my investing techniques via my “Invest Like a Pro in 10 Minutes a Day!” series of 4 books where you can learn the “end to end” process to investing and gain key investing insights and skills (https://brighterdayslifecoaching.com/published-books…/).

I wish you much success in creating a brighter financial future for yourself, your loved ones, and those who follow! Have a wonderful holiday season!

#finance #stocks #investing #stockmarket #success

What are the two most important investment questions everyone must answer regardless of age or where they are in terms of progressing towards their financial goal(s) (in order of importance)?

1. What is my financial goal(s) [e.g. Jan 2026: $50,000 Down Payment for a Home]? This must be clearly defined and periodically revisited to ensure the goal(s) remains sufficient for meeting your future needs in the year you will start needing it (so escalation is important based on inflation and potential cost changes)? For example, if you are saving for a down payment for a home and you decide you later would prefer a larger house in a nicer and more expensive area and house prices increase substantially, then you’ll need to account for all of this in your financial goal for the year you plan to achieve it. Otherwise, you may fall short and have to extend this goal for several more years than originally planned. So, always keep this in mind when periodically revisiting and reviewing your financial goals.

2. What is the MINIMUM risk I can take, based on progress to date, and still meet my financial goal(s) identified above? This will drive your investment decisions and strategies.

Most investors fail to achieve their financial goals because they do not maintain awareness or dynamically make adjustments to item 1 and don’t dynamically adjust their investment strategies to account for item 2 based on progress to date. Don’t do that to yourself. Because these must be not only defined and factored in when first establishing your financial goals but also periodically revisited and re-assessed in a dynamic fashion. So, this is not a static process.

A whole lot can go into the above two questions and the investment strategies you employ. And you can learn all about these as well as all of my investing techniques via my “Invest Like a Pro in 10 Minutes a Day!” series of 4 books where you can learn the “end to end” process to investing. So, use this period of social distancing to your advantage by gaining this knowledge and learning these skills and techniques (https://brighterdayslifecoaching.com/published-books…/).

#finance #stocks #investing #stockmarket #success