A common topic lately has been the problems with emerging markets and why the asset class is down so much this year. It's important for investors to examine these problems because the asset class is expected to generate excess returns over time but is underperforming now. We know we're supposed to "buy low and sell high", but in practice it's a very hard thing to do, especially when it comes to more complicated parts of the global stock markets.
Of the many destabilizing forces in the world today, blockchain may be one of the most misunderstood. We've all heard how this mysterious process is what powers bitcoin and other cryptocurrencies. Some of us may even have heard how major companies, including asset managers and brokerage firms like Vanguard and TD Ameritrade, are experimenting with the technology. But what is it? How does it work and what is it good for?
We've all heard stories about folks still working in their golden years because they can't afford to retire. While this is often due to forces beyond their control, there are also common but avoidable planning mistakes to learn from.
Along these lines, The Wall Street Journal has been running a series highlighting the plight of average Baby Boomers struggling to afford to retire. Titled Unprepared, the series looks at the lives of real people through the broader lens of what the Journal accurately portrays (in my words) as the slow-motion train wreck of many Americans reaching retirement age and largely being, well, unprepared.
When rates on CDs are higher than bonds, why invest in bonds at all? If most bond prices are negative so far this year, why not sell them and just deposit the money at the bank where we can earn a couple percent? Anything positive is better than something negative, right?
These are good questions and it's important to explore the answers since some (or many) of you have probably asked yourselves similar questions lately. The issue is that, so far this year, bond investments are mostly negative while yields on cash investments like CDs have turned up in recent months and seem more appealing.
Year-to-date, the total return (including dividends) of core bond index funds like Vanguard's Total Bond Market and iShares Core Aggregate Bond Index are down around 1% - 1.2% while 1yr CDs, for example, currently offer almost 2.5%.
It's entirely reasonable to consider dumping underperforming bonds in favor of nice, safe, comfortable CDs at the bank. The problem is that it's the wrong thing to do. Or, at least it's the wrong thing to do with your long-term savings.
A common question lately has been about what to do with cash at the bank. Interest rates have been rising and have finally started lifting yields on certificates of deposit (CDs). But are rates good now or should you wait for them to go up? What about online banks, are they a good option? And how much money should you have in CDs anyway?
This past weekend I was barbequing with a group of friends, all dads of teenagers and younger, and one of the subjects talked about was how to teach our kids about money. We complained about how the subject is rarely taught in schools but agreed that it's our responsibility to give these tools to our kids. Teachers have enough on their plates already anyway.