So another finance piece today. Remember these are my opinions based on my experience of 30 years in the finance industry. Prior to making any financial decisions, you should seek out as much information and advice as you can to make sure you make the best decision for you.
So we are in an extended period of inflation and international worry, which affects financial markets. Inflation has leveled off, but we have two very unique situations that have occurred in the last few years making this inflationary period extend longer than most anticipated. First the pandemic. Without getting into that whole debate, economically, when you prevent people from working and companies from manufacturing and print money to sustain them inflation happens. Basically, there are less goods in the economy, making those goods more valuable. The second thing is we have had the great resignation.
Yes it’s rooted in the pandemic shut downs but the underlying economic realities of gig work also contributed. Coupled with the Baby Boomers (by population our largest generation) aging out of the work place and you have the conditions by which companies have to pay people more to produce goods and services, so they charge more for said goods and services. That is the inflation bit, the international worry? The Ukraine war.
Whenever a super power goes to war, (I define super power as any nation with nukes) everyone else gets on the edge of their seat. Russia has struggled in Ukraine, they are going to be there awhile and I do not seeing that war resolving soon. Therefore, this means you have a volatile period of ups and downs in markets. It’s hard to predict when things will stabilize my best guess is probably after the 2024 U.S. election, but that’s a guess.
So what do you do as an investor? You continue to be disciplined and invest slowly and steadily. You don’t sell in a volatile period unless you need liquidity fast. You ride the ups and downs, your buy opportunities now will likely evolve into gains later and sell opportunities are usually few and far between. It’s not a horrible idea to put some assets in fixed securities either, CD’s and treasuries are always nice to have but I would never go more than 10% of my portfolio. Still some CD’s are at 5%, which isn’t horrible when compared to historic inflation numbers.
Markets always go up and down, we will continue to see 300+ point swings some days for some time now as the U.S. Fed reserve keeps manipulating the interest rates (they were held artificially low for over a decade). The fed rate now is 4.75%. Anything over 5%, I think is a pretty big stretch but who knows at this point. Keep investing consistently and if you have a 5-10 year window you should be fine and actually come out ahead. Make sure you keep an eye on auto loans, it is the next “big bubble” and I think that one is coming to us later this year but we will see.
Overall, the best strategy to wealth is to retain as much of your income as possible and not send it to other people so you can live. Then taking that income and investing it with a long-term goal of growth. It takes time and perseverance particularly when things are rocky like they are now.
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