Mid Week Reads: July 13th, 2022
Reads, Links, and Charts that tell the story.
Inflation, Student Loans, and Markets
When it rains, sometimes it pours.
For the Fed, Easing Too Soon Risks Repeat of Stop-and-Go 1970s (Wall Street Journal)
With the Student Loan payment pause set to expire in the coming weeks, I felt it was relevant to include a few links.
Student Loan Interest Is A Massive Problem. There's A Plan To Ease It (Fatherly)
Nightmare Scenario: No Student Loan Cancellation And Student Loan Payments Restart (Forbes)
Charts on Markets: Buckle Up
In case you were unaware, markets are down for the year. Way down. Here are the best tips we have for riding out a downturn.
Have your cash reserve topped off: We know a lot of people hate this idea because inflation is at its highest in several decades. But if your income stops (let me rephrase….you get let go in a layoff or your revenue from business dries up) cash goes from trash to king very quickly. You can only keep a household floating on plastic for so long, then the bill comes due. I’ll say it again, have cash on hand. For the self employed or those where your pay is not stable, have between six months and a year of expenses saved, for the regular W2 employee with stable pay, 6 months is likely enough. Here is the important part, refresh your household spending number as prices have gone up, so has your non-discretionary spending.
Know thyself: Get into a portfolio that is for you. The only index I ever want to hear about is the one that directly relates to you or your portfolio. Unless all you did was buy the index fund or ETF, throw those headlines out the window. Instead, find out how it impacted your portfolio. If you still want to freak out afterwards, be my guest. If your portfolio returns or volatility (the up and down movement of value) sacres you, consider moving to a more conservative portfolio.
Keep buying: If you have the ability and fortitude to do so, keep. buying. Financial markets are one of the only places I know if where most people run out of the store when everything goes on sale.
Avoid buying single stocks: Unless you know it very well. One of the good characteristics about capitalization based indexes that they are self cleaning, meaning the underperforming companies will get kicked out if they fall below a certain value…and they have to fall further than the other companies. When a stock goes from being #500 in the S&P500 to being #501, they get kicked out in what is known as reconstitution. The only way I would suggest people have individual names is if they are a) doing direct indexing, b) know the stock well and have picked a stop loss number, or c) they know the risk and are okay with it. Of course, I would almost never suggest someone have an individual name as more than 10% of their investments, barring some very narrow circumstances.
Source: Koyfin. In some cases, ETFs or Funds are used as proxies. It is impossible to invest directly into an index.
US stock sectors have all been hurt, except energy.
Source: Koyfin. ETFs or Funds are used as sector proxies.
Trivia: When was the last time the Euro and US Dollar were are parity?
Scroll down down for answer.
Source: Koyfin. For the first time since the early 2000s, the Euro and USD were at parity.
