Sighting: People, Get Ready

Retirement can sometimes feel like this amorphous concept, but just because we can’t touch it or see it, doesn’t mean we can pretend it’s not real. We should have a sense of urgency about retirement because it’s coming, and there are no do-overs.

The best time to start saving was as soon as you got your first paycheck. The second best time is now.

– Michael Batnick writing at his Irrelevant Investor blog on 9/19/20. Read more at bit.ly/3iZuFe5.

Sighting: Negativity Is Not an Investment Strategy

I understand why people are negative about, well, everything. 2020 hasn’t exactly been a walk in the park. There’s plenty to worry about these days.

You could argue that the investing landscape has never been harder than it is today considering the level of interest rates around the globe.

But you still have to invest. You can’t bury your money in your backyard or keep it all in cash when there is no such thing as a risk-free rate of return.

Complaining about the Fed is not going to help fund your retirement. Making fun of Robinhood speculators does not in fact create alpha. Being mad at the stock market for not dropping further during a pandemic doesn’t help fund your child’s 529 plan.

Any position you take in regards to your portfolio involves risk. Investing in stocks is risky. Bonds are also risky. Crypto, private equity, hedge funds, real estate and every other financial asset involve risk-taking to make (or lose) money.

But guess what else involves risk — doing nothing! In fact, doing nothing with your money is the biggest risk of all.

There are no guarantees when investing your money in risk assets. Maybe you’ll lose a boatload of money investing in risk assets. In fact, you almost certainly will at times. There is no way to completely hedge risk out of the equation when trying to grow your capital.

There is a way to guarantee awful outcomes with your savings — complain about the markets and don’t do anything with your money. If you never take any risk, you will never have enough saved for retirement. Being pessimistic and sitting on the sidelines at all times guarantees you will lose money to inflation over the long-term.

Complaining can be cathartic at times but it’s not an investment strategy. You still have to invest in something if you wish to grow your capital.

– From a 9/20/20 post by Ben Carlson on his A Wealth of Common Sense blog. Read more at bit.ly/3kGwk8P.

Sighting: How to Think Long Term With Near-Zero Interest Rates

A long-term environment with superlow interest rates can mean different things to different people — sometimes multiple things to the same person.

With the Federal Reserve signaling that benchmark, short-term interest rates would likely be held near zero until 2023, many may be reminded of the period following the last recession, when superlow rates lasted for seven years.

Now America’s savers and borrowers face new, possibly more difficult choices. Over the previous decade, for example, the yield on safe 10-year U.S. government debt averaged about 2.4%, according to FactSet; today it is hovering around 0.7%.

Low rates may encourage some people to buy homes or refinance them, even as others consider delaying retirement or postponing other money milestones. Whether superlow rates present opportunity or peril depends on where you fall on the borrowing-saving spectrum. Here’s how to think about near-zero rates for the next few years.

Mortgage rates are likely to stay low. The average rate on a 30-year fixed mortgage is 2.87%, near its lowest level in about half a century.

That is likely to spur more home buying, though caution is warranted. I would never encourage someone to rush out and buy a home just because rates are low,” said Mike Fratantoni, chief economist and senior vice president of research at the Mortgage Bankers Association....

Borrowers with good credit scores will benefit most from superlow rates. Meanwhile, those who save, invest or lend may suffer in this rate environment.

This is especially true when it comes to cash. Those with so-called high-yield savings accounts already saw rates drop when the Fed started cutting.

Another group that gets hit: those who are approaching a life event that requires holdings that produce a steady income stream. Examples are people with target-date savings vehicles, such as retirement or 529 education savings accounts. These typically shift more money into bonds and cash as retirement or college approaches. But those assets are now likely to yield far less and so will produce less income.

Diminished income streams may lead some people to delay retirement, or college....

While low rates may tempt some people to take on more risk, don’t forget: We’re still in a pandemic.... Don’t chase yield without being mindful of the risk,” [certified financial planner Malik] Lee said. We’re still not out of the water with Covid. I’d caution people: Don’t get greedy.”

– From a 9/19/20 article in The Wall Street Journal. Read more at on.wsj.com/3mFfIjA.

Sighting: Too Much Stuff

As a kid, I used to collect stuff — Lego, vacation souvenirs, stamps. That urge to collect has never completely left me. Over the years, I’ve amassed limited edition prints, old economics books, presidential campaign posters and more. At one time, I even had a copy of every article I’d ever written, as well as a binder filled with all the student newspapers I edited while at Cambridge.

When I die, my children aren’t going to want this stuff. In fact, much of it I don’t want. Whenever I can unload some of these things without triggering too many regrets over the time and money wasted, I grab it. All this is a reminder of why money spent on experiences, rather than possessions, is so much better for happiness. Possessions may deliver an initial thrill when they’re first acquired, but all too quickly they can become a burden.

– Jonathan Clements, former personal finance columnist for The Wall Street Journal, reflecting on his biggest financial regrets in a 9/19/20 post at HumbleDollar.com. Read more at bit.ly/3coIPD6.