What Are TIPS?

Like I-bonds and other Treasury bonds, TIPS are issued and backed by the U.S. government. This offers a level of security and comfort you won’t get with corporate bonds, stocks, or exchange-traded funds.

Most government bonds have fluctuating, unpredictable yields and prices based on a multitude of factors, including supply and demand in the bond market. There’s typically little or no adjustment made for elevated inflation, and they might not offer much protection for frustrated investors.

If the yield on your bond is lower than the inflation rate, you are actually losing money. That is not an appealing prospect.

In contrast, TIPS are specifically designed to be inflation-linked. The U.S. Treasury adjusts the principal of a TIPS using the most commonly known measure of annualized inflation, the Consumer Price Index or CPI, which is released monthly by the Bureau of Labor Statistics.

Plus, the Treasury assures that, upon maturity, a TIPS holder will get either the inflation-adjusted price of the TIPS or the original principal, whichever is greater. Hence, you’ll never get a penny less than the original principal you invested in the TIPS.

Moreover, with a TIPS, you’ll get a fixed interest rate, which is set at an auction and won’t change after that, and the rate is never less than 0.125%. That’s a feature you won’t typically get with bonds in general and certainly won’t get with riskier assets.

As of Dec. 13, 2022, the TIPS yield is 1.324%. That may not sound like much, but remember that this is on top of your inflation protection.

Are TIPS the Same Thing as I-Bonds?

The Treasury makes it crystal clear that, while there are some similarities between a TIPS and a Series I Savings Bond (also known as an I-Bond), there’s definitely not the same thing. For one thing, I-Bonds are non-marketable, which means they cannot be bought or sold in a secondary securities market.

I Bonds offer a valuable hedge against inflation but are not for every investor. Consider these pros and cons of I Bonds before investing.

People don’t typically buy TIPS to “flip” them for short-term gains, but at least you’ll know that you can buy and sell them in a secondary securities market (with the proviso that TIPS can’t be sold in a secondary market until they mature).

Then, of course, there’s the strong inflation-adjustment focus of TIPS which isn’t quite as present with I-Bonds. With a TIPS, there’s the inflation-adjusted principal that’s used to calculate the interest the holder will receive.

These are semiannual (twice per year) interest payments, as opposed to I-Bonds, where interest accumulates over the life of the I-Bond and is only paid to the holder upon redemption.

There is some inflation indexing with both TIPS and I-Bonds. Here’s the difference, though: I-bonds are indexed to a semiannual inflation rate that’s announced in May and November. Meanwhile, TIPS are inflation-indexed every single month of the year, as that’s how often the Labor Department’s CPI report is released.

There’s also a difference in the time frame/maturity duration between a TIPS and an I-Bond. Whereas I-Bonds are rather inflexible – they always have a 30-year life span – a TIPS gives you time-horizon choices with life spans of 5, 10, and 30 years.

Why Should I Buy TIPS?

Frankly, TIPS are among the most underappreciated government-backed assets. They rarely get attention in the financial press, though with inflation rearing its ugly head in 2022 and 2023, the appeal of TIPS is readily apparent.

Again, there’s also the flexibility aspect of TIPS, which offers three different maturity durations.

Portfolios of practically all sizes can accommodate a TIPS as the minimum purchase amount from the Treasury is $100; above and beyond that, TIPS purchases are made in increments of $100.

There may also be favorable tax treatment with TIPS. Specifically, there are no state or local taxes applied to a TIPS (that’s according to the U.S. Treasury, but be sure to double-check this with a licensed tax professional).

Be aware, however, that you’ll be expected to pay federal tax each year on any interest earned from a TIPS. Also, your federal taxes might be affected by any increase or decrease in the principal of your TIPS.

Yet another reason to buy TIPS is that you’ll get instant portfolio diversification, but with a special inflation-adjustment angle that few other financial instruments can offer. This isn’t to suggest that anyone ought to renounce cash completely. It’s an interesting idea, though, to exchange some excess cash for TIPS during times of high inflation – like 2022 and 2023, for instance. Just bear in mind that a TIPS isn’t quite as liquid as cash, so know your time horizon before investing in one.

Where Can I Buy TIPS?

If you have a portfolio manager at a bank, he or she can probably help you invest in TIPS. You could also try delving into a secondary securities market to purchase TIPS, though that’s generally only recommended for advanced traders.

If you’re a do-it-yourself type of investor, you can purchase TIPS directly through the U.S. Treasury’s website known as TreasuryDirect.gov. That way, you’ll be buying right from the source and eliminating the middleman (such as a bank, broker, or dealer).

Ultimately, there’s no need to seek out complex financial instruments or high-risk assets when you can easily purchase a government-issued bond that’s designed to help you deal with lofty inflation. So, feel free to diversify your portfolio with ease and flexibility – take a tip from me and give TIPS a try today.

The post Treasury Inflation-Protected Securities: What Investors Should Know About TIPS appeared first on FinMasters.

This is true in astronomy but also in the financial markets. Market rotation, also known as sector rotation, allows patient and forward-thinking investors to take advantage of the ups and downs that markets have experienced throughout history and will continue to undergo as long as human behavior remains predictable.

What Is Market Sector Rotation?

Market sector rotation involves the movement of money from one sector or part of the market to another.

It’s called “rotation” for a good reason: like the earth revolving around the sun, money will move away from one area of the market to another for a while but will inevitably (or at least, probably) return sooner or later.

Unlike the earth revolving around the sun, however, a full market rotation doesn’t occur over 24 hours. It’s a process that can take months or even years as shifts in sentiment cause investors to pull their money out of one group of financial assets and into another.

Studying rotation can help us understand how cyclical and sentiment-driven the financial markets really are. In the stock market, investors might collectively favor fast-growing technology stocks for a while; 2021 provided a prime example of this as traders bought up shares of famous tech names like Alphabet/Google and Meta Platforms.

In contrast, many of those same investors who rotated into large-cap technology stocks in 2021 rotated out of them and into defensive stocks like General Mills and Eli Lilly as markets turned down in 2022.

Sentiment shifts constantly (though not necessarily quickly). At any given moment, investors could favor or disfavor any number of market sectors: technology, consumer staples, energy, healthcare, banks, commodities, you name it.

The cycles of money movement aren’t based on what’s happening at the moment. Investors tend to be forward-looking. In other words, they’re positioning themselves for what they believe will be the next cycle, often months in advance.

