This Week In Your Wallet: The Stock Market Ride
Okay, everybody, breathe. We knew this downturn in the stock market was coming. We just didn’t know when. Usually, we can trust the markets to go up a bit, then retract, go up and retract. Since 2009, we’ve been headed pretty much straight up. And in the past week — including as we send this newsletter out today — we are getting what seems like all of those overdue retractions at once. Here are a couple of things to perhaps help you feel a little calmer about what’s going on. (That’s assuming your nerves are frayed in the first place. If they’re not, you’re already ahead of the game.)
First, don’t look at the numbers, look at the percentages. The 1175 drop in the Dow Jones Industrial Average may have broken a record as the largest single point drop in history, but those big numbers don’t mean as much when they represent a smaller share of the overall pie. In percentage terms, the Dow fell just 4.6 percent. In 1987, it fell just over 500 points — but more than 22 percent. That was a much bigger deal.
Second, focus on the number of shares you own, not the value of those shares. In rocky times, it helps to change the frame. If you must look at your investments, remind yourself that when markets fall, it’s an opportunity to buy more shares at lower prices than before. Eventually, those shares will head back up.
Third, before you make any changes, ask yourself what has changed to warrant them. As we’ve reminded you in this newsletter as the markets have rallied, money you need in the short term — to make next semester’s college tuition payment, to put the down payment on the house you’re planning to buy in 2019 or 2020 — doesn’t belong in the market. It never did. If it’s still in there, pull those dollars out before they lose additional value and park them somewhere safe. Even with the losses over the past week, you may find in evaluating your asset mix that the increase in stock prices over the last year means you’ve got more in equities overall than you are comfortable with. If that’s the case, do a little rebalancing to bring it back in line. If you’re in it for the long haul — i.e., we’re talking about your retirement funds — and your risk profile is where you want it to be, just keep putting money into that 401(k) every month. You don’t need to meddle.
Fourth, and finally, remind yourself of two things: One, as The New York Times’ Neil Irwin aptly wrote this morning, “2017 was weird” in that it was soooooo free of bumps in the market road. “The last 18 months have been one of the least volatile periods for the stock market in modern times. Humans have a bias toward recency, an inclination to let recent experience shape our expectations for the future.” In other words, the fact that it’s been going up so evenly has led us to believe it would keep going up so evenly. Reaching for the Pepto-Bismol is actually pretty normal in a case like this. And two, the economy is doing well. So well, in fact, that there’s a risk that wages will grow too fast, the economy will overheat, the Federal Reserve will increase interest rates faster than expected to pump the brakes a bit and we’ll have more inflation than we’re used to.
Eventually this bull market will become a bear market, which will become a bull market yet again. These are factors none of us can control. What you can do is continue to control your own personal economy. Save enough. Grab matching dollars. Maximize your tax advantages. Put your money to work in a mix of investments that makes sense for you. Then, wake up and do it all again.
Oh, and if all this volatility is inspiring you to say, “Well, I’m just going to buy Bitcoin,” please don’t. At least not until you read this.
Face-Off: Walmart Vs. Amazon
In other news (yes, there is other news), you may be wondering when it comes to cutting costs, which shopping giant wins — Amazon or Walmart?
LendEDU, an online marketplace for student loan refinancing, conducted a relatively thorough investigation on its blog. The researchers priced checked 50 products — an assortment of home goods, kitchen/home appliances, technology and entertainment products, food and beverages and miscellaneous items. For all 50 items combined, the total cost was 10.37 percent cheaper on Walmart’s website. Amazon also ranked more expensive in four out of the five categories (especially in home goods). However, Amazon was cheaper by 22.51 percent when it came to food and beverages. The moral: It pays to know what you’re buying before you shop.
And FYI, although Amazon is widely seen as the reigning king of online ordering — it offers free one-day, two-day and same-day delivery on millions of items through its Prime membership option ($12.99 per month or $99 annually) — Walmart is working hard to crack the online ordering space. Walmart offers free two-day shipping on more than two million products. There’s no membership fee, but there is a $35 cart minimum.
W-2 Scam Alert
It’s tax season, and unfortunately, that doesn’t just mean refunds — it means fraudsters are looking to snag people’s personal data and use it to cash in. It’s important to watch out for phishing scams of all kinds — meaning emails, links or phone calls asking for your sensitive information. The latest on-the-rise ploy? Seemingly legitimate emails asking for a copy of your W-2. Thieves used business emails to pose as company executives and sent messages to payroll employees asking for copies of their W-2 forms (which include names, addresses and Social Security numbers), reports AccountingWEB, a community for tax and accounting professionals. They then filed fraudulent tax returns or sold it to others who likely planned to do the same. So even if you think you know the person or company contacting you, verify with them directly — in a new correspondence coming directly from you — that the request is legitimate. (Even if it’s your boss.) Better safe than sorry.
In other news (yes, there is other news), you may be wondering when it comes to cutting costs, which shopping giant wins — Amazon or Walmart?
LendEDU, an online marketplace for student loan refinancing, conducted a relatively thorough investigation on its blog. The researchers priced checked 50 products — an assortment of home goods, kitchen/home appliances, technology and entertainment products, food and beverages and miscellaneous items. For all 50 items combined, the total cost was 10.37 percent cheaper on Walmart’s website. Amazon also ranked more expensive in four out of the five categories (especially in home goods). However, Amazon was cheaper by 22.51 percent when it came to food and beverages. The moral: It pays to know what you’re buying before you shop.
And FYI, although Amazon is widely seen as the reigning king of online ordering — it offers free one-day, two-day and same-day delivery on millions of items through its Prime membership option ($12.99 per month or $99 annually) — Walmart is working hard to crack the online ordering space. Walmart offers free two-day shipping on more than two million products. There’s no membership fee, but there is a $35 cart minimum.
W-2 Scam Alert
It’s tax season, and unfortunately, that doesn’t just mean refunds — it means fraudsters are looking to snag people’s personal data and use it to cash in. It’s important to watch out for phishing scams of all kinds — meaning emails, links or phone calls asking for your sensitive information. The latest on-the-rise ploy? Seemingly legitimate emails asking for a copy of your W-2. Thieves used business emails to pose as company executives and sent messages to payroll employees asking for copies of their W-2 forms (which include names, addresses and Social Security numbers), reports AccountingWEB, a community for tax and accounting professionals. They then filed fraudulent tax returns or sold it to others who likely planned to do the same. So even if you think you know the person or company contacting you, verify with them directly — in a new correspondence coming directly from you — that the request is legitimate. (Even if it’s your boss.) Better safe than sorry.
Have a great week,
