Category: Finance

(photo by Alec Favale on Unsplash)

Where can we invest our money right now? This is a tricky question to answer. Hold cash in a savings account earning 0.01%? No. Lock cash into a CD for 1 year earning 0.6%? No. How about bonds? No, extremely low interest rates too.

Stocks? Under normal circumstances, investing in the stock market is a great way to grow your money. And if you have invested in the market in recent years, congratulations. The markets are at or near all-time highs.

Here is a one-year chart of the SPY (S&P500) through today… Straight Up!

Many companies (but not all) are reporting all-time great earnings numbers for the most recent quarter, especially certain big name tech companies. With few exceptions, day-after-day the market rips higher, like today. Yet, I am leary to jump in here. Some of the big tech companies have stated they anticipate their next quarter to be weaker due to the the Covid variant getting worse, causing slowdowns in production.

If I thought the stock market still had upside from here, I would still wait for a pullback before investing. Two Monday’s ago the markets went down (a rarity).  The following days, Tue through Fri, the market cranked back up to all-time highs. That’s because investors are still “buying the dip”.

According to some stock market experts, another big reason the market continues to trend up is because the Federal Reserve Bank is pouring money into the market at record amounts. In effect, the federal government is printing extra money solely for the purpose of investing it in the market. Actually, Federal Reserve Chairman Jerome Powell confessed this fact on 60 Minutes last year (creating digital currency to invest in bonds). See 30 second clip here:

https://www.youtube.com/watch?v=lK_rYS8L3kI

Thus, stock market prices continue to move higher, in big part due to this federal support. What happens when the Feds ease this program?

I would be remiss to not bring up the topic of inflation. You may have noticed that prices for just about everything continue to go up. The “experts” state that the current inflationary trend is “transitory” (temporary) and that we will see a decrease in prices in just a few months. I’m not so sure.

Due to rising costs, companies have to pay more to purchase their raw materials. And finally some companies are increasing minimum wage to $15. However, no doubt these companies are passing these higher costs on to us, the consumers.

And as another example, there is a shortage of new cars being sold due to a shortage of computer chips. This has limited the number of vehicles for sale on car lots, which has led to astronomical prices for NEW vehicles. This in turn has caused prospective vehicle purchasers to scour the USED car, van, and truck inventories, causing a lot of demand, which in turn has caused extremely high prices too. The fair market value of many used cars today is worth MORE than the initial purchase price. Who knows when these sky high prices will drop back down to earth.

So where can you invest your money now?

Pay off debt, such as credit cards, and perhaps, pay more each month toward your mortgage. Your borrowing rate is most likely higher than the savings interest rate you could earn by keeping your money in the bank.

If you don’t have one yet, build up an emergency cash fund.

And while I do NOT recommend the following for any of my readers, in order to be transparent with my own trading, I am using a small portion of cash in my brokerage account to “short” the market. Most individual investors buy a stock at a low price, and sell it at a higher price for a profit. The opposite is true when “shorting”. A short position means that you sell a stock to open a trade, anticipating a drop in the stock, and then buy back the stock at a lower price for a profit. However, shorting (selling) a stock is viewed as more risky than buying a stock. If I buy 100 shares of stock currently trading at $25, if the stock goes to $0 (i.e., bankruptcy), I risk losing $2,500. However, if I short a $25 stock, in theory the stock can go higher forever. Thus, I would have unlimited risk in this scenario.

I also have cash on the sidelines. If (or when) the market ever drops significantly, I will have cash available to purchase ‘strong’ stocks at a discount.

(photo by Micheile Henderson on Unsplash)

It’s August 1st. And that means it’s time for another Ultimate Blog Challenge. If interested in participating as a blogger, here is a link to Paul Taubman’s website: https://ultimateblogchallenge.com Give it a try!

In the last challenge during May 2021, I chose to write about healthy habits that you can apply to your own life utilizing small steps over time.  I’m going to change things up this time around. My focus for this challenge will be on the stock market, personal finance, and other random topics of interest.

Whether you handle your investments and personal finances on your own, or you delegate these responsibilities to someone else, it is important to have an understanding of these topics so that you can make educated decisions on your financial situation that move you towards your financial goals.

The pandemic has put many individuals at risk financially, while others have thrived.

Those hurting may have lost jobs as certain businesses struggled to remain afloat during lockdown. And starting today, renters who have struggled to keep up with rent payments may be at risk at losing their apartments as the eviction moratorium deadline has just passed without the Federal government voting last Friday to extend this timeframe.

Those thriving financially may have had a steady job throughout the pandemic. And as the stock market has steadily moved higher and higher throughout lockdown after its initial drop, those who kept long positions in the market have done well.

The stock market is at or near all-time highs.  No one knows which way the market will go. I personally thought the market was over-bought a few years ago. If you have invested long in stocks during the pandemic, it has been easy money. And perhaps that will continue. However, at some point, volatility will return. And when it does, investors will need to be more selective on the investments that they make.

My goal for this blog challenge is to increase my knowledge of the markets and personal finance topics in order to become a better stock investor. If I can explain complex subject matter in easy to understand language, then you and I can both benefit.

Now for the usual disclaimers. I am not a professional stock trader, nor do I have any professional trading licenses.  I only trade stocks for myself as a personal investor. And while I do have a CPA license (currently in inactive status), these blogging topics are not my area of expertise. Thus, please consult with your own stock broker or accountant for guidance.

If you have any personal finance topics that you’d like me to write about, please let me know in the comment section below.

I look forward to researching and sharing these topics with you during this month. I hope that you get something beneficial out of it in order to reach your own financial goals, and to thrive.