Is Market Rotation the Same as Economic Expansion and Contraction?

Economic expansion and contraction can lead to market rotation, but they’re not the same thing.

When the economy is firing on all cylinders, that’s expansion. It’s marked by low unemployment, wage growth, and growing corporate earnings and gross domestic product (GDP). When those factors are moving in a negative direction, those are signs that the economy is shrinking or contracting.

Market rotation is a response to those larger economic cycles. When the economy expands, investors rotate out of more defensive sector assets, such as consumer staples and utility stocks, and possibly government bonds and gold.

Those asset classes don’t necessarily lose value, but they may underperform compared to riskier assets, such as technology stocks, that draw investment during expansionary phases.

Economic contraction induces the opposite behavior: rotation out of high-risk assets and into safety-focused investments, with cash and government bonds often being considered the safest of all (as evidenced during the COVID-19 crisis of March 2020).

Even during times of relative calm where there’s no strong tendency toward economic expansion or contraction, there can still be rotation between stock-market sectors.

Is it possible for investors to capitalize on these sentiment-driven movements?

How to Use Market Sector Rotation to Your Advantage

It is often possible to take advantage of temporary cycles in the financial markets. Having a “this, too, shall pass” attitude and knowing that rotation is usually transitory can help you stay anchored when billions of dollars flow from one sector to another.

Ultimately, capitalizing on market rotation means being a contrarian: thinking independently and moving in the opposite direction from the crowd. Contrarian investing has helped legendary investors like Warren Buffett and Charlie Munger build vast amounts of wealth over time.

Certainly, it’s easier for contrarians to take advantage of market rotation during times of strong economic contraction. After investors rotated into cash and government bonds in March 2020, you could have bought practically any sector of large-cap stocks and profited handsomely just by holding your shares throughout the remainder of 2020 and all of 2021.

Folks with the gumption and the foresight to reallocate into quality companies in risk-on sectors like technology fared particularly well during the stock market’s recovery from the COVID-19 crisis.

When the economy contracts, rotating into defensive names can help you shield your wealth against volatility. During turbulent times for the economy, relatively safe sectors like consumer staples and utilities have traditionally lost less than high-growth areas of the market.

The Contrarian Approach

A true contrarian is more likely to reallocate into defensive stocks when most investors are complacent, and stocks are generally expensive rather than waiting until the economy and financial markets encounter turbulence.

When the economy isn’t strongly trending in either direction – boom or bust – the rubber really meets the road when it comes to sector rotation. Don’t assume that money can’t be made when the overall market is going sideways, as there’s almost always some form of sector rotation going on under the hood.

Contrarians can look for segments of the economy that happen to be currently out of favor but which have a long track record of consistently making a comeback sooner or later.

It takes a strong stomach to buy large-cap bank stocks, for example, when most traders are selling their shares from that sector, but capital has always flowed back into those sectors eventually.

It also requires clear-headed, non-emotional thinking to take profits on, say, real-estate stocks when prices are high, and seemingly everyone is predicting blockbuster returns in that sector.

Most investors will buy defense stocks when the sabers are rattling, and the news is all of the war and sell them when peace breaks out. The contrarian will buy them when everyone’s talking peace and sell them when the next war breaks out.

Research Is the Key to Profiting from Market Rotation

Most of all, you’ll need to keep tabs on the ups and downs of various market sectors in order to apply these contrarian principles profitably. It’s important to keep up with daily changes in overall investor sentiment while also having the patience to wait until a particular sector is heavily favored or disfavored before you hit the “buy” or “sell” button.

As always, outperforming most investors means keeping your emotions in check and using other people’s extreme or irrational sentiment shifts to your advantage. That’s the essence of capitalizing on market rotation, where cycles aren’t always predictable, but they are certainly inevitable.

The post What Is Market Rotation and How to Use It to Your Advantage? appeared first on FinMasters.

Get your calendar ready, as you’ll definitely want to mark down these must-know dates for informed dividend investors.

What Are the Four Most Important Dividend Dates?

The U.S. Securities and Exchange Commission (SEC) identifies four essential dividend dates that investors should know:

The Declaration Date

So, let’s say you’re interested in purchasing XYZ stock in order to collect a dividend payment from Company XYZ. The company’s board of directors will declare a dividend (the dollar amount, when it will be paid, etc.) on – you guessed it – the declaration date.

This announcement can typically be found on the company’s investor relations website. Hence, as a prospective investor in XYZ stock, you’d want to check Company XYZ’s website regularly for updates.

2. The ex-dividend date

If Company XYZ’s board declared a dividend on, let’s say, August 9, then the company might schedule the next important date, the ex-dividend date, for August 16. It’s been said that the ex-dividend date is the most important dividend-related date to know, so you’ll definitely want to mark it down.

You don’t have to own XYZ stock on the declaration date to receive the dividend payment from Company XYZ. However, you must own the stock before the ex-dividend date in order to receive the dividend payment. That date is “ex-” or without dividend, meaning you won’t get the dividend payment on or after that day.

You’d need to purchase shares of XYZ stock on or before August 15 if XYZ Company sets the ex-dividend date for August 16. Buying the shares first thing in the morning on the ex-dividend date won’t suffice.

3. The Record Date

One business day after the ex-dividend date is the record date. Thus, if the ex-dividend date falls on a Friday, the record date would be on a Monday. Let’s say, for Company XYZ, that the record date is August 17.

Did you buy XYZ stock before the ex-dividend date and continue to own it on the ex-dividend date? Great – now it’s time for Company XYZ to check its record books and determine if, in fact, you owned shares of XYZ stock before and during the ex-dividend date. If so, then congratulate yourself, as you’re eligible to receive the dividend payment that was announced on the declaration date.

Strictly speaking, you don’t have to own the shares on the record date to receive the dividend payment. It’s all about the ex-dividend date, and that’s why it’s often considered the most important of the four key dividend dates.

4. The Payable Date

Finally, there’s the payable date, which is when you’d actually receive the dividend payment. Nowadays, it’s typically deposited directly as cash in the shareholder’s investment account, though it could also be mailed as a check.

Waiting for the payable date will require some patience, as it might come several weeks after the record date. For instance, Company XYZ’s payable date might be September 7. The good news is that you’d receive the dividend payment on that day (or perhaps a few days later if it’s mailed as a check) even if you didn’t own XYZ stock on the payable date (maybe you decided to sell your XYZ stock shares sometime after the ex-dividend date).

