Money Musings 💭 What to do with that great investment idea…
If you have been here a while, you know that I have a pretty boring (yet effective!) investing strategy. I invest for the long-run in broadly diversified low fee index funds.
Over the last 30 years, this has yielded over 8% annual return adjusted for inflation. Not too shabby. 🤑
Plus, it’s low fuss. I can automate my investments and don’t always have to keep up with business news or read company 10-Ks to feel confident in my investments.
BUT what about the folks who think it’s fun to invest in a specific company they love or want to try their hand at stock picking?
That’s called speculative investing and it can be fun for some, but doesn’t have to be part of your overall portfolio.
In relationships, opposites tend to attract. J is my investing counterpart. He thinks it’s fun to come up with an investing thesis and act on it. And he has a CFA and MBA so he has the expertise to back it up.
I won’t comment on whether or not he’s been successful 😆 but I will say that in general people tend to be a lot louder about their wins than their losses.
When your coworker is bragging about how much they made on Bitcoin at the water cooler, remember that you’re not hearing about the bets they lost. Plus, we all know what happened to Bitcoin a year later.
Not to say you can’t be successful, you can! It’s just there’s a lot at play and often things happen that we wouldn’t have predicted. It’s really hard to beat the market.
Important distinction: It’s important to note that stock picking is different from building a diversified portfolio using individual stocks. This is a long-term strategy to invest in the market by purchasing 30-60 companies that represent different industries and markets, almost like recreating your own version of a diversified ETF. But I digress…
So if you or your partner think it’s fun to pick individual stocks, nurture your curiosity but keep it within these guidelines:
Make sure it’s money you’re okay with losing
Keep it to less than 5% of your total portfolio
Have some important financial boxes checked. Make sure you have a rainy-day fund ✅, you’re investing for retirement in tax-advantaged accounts (and maxing out 401(k) matching if you have it) ✅, and you’ve paid off high interest credit card debt ✅
Who do you resonate more with, me or J? Hit reply and let me know!
MONEY MOVE OF THE WEEK
PAY DOWN DEBT SERIES: STEP #3 - PRIORITIZE.
We’re onto step 3 of our pay down debt series. ICYMI, here’s step 1 and 2. Now you’ll want to prioritize which debt you’ll plan to pay off first.
You’ll see a column on your debt tracker where you can rank each piece of debt, starting with #1 (the highest priority) and working your way down the list. How do you decide which comes first? I use one of a combination of three methods.
The snowball method. Pay off the debt with the lowest balance first. This method works really well if you have a card or loan (or a few) with a relatively low balance because it feels amazing to cross it off your list. These wins help us build momentum and I often see people pay down their debt more quickly.
Avalanche method. Pay off the debt with the highest interest rate first. With this method you pay off the most expensive debt first or the debt that technically is costing you the most money. This method works really well if there is a loan or credit card that has a much higher interest rate than the others because paying it off has a big financial impact.
Emotional method. Pay off the debt that has the greatest emotional impact. Sometimes there’s a loan that drives us bananas. Maybe you owe your parents money and even though there’s no interest you can’t wait to pay them back. Or maybe you had a horrible experience with a certain financial institution and you never want to see or hear from them again. If you don’t have a loan that elicits a big negative emotional response you can skip this method.
YOU GOTTA SEE THIS
WHEN WOMEN LEAD.
I’m reading Julia Boorstin’s book When Women Lead, which is filled with compelling stories and research about why women make incredible leaders and how that impacts companies and the world in general.
Here are a few stats that stood out to me:
Female leaders are more likely to have diverse teams. The most racially diverse companies report financial returns 35% above the industry average, the most gender diverse companies report financial returns 15% above the average (McKinsey) 💰💰
Female CEOs pay their high-earning female reports more than male CEOs do (World Economic Forum)
Some of the traits that women leaders tend to embody that all leaders would benefit from:
Building teams and companies with purpose
Leading with gratitude and empathy
Long-term and big picture thinking
Growth mindset and embracing change
Resilience and acting quickly without ego
Listening to be heard
What superpowers or strengths help you lead? 💪💪 Hit reply and let me know.
your weekly money wins
Here are all the amazing money moves you made this week 👏👏👏
Meesh J: After years of financial education, I am starting to feel comfortable with my investments, 401k contribution and maxing out my Roth IRA. I have finally put my savings (minus 3 months expenses) in a HYSA!
Harriet: Ate at home when I wanted take out
TB: Put my savings into a high yield money market fund!
Lee: Negotiated rate for medical care not covered by insurance
Carly C: Finally filled out the paper work to get pre-approved to buy my first home
Andrea J: Got our tax refund and put away in savings!
Amanda K: Put $200 in last year's Roth IRA before the deadline
Lisa V: Got a financial advisor
Stephanie B: Paid a drop-in fee at the gym to see how often I got before committing to membership
Karen: Used my savings to buy a new mattress! Mine was from 1999 😂
Wiri W: Got a raise at work and reduced the motorcycle insurance
Lynn L: Used $4K bonus to make an extra mortgage principal payment!
AmyB: Avoided a septic tank charge by buying a product that seems to be working, have networked with new businesses who want to work with me, after AMEX killed my credit score last year by closing cards - my score has finally risen 100 pts
Carla W: Paid off a bill
Cath H: Invested in a new tech start up. I bought one whole share.
Kamila K: I submitted health insurance claims.