Don’t let the constant flow of predictions and prognostications about the markets and the economy—no matter how prescient they may seem—divert you from a comprehensive plan designed to achieve success over the long term.
If you’ve ever been inclined to try to improve your retirement prospects by closely tracking the financial news and then shifting your strategy to stay a step ahead of the market’s twists and turns, 2016 seemed to provide a bounty of opportunities.
A 2016 study from the National Capability Study by the FINRA estimated that nearly two-thirds of Americans couldn’t pass a basic financial literacy test, meaning they got fewer than four answers correct on a five-question quiz. What can be concluded from the study is that Americans demonstrate relatively low levels of financial literacy and have difficulty applying financial decision-making skills to real life situations.
Financial literacy is about money management. And, managing money is a lacking skillset of most Americans. A significant part of money management is the ability to make ends meet through spending less than you earn and possessing adequate savings. Individuals who are not balancing monthly income and expenses are not saving and thus may find themselves struggling to make ends meet.
Personal finance expert Manisha Thakor, founder of MoneyZen Wealth Management, emphasized that it is important to learn to live within your means — making sure that no matter what your income is you have something leftover to set aside for savings and investing, and that you are not carrying credit card or consumer debt. Make sure that your mortgage, car loan, and student loan are the only types of debt you carry.
If you’re not saving and have not created an emergency fund, it’s a sign that you’re not living within your means and that you are spending more than you earn. For every year that you work, she advises that an individual should strive to fund a year of retirement. In an ideal world, people would be saving 10, 15, 20 percent of their earned income.
Living below ones means and agreesively saving is key for working adults to not engage in lifestyle creep. As your income goes up, temptation escalates to live larger and spend more. It’s not always frivolous or non-essential spending that is the culprit. Oftentimes the frivolous spending can be on children or what one deems essential for an upgraded lifestyle.
Individuals should commit to viewing money as something much bigger than just a tool, but as a means to an end. Give money purpose or make it a means to achievimg long term goals and aspirations, such as buying a home, saving for retirement or sending a kid to college.
Ms. Thakor states that people must view money as part of creating a desirable “financial well-being” — an aspect of well-being that individuals grow and nurture the way they would spiritual well-being, physical well-being, and emotional well-being throughout their lives.
Please understand that risk and security are fundamental personal finance concepts. Regarding risk, according to Ms. Thakor, there are three components to risk: one’s willingness, one’s ability, and one’s need.
Willingness means being able to “sleep well at night”. As an investor, do you have the “psychological predisposition” toward taking risk or not?
Ability is “a function of an investor’s age and the stability of their income”. If they are a very young director of sales, they have a much higher capacity to take risk than a 60-year-old retiree.
The final piece is need. “An individual should not take more risk than they need.” One should know the “least amount of risk that they need to assume” in order to realize their long term goals.
It is important to appreciate that much of the America’s personal finance industry, which we will call Wall Street, is geared towards getting the retail investor, which we will call Main Street, to take on more risk because it generates more fees and revenue for Wall Street. Essentially, in the American culture, there exist a paradigm toward growing for growth’s sake. And, as individual retail investors, there is no good reason to blindly follow the crowd.
A recent survey conducted by UBS found that only 23% of women globally take charge of long-term financial-planning decisions. And it isn’t a generational problem: 56% of women aged 20 to 34 defer to their spouse compared with 54% of women over 51 years of age.
A report from the Financial Industry Regulatory Authority suggests that women’s financial understanding is going in the wrong direction, too. Baby boomer and Generation X women revealed higher levels of financial literacy than millennial women based on a five-question quiz.
Initially, it was puzzling to understand why highly socially conscious NBA basketball players were being unusually silent and staying on the sidelines regarding the controversy of freedom of speech inside the People’s Republic of China and the human rights of the Hong Kong protesters. Especially, their silence was puzzling when one considers how vocal and visible a stance a number of NBA players took regarding Colin Kaepernick’s freedom of speech and his right to kneel during the pre-game playing of National of Anthem.
In 1992, an aide to then Democratic presidential candidate Bill Clinton once commented “it’s the economy, stupid”. Well, in the case of the socially conscious NBA players being surprisingly quiet, it appears that it is not the economy, but “it’s the money…stupid”.
NBA teams’ total players’ salaries are capped and directly tied to a percentage of the league’s revenues. If NBA’s top line revenues are impacted by the current controversy in China, then there is a high probability the revenue pie will shrink. And conversely, the salary cap for players salaries will shrink proportionally if Chinese corporations decide to end their lucrative multi year partnerships, which are worth billions of dollars to the NBA.
Additionally, many top NBA players such as James Hardin, Stephen Curry, and LeBron James, to name a few, spend time in China during the off season meeting basketball fans and getting paid. They spend time in the second largest economy signing endorsement deals, promoting themselves and the sport of basketball, and subsequently, promoting the NBA. And, it appears that ‘…for the love of money…’ the players do not want to rock the boat and jeopardize the Chinese golden goose that supplements their million dollar paydays.
Thus, the otherwise socially conscious NBA players have been “radio silent”. They have yielded on the issue of Hong Kong protesters human rights and the Houston Rockets GM’s tweet supporting the protesters that sparked the current brouhaha. Although a few players and coaches have offered tepid apologies to China for someone in the NBA fraternity expressing their freedom of speech, the majority of players have been mute.
Fortunately for Colin Kaepernick, there was not an autocratic Communist government threatening the bank accounts and freedom of speech of the otherwise socially conscious NBA players.
The Oracle of Omaha says the U.S. economy has plenty of runway left before the next recession. “Right now, there’s no question: It’s feeling strong. I mean, if we’re in the sixth inning, we have our sluggers coming to bat right now,” Buffett said in an interview with Becky Quick on CNBC’s “Squawk Box” Thursday morning.