Know the Dates, and Get Ready to Get Paid

The SEC observes that companies sometimes pay dividends in the form of stock shares instead of as cash. In that case, the dividend-related procedures may be different, so be sure to check with the dividend-paying company for further clarification on this.

Now you’ve got some tasks for your to-do list: Check the company’s investor relations website, learn the most important dividend dates, set up reminders so you don’t miss them, and of course, be sure to own some stock shares so you can start collecting those dividend payments.

The post Stay Ahead of the Curve – Learn the Dividend Dates You Need to Know appeared first on FinMasters.

We can’t advise you on how to do your taxes – you’d need to consult a licensed, registered professional tax advisor for that – but it’s still worthwhile to learn about the modern practice of tax loss harvesting. By deploying this tax-time life hack, you may be able to keep more of your own money when it’s time to pay the Internal Revenue Service (IRS).

Turning a Bad Year Into a Tax Break

And so, we start with the billion-dollar question: What is tax loss harvesting?

Interestingly, the term tax loss harvesting isn’t an official term employed by the IRS, and it doesn’t appear anywhere in the IRS’s discussion of capital gains.

For the purposes of this discussion, capital gains are the money you’ve made on your profitable investments during the taxable year. Capital losses are the money you’ve lost on your unprofitable investments.

Tax Loss Harvesting and Capital Losses

The concept of tax loss harvesting is intimately related to capital gains and losses. If you had a bad year as an investor and ended up losing money when all is said and done, that’s a capital loss. Of course, the IRS isn’t going to make you pay taxes on your investments that year if you didn’t make money and therefore had a capital loss. You can even deduct up to $3,000 (or $1,500 if you’re married but filing separately) of your capital losses from your taxable income during that losing year.

And so, we’re already observing one of the tax loss harvesting rules: The most that you can “harvest” in any given tax year in the U.S. is $3,000/$1,500. This is true even if you lost a lot more than $3,000/$1,500 in stock, cryptocurrency, bonds, and other investments during the year.

Don’t deliberately try to lose more money than that limit as a tax strategy – it just wouldn’t make sense.

Tax Loss Harvesting and Capital Gains

What if you didn’t have a losing year overall, though? If you come out ahead when all is said and done, then you can’t reap the tax-time benefits of a capital loss on your investments. Moreover, if you finish the year with a capital gain, then you’ll be liable for taxes on that gain. Depending on your total income and other factors, you might have to give 15%, 20%, 25%, or even 28% of the year’s investment profits to Uncle Sam.

So, if there’s a strategy you can use to minimize the capital gains you’ll have to report for the taxable year – and maybe even turn what was a gain into a capital loss for tax purposes – then wouldn’t you want to use this strategy to its fullest extent? That’s exactly what many sophisticated investors do, and if done correctly, it’s perfectly legal.

How Does Tax Loss Harvesting Work?

The strategy is actually quite simple. Before the year ends (and therefore prior to January 1 of the following year), liquidate (which usually means sell) some or all of your losing investments.

As for your winning investments, you can just hold on to them so that you won’t have to pay taxes on the profits until a later time.

In other words, you’re using your losses to offset, either partially or entirely, your profits for the taxable year.

Everything you do within this strategy must be done on or before December 31. Otherwise, the IRS won’t allow it to count for the tax year in question.

All of this will become clearer when we try out a tax loss harvesting example.

Remember: You can only incur a capital gain or loss on investments that you sell. If you don’t sell and take a profit, you won’t be taxed on the gains.

A Rule to “Wash” Out For

Now, let’s modify the scenario.

What if you only took $6,000 worth of profits from your investments that year but still booked $8,000 worth of capital losses from your less-than-ideal investments? In that case, you could harvest $2,000 worth of capital losses when all is said and done, thereby potentially lowering your overall taxable income and keeping more of your money.

Don’t try to be clever and think you’re going to sell those losing investments on December 31, only to buy them back on January 1. The government caught on to this little trick a long time ago, and the IRS has a regulation in place to deter taxpayers from trying it. It’s called the wash sale rule, and it basically means that the IRS won’t allow a capital loss to count for tax purposes if you buy back the same asset – or even a “substantially identical” asset, such as an option that’s based on a stock – within 30 days after you sold it.

The point here is that if you’re selling a stock or other asset near the end of the year for tax loss harvesting purposes, know that you won’t be able to claim that loss with the IRS if you repurchase that asset (or something “substantially identical”) within 30 days.

This shouldn’t prevent you from selling, say, Microsoft stock in late December and purchasing Apple stock in early January; they’re both technology stocks, but aren’t “substantially identical” according to the IRS’s definition.

Is Tax Loss Harvesting Worth It?

So, now you know the basics of tax loss harvesting and what it might look like in action. This still leaves open a fundamental question, though: Is tax loss harvesting worth it?

It’s best to consult a tax professional to get the answer to that question, as the value of tax loss harvesting depends on your individual circumstances. How badly do you want to hold on to your losing investments? Are there reasons to believe that those investments will eventually turn into winners? And how much tax benefit would be gained from selling the losing investments before January 1?

The answers to these and other questions will help to determine whether tax loss harvesting is worth pursuing. It’s a strategy that has helped many investors lower their tax bills year after year, and under the right circumstances, it might be right for you too.

The post What Is Tax Loss Harvesting: How It Works and Is It Worth It appeared first on FinMasters.

Dollar-cost averaging exploits that principle. While it’s entirely appropriate for investors at all experience and skill levels, it’s particularly well suited to individual self-directed investors who don’t have the time or the wherewithal to nimbly navigate the market’s unpredictable ups and downs.

You don’t need a huge account to get started. You only need access to some investable cash that you probably won’t need to use anytime soon, an investment account, and a source of income or other funding that will allow you to continue investing in the future.

You’ll also need to identify a stock or other investable asset that you believe (after conducting thorough research, of course) has the potential for long-term upside in its price.

And, of course, you’ll need to know the basics of dollar cost averaging.

What Exactly Is Dollar Cost Averaging?

The U.S. Securities and Exchange Commission, or SEC, states that dollar cost averaging involves investing your money into an asset at “regular intervals” and in “equal portions.” The SEC also specifies that one would continue to do this “regardless of the ups and downs in the market.”

Perhaps that last phrase could be modified to “regardless of the ups and downs of the price of the asset you’re purchasing” since not every financial asset follows the markets.

In any case, there are a number of moving parts here, so let’s break them down one at a time.

First of all, “regular intervals” could mean that you’re putting money into the same stock or another asset once a month or perhaps once every two weeks since that’s how often many people get their paychecks. These are common time intervals to invest with dollar cost averaging, but you can pick whichever interval is right for your circumstances.

Another part of the equation is that you’d be investing in “equal portions” meaning you’d invest the same, comparatively smaller amount of money into an asset instead of putting the total amount into it all at once.

Note: the idea is to buy the same dollar amount of the asset, not the same number of shares/ounces/tokens/etc.

Finally, don’t ignore the “regardless of the ups and downs” part of the formula. Even if the asset you’re buying on a regular basis is volatile, dollar cost averaging means suppressing your emotions and just buying the $100 worth of XYZ stock (or whatever amount and asset you’ve chosen) on schedule, as planned, no matter where the stock moves.

What Are the Advantages?

There are a number of advantages of dollar cost averaging, as opposed to pouring your investable money into an asset all at once.

For one thing, you might want to invest $20,000 in XYZ stock, but you might not have all of that money available now. So, dollar cost averaging allows you to contribute what you can afford until you eventually invest the entire amount.

Second, the strategy offers simplicity and consistency, which will benefit many beginners and intermediate investors who aren’t ready to try out more complicated strategies (which aren’t necessarily superior). Dollar-cost averaging doesn’t require any fancy formulas or constant staring at the computer screen.

Your broker might even allow you to automate your regularly scheduled contributions, thereby making an easy strategy even easier.

Furthermore, dollar cost averaging helps to prevent investors from falling into the “time the market” trap. When an asset price falls, you might get fearful and refrain from investing in it. Or, after the price goes up a lot, you may be tempted to rush in and buy it. However, this type of behavior runs counter to the principle of buying at low prices and selling at higher prices.

Dollar-cost averaging, in contrast, encourages you to ignore the temptation to “chase” the asset’s price moves, as you’d just stay consistent with the schedule and the fixed dollar amount.

Because you’d be buying more at lower prices and less at higher prices, your average purchase price of the asset can go down: hence the name dollar cost averaging.

The objection that more purchases mean more fees doesn’t necessarily apply in an era of no-commission trading. However, be sure to check with your broker to determine your particular commission and fee structures.

What Are the Risks?

Dollar-cost averaging imposes discipline and largely removes timing risk: the risk of buying at the wrong time or falling into the trap of buying high and selling low.

Stock markets have always risen over time. That doesn’t mean every stock rises over time. Some companies fall and fail and never get back up. No strategy will protect you from the risk of simply investing in a company that doesn’t have a future.

If you don’t have the expertise to select individual stocks with confidence, you can apply the strategy to a mutual fund or ETF, or even an index fund. This provides a level of diversification that insulates you from the risk of simply selecting the wrong asset.

Above-Average Returns Are Possible with Dollar Cost Averaging

Could you make more money with an immediate, lump-sum investment instead of dollar cost averaging? It’s possible in some instances, but dollar cost averaging helps investors stay disciplined and buy more when prices are low, and less when prices are high – a policy that has certainly stood the test of time.

It’s a strategy that some people use in 401(k) and other retirement-appropriate types of accounts, but it might be worth trying in other long-term portfolio types as well. So, for a keep-it-simple approach that might offer enhanced returns with less emotional involvement, consider putting your dollars to work with dollar cost averaging.

The post What Is Dollar Cost Averaging? appeared first on FinMasters.

Let’s say, as an example, that you have $10,000 in cash that you’d like to invest in a variety of stocks. That’s a sensible approach, as diversification can help to reduce your portfolio’s exposure to single-stock risk.

So, you get a hankering for burritos and decide that you want to invest in Chipotle stock. You’re amazed to find out that, as of early October 2022, just a single share of Chipotle stock costs over $1,500. Then, your attention turns to car parts and you consider taking a small stake in AutoZone, only to discover that one share of AutoZone stock costs over $2,000!

Taking up 15% or 20% of your account with a single stock isn’t ideal for portfolio-diversification purposes. I guess you’ll just have to avoid companies with high share prices – or will you?

There’s a surprisingly simple solution that can make cost-prohibitive stocks more accessible to account holders of all sizes.

It took a while, but brokers have responded to the needs of smaller investors with a product called fractional shares. Don’t worry, I won’t take you back to fifth grade and quiz you on adding and subtracting fractions. Instead, we’ll ask and answer the question: What are fractional shares?

What Are Fractional Shares?

According to the U.S. Securities and Exchange Commission or SEC, a fractional share is “when you own less than one full share of a stock or other security.”

It’s pretty rare that people are referring to anything other than stocks if they’re discussing fractional shares, though. Stock brokers do offer fractional shares of exchange-traded funds or ETFs, as these trade similarly to stocks.

Think of going to an Italian restaurant when you’re craving pizza. If you’re by yourself, you probably don’t plan to eat an entire pizza. If the restaurant wants to stay in business, they’ll offer individual slices of pizza; likewise, responsive brokers are now offering slices or fractions of certain stock shares.

Thus, like a small slice of pizza, it’s much easier for a small account holder to digest one-tenth of a share of Chipotle or AutoZone stock than an entire share. Suddenly, those expensive stocks aren’t so cost-prohibitive anymore, and now just about anyone can participate in the growth potential of a broad variety of businesses.

Explainer: What Makes a Stock “Expensive”?

A stack that costs $1000 per share is more expensive than a stock that costs $100 per share, right?

Not really. For investment professionals, a stock is “cheap” not because of its share price, but because of its price relative to its fundamentals. A stock with a low per-share price can be expensive and a stock with a high per-share price can be cheap.

For example, if that $1000 stock belonged to a company with high revenue and earnings growth, no debt, and very attractive valuation ratios, an analyst would call the stock cheap, because its price is low relative to its value. If the $100 stock belonged to a company with slack or falling revenue and earnings growth, high debt, and weak valuation ratios, analysts would call it expensive.

Who Should Buy Fractional Shares?

Fractional shares aren’t only for investors with small accounts. They can be useful for portfolios of just about any size.

The SEC is correct in pointing out that “Fractional shares are a way to invest when you do not have enough money to purchase a full share of a particular stock.” Yet, that’s not the only scenario in which purchasing fractional shares would make sense. Even if you have a six-figure portfolio, you still might not want to allocate more than 0.5% of it toward any individual stock. In that case, buying half of a share of a more expensive stock would be an easy solution.