Florida U.S. Senator Marco Rubio was recently on CNBC warning American investors and public pension funds who invest in stocks of Peoples Republic of China businesses listed on U.S. stock exchanges to beware. Like Enron and Worldcom, the companies could potentially be fraudulent enterprises, or like they say in Texas, “big hat, no cattle” entities. Essentially, these Chinese “public” companies are not regulated by the Securities and Exchange Commission (SEC) like their American counterparts. And, these listed companies are not currently required to abide by U.S. or Western generally accepted accounting practices (GAAP) standards.
The SEC exists to protect U.S. investors from the shenanigans of public companies. Yet, trillions of dollars of U.S. capital from American investors and pension funds are invested and continue to flow into these highly risky non transparent companies that are not regulated by the SEC.
If there was ever a time for investors or buyers of stocks to beware, it would relate to investments in Chinese stocks. Even the large cap highly own stocks of Chinese companies such as Alibaba (BABA), Tencent (TCEHY), Nio (NIO) and Baidau (BIDU), pose major potential risks to U.S. investors since no independent accounting firm has audited their financial reports or filings to assess their veracity.
Just like the quarterly and annual numbers of gross domestic economic product provided by the Chinese Communist government are viewed as works of fiction by most Western economist, Chinese companies’ financials should be reviewed with similar, if not , more scrutiny and skepticism.
CNBC Mad Money host Jim Cramer has commented on many occasions to viewers that he personally avoids and would not recommend his viewers to invest in Chinese companies stocks. He cites their lack of financial transparency and unknown corporate governance as reasons to avoid all but the largest of these stocks.
Finally, Senator Marco Rubio and Hayman Capital Management founder Kyle Bass, have been sounding the alarm for years about the threat potentially posed to the U.S. financial markets and to the retirement pension plans of millions of Americans by these listed foreign companies. Senator Rubio, along with a bi-partisan group of Senators, have been both sounding the alarm and proposing that all companies listed on major U.S. security exchanges be required to follow the same reporting standards and independent audit requirements followed by U.S. public companies. And, those foreign companies found not in compliance with SEC regulations for public companies should be de-listed from American security exchanges.
“Like the NBA, we welcome the Chinese censors into our homes and our hearts. We too love money more than freedom and democracy. Xi doesn’t look like Winnie the Pooh at all. Long live the Great Communist Party of China! May this autumn’s sorghum harvest be bountiful! We good now China?”
For the past twenty to thirty years, thousands of American and Western European international corporations have had to compromise abiding by Western democratic values and rights, those same values and rights that made them successful, to conduct business inside China and access the enormous Chinese domestic market.
From all appearances, these corporations have sought bottom line profit and top line revenue growth by doing business in China above basic human values of freedom of speech and the rule of law.
For decades, corporations have literally bent over backwards and several have performed ‘unnatural acts’ to appease the Chinese autocratic government officials. These corporations have overlooked draconian censorship, brutal repression, forced labor and re-education of minority ethnicities, and outright fraud to chase monetary gain in China.
No American or Western European corporation appears immune to seeking profit over values to conduct business in China. Google, one of America’s largest technology companies, appeared to ignore its own corporate values and offered a version of its search engine and services that conformed to the Communist autocratic government’s oppressive censorship policies. Only after Google employees threatened to strike and the American media shined light on the deal did Google abandon the effort.
Now, thanks to the NBA desire to expand in China and a team’s general manager’s tweet supporting the Hong Kong protestors, Chinese harsh censorship and irrational response by global norms to core American values and rights, freedom of speech and rule of law, are finally getting the media and public attention it deserves. With billions of dollars and international market growth at stake, NBA Commissioner, Adam Silver, is attempting to tightly walk a fine line between living by Western core values of freedom of speech while simultaneously preserving access to the lucrative Chinese domestic markets.
What lessons Americans should learns from the current controversy is that the Chinese Communist autocratic government ruthlessly censors speech, curbs individual freedom, runs roughshod over the Western standard rule of law and represses any entity, individual or corporate, that challenges or threatens its legitimacy or core principles.
Houston Rockets general manager Daryl Morey’s now-deleted tweet in support of the Hong Kong protests and the response to it have already earned more attention than dozens of other stories in recent years documenting questionable relationships between U.S. companies and Beijing, writes Jake Novak.
— Read on www.cnbc.com/2019/10/08/chinas-reaction-to-the-nba-is-the-wake-up-call-the-world-needed.html
Effective investors often share these 6 traits. These traits are useful for those who prefer to control their investing with a hands-on approach.
1. They start investing early. It’s math: The more years investors begin to invest, the more money they may be able to earn through the power of compounding. Starting early means a longer investment time horizon. And, a longer time horizon allows you to invest in assets that have more growth potential over time.
2. They prioritize their goals. With clear goals and a clear time frame, investors can prioritize. That helps develop asset allocation because an investor has time horizons around those goals.
3. They save consistently.. Consistently save a portion of their income generally reach their goals faster. Those who make contributions to their retirement savings every year, as opposed to those who skip some years, can accumulate more and are more likely to reach their goals.
4. They’re comfortable taking risk. Successful investors know that for the potential to grow their assets faster than inflation, they’ll have to invest in assets with a higher than expected return, such as stocks, which carry higher levels of risk.
5. They diversify. Investors spread their money among different asset classes — stocks, bonds, real estate, commodities, and others — and also diversify within those asset classes. That might mean, for example, owning stock of U.S. companies, as well as companies in other countries.
6. They’re tax-wise. Taxes should never be the sole driver of an investment decision, but making tax-wise investment decisions can help maximize after-tax returns. For example, investors might choose to move money from taxable accounts into assets with lower or no tax obligation, such as municipal bonds.