Or, let’s say you’re an adherent of a strategy called dollar cost averaging. This basically means investing a fixed dollar amount in a particular stock (or ETF, etc.) on a regular schedule, such as once per month. You might find it difficult to invest a specific dollar amount in a more expensive stock – but I’ll bet you know where I’m going with this. Just use fractional shares to effectively slice off a piece of a share and voila! You’re now able to invest that exact dollar amount you wanted to (or at least, pretty close to it).

Are Fractional Shares the Same as a Stock Split?

You might have heard about stock splits and think that this sounds a lot like fractional shares. They’re not quite the same thing.

Without delving into the finer details of stock splits, we can just say that these operations are initiated by the companies that issue the shares, not by the brokers that assist you in buying and selling the shares. If a company wants to make its stock shares more affordable, it can enact what’s technically called a forward share split. With this, the proverbial pizza is already cut into slices for everyone – no need to request a purchase of fractional shares from your broker.

For instance, Apple and Tesla have enacted forward share splits multiple times because their stocks went into the $700s, $800s, or even above $1,000. These companies did the slicing and dicing for you, but other companies choose not to enact stock splits even if their shares become expensive. That’s not a problem if your broker is willing and able to let you buy fractions of those pricey stocks.

Where Can You Buy Fractional Shares?

Not every broker offers fractional shares, and you’ll need to contact the customer service department of your broker to determine whether you’re eligible to purchase them. That said, as of October 2022, there are some U.S.-based brokers that appear to offer fractional shares to qualifying customers.

Here’s some good news: Many of the brokers who offer free or lost-cost self-directed trading also happen to offer fractional shares. These include some names that might be familiar to you: Charles Schwab, E-Trade, Robinhood, TD Ameritrade, Interactive Brokers, Fidelity, Merrill Edge, and Vanguard.

Not all stocks might be available for fractional share purchases. Individual brokers may place restrictions on fractional share purchases, such as requiring a minimum account size. Some brokers understand that fractional shares are often geared toward smaller account holders, and will therefore try to be more accommodating in providing this investment option.

If you’re shopping for a broker, look at your options and compare their rules on fractional shares.

What Are Fractional Shares? How Could They Benefit Investors?

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Get in on the Action with Fractional Shares

So now, you have the lowdown on an investment product that can help you implement strategies such as portfolio diversification and dollar cost averaging. Fractional shares aren’t just for small account holders, as anybody might opt to mitigate his or her exposure to a particular company (or companies, in the case of a fractional ETF share).

Thanks to some of the more responsive brokers, investors of all sizes can more easily purchase some pricey stocks even when the companies choose not to enact stock splits. It’s a step in the right direction as fractional shares can often make investing more accessible, so feel free to take advantage of the opportunity and try a few stock slices for yourself.

The post What Are Fractional Shares? How Could They Benefit Investors? appeared first on FinMasters.

While stagflation isn’t pleasant when it happens, learning about it shouldn’t be such a scary proposition. As we unpack stagflation and consider some historical examples of it, we can better understand its significance while, hopefully, preparing for what could at some point happen again.

The “Flation” in Stagflation

So, let’s start at the beginning: What is stagflation, anyway?

Stagflation is a compound concept that combines a stagnant economy (i.e., a recession) with high inflation.

So, when considering stagflation vs. inflation, just remember the idea of set and subset: Stagflation by definition involves inflation, but inflation doesn’t usually include recessionary conditions, so not all inflation involves stagflation.

Since we have one word and two separate but sometimes related concepts here. Perhaps it’s best to start with the second concept first: inflation.

In its most basic terms, inflation describes an increase in the prices of the things we buy. This creates an effective decline in the value of the money you’re using: the same amount of money buys less.

Inflation, at least in the U.S., is typically expressed as a percentage. How much did the prices of commonly purchased goods increase, compared to where they stood a year ago? This is calculated using the growth rate in the Consumer Price Index, or CPI. This is provided each month by the Bureau of Labor Statistics (BLS) – the same government agency that also provides monthly unemployment figures, but we’ll touch upon that in a moment.

So, if the August 2022 CPI growth rate was 8.3%, that’s how much more expensive food, fuel, shelter, and other essential products generally cost in America compared to August 2021. The Federal Reserve, which moderates the flow of U.S. dollars to the nation’s big banks, prefers to see the rate at 2%, so the 8.3% figure is an expression of unusually high inflation.

In other words, the “-flation” in stagflation isn’t just inflation; it’s unusually elevated inflation in a particular geographic region, compared to its usual or expected rate. Thus, inflation, and therefore stagflation, only makes sense within a specific context.

When the Economy Loses Its Flow

Then, there’s the other part of stagflation: the stagnant economic conditions.

If stagnant waters are ones that aren’t flowing like they ought to be, then a stagnant economy similarly isn’t advancing or developing. The money isn’t flowing throughout the economy because people aren’t buying products like they would during a more robust economy. And, when people cut back on purchases, businesses suffer and sometimes, this leads to a deep, persistent regional economic downturn commonly known as a recession.

Technically, the U.S. isn’t in a recession until a non-profit institution called the National Bureau of Economic Research (NBER) calls the current economic conditions a recession. There’s no numeric formula provided for this; rather, the NBER characterizes a recession as involving a “significant decline in economic activity that is spread across the economy and lasts more than a few months,” with such factors as “real personal income less transfers, nonfarm payroll employment, employment as measured by the household survey, real personal consumption expenditures, wholesale-retail sales adjusted for price changes, and industrial production” taken into consideration.

Most likely, the NBER didn’t declare a recession in August of 2022 despite the high inflation rate because, at that time, U.S. unemployment was relatively low at 3.7% of the measured population^[1]. This was determined by a government entity that’s already familiar to you now: the BLS.

In contemplating what causes stagflation, then, one must consider an interrelated web of unfortunate factors.

If inflation remains persistently high, this could lead to recession and therefore stagflation if the inflation crimps spending and borrowing activity – two linchpins of a robust, thriving economy. This, in turn, could lead to hiring freezes and layoffs, which would typically be reflected in a rising unemployment rate – another telltale sign that the country may be entering into a recession and/or stagflation.

When Opposites Combine

Under normal conditions, inflation and stagnation are opposites that we wouldn’t expect to see at the same time.

Inflation occurs when there are too few goods and services available to buy – too much money chasing too few goods – and buyers bid the prices of goods up. The natural response for producers is to make more goods, which tends to cut unemployment. Inflation is typically a sign of an overheated economy, where demand exceeds supply.

Recessions typically occur when demand for goods is low. Consumers stop buying, manufacturers cut back, and unemployment increases. A recession is normally a deflationary condition, where the economy cools off.

What Is Stagflation? Should I Be Worried About It?

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Stagflation brings these two natural opposites together. This can happen in some circumstances, but it’s relatively unusual.

Stagflation in the 1970s: An Imperfect Storm of Adverse Conditions

There have been notable historical examples of stagflation throughout the ages, including Japan’s so-called “lost decade” of the 1990s (though of course, that example was outside of the NBER’s purview to officially declare it recessionary). In the U.S., however, people typically think of the nation’s economic conditions during the 1970s as the definitive example of stagflation.

What caused stagflation in the 1970s? As usual, it’s difficult to pinpoint a specific incident that sparked the stagflationary chain reaction. One contributing factor may have been the Nixon administration’s “closing of the gold window”: the U.S. dollar, once pegged to gold, was now declared valuable by fiat or government decree. This enabled the government to print and spend money more freely, which evidently led to an oversupply of dollars and hence the devaluation of those dollars.

The actual impact of this may have been less than some speculate. Between the cost of the Vietnam War, Johnson’s “Great Society” programs, and foreign banks effectively creating dollars by lending more than they had in reserve, the dollar supply had far outrun US gold reserves well before Nixon formally dropped the link.

There were certainly other, concurrent contributing factors, not the least of which was high gasoline prices prompted by OPEC member nations constraining the flow of petroleum to the U.S.

By the end of the decade, stagflation was a household term: U.S. inflation approached 14.5% and unemployment topped 7.5% during the summer of 1980^[2].

In hindsight, we can take cues on how to beat stagflation from the Paul Volcker-chaired Federal Reserve of the early 1980s. The Federal Reserve deliberately slowed down the economy by raising the nation’s benchmark interest rate to very high levels, plunging the U.S. into a painful recession but eventually suppressing inflation to a more manageable level. Without the high inflation rate, money could flow more freely throughout the economy, and stagflation was tamed.

It’s Not Always About Policy

We tend to think of economic events as products of government policy, but there’s a lot that happens in the economy that does not involve the government.

Another factor driving 1970s stagflation involved demographic shifts: the primary economic activity of the American family at that time was putting the baby boomers through college, which involved large expenditures without production and greatly constrained demand.

Beginning in the late 70s and early 80s, the bulk of the baby boom was moving out of college and getting their first jobs and their first credit cards. At the same time their parents, who were still in the workforce, began catching up on the buying they’d put off while the kids were in college.

That surge in demand had a major impact on reducing stagnation, but why didn’t it push higher inflation?

Part of the answer is that US imports grew from $294 billion in 1980 to $630 billion in 1990, providing a rising supply of lower-priced goods to soak up the new spending power that was driving the economy out of stagnation.

Economies are complicated and there’s almost never a single cause for their movements!

Take a Vacation From the Fear of Stagflation

The term “stagflation” reappeared in public discourse in 2022. Economic growth has been largely stagnant, debt levels are high, and an asset bubble is unwinding, all conditions we usually associate with recession.

At the same time inflation has reached levels not seen since the early 1980s, driven largely by production and supply chain disruptions that have kept goods off the market and kept consumers bidding for a limited supply of goods.

So is it stagflation?

Not quite. Inflation is real and there are signs of stagnation, but unemployment remains extremely low and production continues to recover. There is a chance that the economy will sink into recession, but economists expect that a recession would bring inflation rates down.

It’s possible that inflation could remain elevated even as the economy slows, generating 1970s-style stagflation, but that’s a possibility, not a certainty.

Among the important takeaways from the example of the 1970s is that, no matter how bad stagflation may get, it will always come to an end sooner or later. The damage will be done, but nations eventually heal and people put their lives back together.

Some nations have also responded to economic crises in very destructive ways. This typically occurs not because of the economic dislocation, but because people respond to the dislocation by embracing extremist political ideologies, often leading to internal or external conflict. As long as nations remain strong and keep to their principles they usually recover and prosper.

So, there’s no need to obsess over whether we’re in a period of stagflation right now or whether we’re about to enter into stagflation. Instead, we can choose to learn from history’s vital lessons and evolve as nations so that hopefully, we can avoid the errors of generations past.

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Mineral mavens shouldn’t put silver on the scrap heap. It’s a surprisingly essential and versatile metal with enduring value and appeal. Plus, silver’s price properties should appeal to risk-tolerant traders of all account sizes. So, let’s put the pedal to the metal and discover why silver truly deserves its label as a precious metal.

Silver Has Many Real-World Applications

If gold is for holding, silver is for using. You can also hold silver as an investment, but comparatively speaking, silver has a wider range of applications. There’s a reason people call silver an industrial metal. It’s used extensively by multiple industries throughout the economy.

According to the Silver Institute, silver is used in solar panels, electrical switches, and chemical-producing catalysts, and can be found in nearly every computer, mobile phone, and automobile^[1]. It’s durable and highly conductive of electricity, which makes silver ideal for coating electrical contacts, such as the ones found in printed circuit boards. Silver can help to reduce the need for wires as silver ink will provide an electrical pathway when it’s painted on a non-metal surface.

Then there are the traditional uses of silver in dental fillings, jewelry, silverware, and various antiques and collectibles.

Throughout the ages, gold may have gotten top billing but silver never really lost its shine. In the modern era, though, silver should always be in demand as long as people are buying electronic gadgets. As governments and private industry ramp up their 5G network spending, silver continues to play a role in building out the critical infrastructure.

Industrial use of silver creates ongoing demand that supports the price.

Silver Is Part of the Vehicle Electrification Movement

There’s another use of silver that’s so important, it deserves its own section. Many of today’s investors want exposure to the fast-emerging electric vehicle market. Sure, one can achieve this by purchasing shares of individual automakers, but this may turn out to be a risky proposition. On the other hand, investors might choose to own something that electric vehicle manufacturers need: silver.

Silver is ideal for electric vehicle components due to its conductivity, oxide resistance, and durability in harsh operating environments. Silver is used in many vehicles’ electrical control units; this is true for traditional internal combustion engine cars as well as modern electric vehicles.

Where the rubber really meets the road, however, is silver’s use in batteries that are used in electric vehicles, as well as the stations that charge these batteries.

Silver and the electric vehicle movement go hand in hand, and the numbers bear this out. As the Silver Institute reports, battery electric vehicles consume an estimated 25 to 50 grams of silver each, and hybrid vehicles consume around 18 to 34 grams of silver; meanwhile, internal combustion engine cars only consume roughly 15 to 18 grams of silver.

The net result has been and should continue to be, staggeringly strong demand for silver in the electric vehicle industry. 2021 automotive-market silver consumption was projected to reach 61 million ounces; this industry is anticipated to consume nearly 90 million ounces of silver annually by the year 2025^[2].

The Silver Price Moves Fast

Silver tends to exhibit faster price action than gold. If you’re more of a “slow and steady wins the race” kind of investor, holding gold might be the way to go.

Consider the math behind some of history’s biggest price moves in precious metals. From the 2008 low to the high in 2011, the gold price gained 166% – not too shabby^[3]. However, that’s nothing compared to silver’s mind-blowing 448% gain during the same time frame.

Yet, the silver sword is double-edged; what moves up fast can also drop fast. Thus, while gold lost 44.6% of its value from the 2011 high to the 2016 low, silver shed an eye-watering 71.8% of its value during that time.

That volatility can be risky, but if you time your entry and buy at a low point in the price cycle, it can also be an advantage.

Silver Could Provide a Good Hedge Against Inflation

Inflation is currently among the most pressing concerns among consumers and investors alike. As currencies such as the U.S. dollar lose value year after year, holding cash becomes a less appealing proposition for the long term.

This is where silver shares a common characteristic with gold and some other minerals: it’s resistant to currency inflation, and can even benefit from inflation. A historical example would be the inflation-intensive 1970s, during which the silver price rallied from $15 per ounce to $130 over a ten-year period^[4].

Of course, past performance doesn’t guarantee future returns, so don’t count on a repeat of silver’s stunning 1970s surge. The idea here isn’t to fantasize about life-changing gains in silver during high dollar inflation, but rather to consider silver as an asset that’s resistant to inflation and therefore a relative safety net when the dollar’s value falls. Besides, Morgan Stanley observes that “silver tends to rise more than gold with rising inflation and a falling dollar” due to silver’s “greater industrial demand”. Again, silver’s greater utility makes it even more useful when the currency loses its value.

There is a downside as well. Aside from the inherent risk of volatility and asset price declines, silver (like any precious metal investment) will not pay interest or dividends: your potential gain lies solely in asset price appreciation. This makes it important to buy at a low point in the price cycle and to take profit if it’s there to be taken.

Silver is much more than gold’s underappreciated cousin. It’s cheap, fast-moving, inflation-resistant, conductive, versatile, and crucial to the global trend toward electric vehicles. If you’re willing to cope with volatility feel free to go for the gold standard of industrial metals and stack some silver in your investment portfolio.

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The stock market offers an enticing vision of consistent wealth building for investors. However, the reality doesn’t always match up to the vision in real life. Stocks fluctuate in value, and while long-term gains may be the objective, intermediate downturns can be quite frustrating.

To help mitigate short-term volatility, many investors diversify their holdings by choosing a variety of individual stocks from different market sectors. Others, in contrast, prefer to use exchange-traded funds or ETFs to diversify their portfolios. They’re both valid approaches, but there are important differences between individual stocks vs. ETFs.

Ultimately, the question of investing in individual stocks vs ETFs is a personal matter based on one’s financial objectives, expertise, time frame, risk tolerance, and other factors. Still, by understanding some crucial differences between the two approaches to equities investing, one can hopefully construct a more tailored portfolio with an appropriately balanced risk-to-reward profile.

The Main Pitfall of Individual Stock Picking: Risk of Failure and Loss

As long as stock picking offers thrills and the possibility of life-changing returns, the never-ending individual stocks vs ETFs debate will always have legs. After all, if you’ve read in the financial press about triple-digit percentage gains in specific stocks, it may be hard to resist the temptation to go all in on a handful of high-conviction stocks in hopes of similar outperformance.

Past performance isn’t a guarantee of future results. Picking the next Tesla or Amazon is like finding a needle in a haystack – or really, like trying to grab a specific needle among a cluster of really sharp needles. If you pick the wrong ones, you (or more precisely, your portfolio’s value) could get badly hurt.

Sure, it’s obvious now that Tesla and Amazon stocks were bound to post huge returns. However, hindsight is always 20/20, and these stocks were much more speculative and uncertain in the beginning. Like the majority of the thousands upon thousands of startups out there, Tesla and Amazon could have failed to gain market share. Their shares could have lost much or even all of their value. They could have ended up like Pets.com stock, which seemed like a surefire winner during the dot-com bubble of 1999 but went to zero after the dot-com bust in 2000.

Thus, the primary pitfall of individual stock picking is the risk of failure. That doesn’t have to mean failure on the investor’s part. There could be a failure of the business or the market sector, which isn’t within the investor’s control. This failure could be a function of fierce competition within a market segment, fluctuating macroeconomic conditions, shifting consumer preferences, and a host of other extrinsic factors, along with company-specific factors such as executive-level changes (like the CEO changes that General Electric underwent throughout the years).

Other Issues With Individual Stock Picking: Time, Effort, and Expertise

Now, individual stock pickers might argue that not everyone is trying to beat the odds and pick out the next Tesla or Amazon. That’s certainly true, as it’s entirely possible to stick to established, tried-and-true names like Coca-Cola and Apple stock. After all, Berkshire Hathaway CEO Warren Buffett is famous for highly successful stock picking, so why shouldn’t everyone give it a try?

The answer is that we can’t all be Warren Buffett. He has time during the day to conduct deep research on individual companies, while most people have jobs, school, children, and/or other demands to attend to throughout the day. Plus, even with the help of the internet, it still requires a great deal of effort to conduct thorough research on individual stocks. In some ways, the internet makes the task more difficult: the sheer amount of information we have at our fingertips can be overwhelming. Buffett has plenty of people to help him conduct that type of research, and they have deep expertise in the financial markets, as does Buffett himself.

In contrast, the average individual investor only has surface-level knowledge of businesses and stocks, if any knowledge at all. Even if you have plenty of spare time and are willing to put a great deal of effort into researching individual businesses, you’ll still be competing against institutional investment firms with deep capital and human resources. It’s an awfully tough game for individual investors to play, not to mention win.

If you insist on toughing it out and trying your hand at individual stock picking, at least do it the right way. As Buffet himself said, “Never invest in a business you don’t understand.” Focus on stocks representing businesses and industries of which you have firsthand knowledge, or at least extensive familiarity.

For example, it might make more sense to invest in Starbucks stock if you see that there’s a Starbucks in every town you visit and the company practically has a monopoly in the coffee-shop market, as opposed to buying an obscure stock representing a company halfway across the world with products you’ve never actually seen or used.

Additionally, individuals who want to try stock picking could try it first with paper trading. Then, if the virtual trading yields satisfactory results over an extended period of time, they could try it with a small portion of their portfolios to limit risk.

ETFs: An Easier Way to Invest

In stark contrast to the often risky and time-intensive world of individual stock picking, ETF investing puts the burden of time, effort, and expertise in the hands of fund managers. Like Buffett, ETF managers spend a great deal of time researching companies and have access to vast human and capital resources that individual investors generally don’t have.

Granted, ETF investors will be required to pay a fee to hold the ETF. That fee is called an expense ratio, and it will reduce your returns, but usually not by very much.

For instance, the most popular ETF in the world, the SPDR S&P 500 ETF Trust (ticker symbol SPY), has an expense ratio of 0.09% per year. That’s less than one-tenth of a percent you’d pay annually for holding the fund, and you’d get weighted exposure to a diversified basket of 500 large-cap companies. Not a bad deal, really, as you can let the fund managers do the hard work for a minimal annual fee.

Be aware, though, that those expense ratios are subject to change and can vary widely among ETFs, so be sure to check any particular fund’s expense ratio before considering an investment (sorry, but you’ll have to do a little bit of research – there’s no way to avoid it completely).

Remember that you pay a fee when you invest in individual stocks as well. Effective stock research takes a large amount of time, and time has value. If you calculate the value of the time it takes you to build a portfolio of well-researched stocks, the cost is likely to be higher than the expense ratio of an ETF!

Besides, ETFs are almost as varied as individual stocks nowadays, so you can craft an ETF-focused portfolio to meet your particular objectives and preferences. Among the most popular and low-cost ETFs are the technology-heavy Invesco QQQ Trust (ticker symbol QQQ; expense ratio of 0.2%), the giant-company-focused SPDR Dow Jones Industrial Average ETF Trust (DIA; 0.16%), and the small-company-inclusive iShares Russell 2000 ETF (IWM; 0.19%).

Finally, it’s worth noting that investing in ETF vs. stocks isn’t an either/or proposition. Investors can hold a combination of ETFs and individual stocks – though again, stock picking involves certain risks and needn’t be overrepresented in one’s portfolio.

So, feel free to pick out individual stocks if you’re so inclined, but be aware that you’d be competing with some of the best researchers in the business. Or, you can give ETF investing a try, and align yourself with those researchers for a relatively minimal fee, and hopefully for enhanced risk-adjusted returns over time.

The Emotion Factor

There are some good reasons to try picking your own stocks, and also some that are less good. If you frequent investment forums on the internet, you quickly see that individual stock pickers dominate the boards. They earn prestige in the community by presenting and defending their research, and they are often the most respected figures on the forums.

ETF investors, on the other hand, may be dismissed as less sophisticated investors that deserve less respect.

It’s natural to seek a role in a community that brings prestige and respect within that community but moving into stock-picking to impress a Reddit group can be a very bad idea. If picking stocks fits your goals and your strategy and you have the necessary time and expertise, go for it. Don’t do it to impress anyone!

Your Choice

Your portfolio contains your money. The decision on how to manage it is yours, and it’s in your interest to make a decision that fits your needs. If you assess your options, your own expertise, and the time you have available, you can make an informed choice and be confident that you’ve made the right choice!

The post Individual Stocks vs. ETFs: Which Is Better for Your Portfolio? appeared first on FinMasters.

% of Americans Who Would Not Be Able to Cover An Unexpected $1,000 bill

4. Bankrate-sourced data from January of 2022 revealed, shockingly, that 56% of Americans would be unable to cover an unexpected $1,000 bill with their savings at that time^[2].

5. Northwestern Mutual’s 2022 Planning & Progress Study determined that the average personal savings, not including investments, was $62,086^[2].

6. The U.S. personal savings rate – or the percentage of disposable income consumers save – dipped to 5.1% in June 2022, according to the St. Louis Federal Reserve. That figure was 8.7% in December 2021, and 14% in December 2020^[3].

7. Ted Rossman, senior industry analyst at Bankrate, recommends having three to six months’ worth of expenses stored for emergency savings. Personal savings expert Suze Orman says eight to 12 months’ worth is better.
8. Vanguard’s “How America Saves 2022” report states that Americans, on average, have approximately $141,542 saved in the company’s retirement funds^[4]. But again, averages can be deceiving: the median balance was found to be just $35,345.

Americans’ Dwindling Savings

1. Stimulus efforts from the U.S. government in the wake of COVID-19 likely had a positive effect on Americans’ ability to save money. That effect may have worn off by 2022. In January, Americans saved only 6.4% of their after-tax income; the pre-pandemic level was 7%^[5].

2. In February of this year, only 16% of survey respondents said they had more in savings than before the COVID-19 pandemic. Even worse, 50% said they had less saved up than they did pre-pandemic^[5].
   The stats were even more startling for lower-income U.S. households. Among them, only 9% said they had more in savings than they did prior to the pandemic, and 64% actually said they had less.
3. It seems that many Americans, for better or for worse, are dipping into their savings. A GOBankingRates study of 1,000 adults determined that 35.54% of respondents had tapped their savings as their purchasing power diminished due to the impact of inflation^[6].
   Not everyone tapped their savings equally, though. While 18% of study participants aged 55-64 had dipped into their savings in order to deal with high inflation, a whopping 52% of 18- to 24-year-olds did so.

Savings and Retirement Planning

% of Americans who are saving for retirement

1. A survey, courtesy of TransAmerica Center, revealed that 77% of American workers were saving for retirement through employer-sponsored retirement plans and other options.

2. Experts suggest that to continue living at or near the lifestyle you’ve had while working, you’ll need between $500,000 and $1 million saved to finance your retirement years.

% of Americans who don’t know exactly how much they need to save for retirement

3. Perhaps we’re not thinking about specific savings calculations like we ought to. The Retirement Industry Trust Association reports that 43% of workers only guess how much savings they’ll need to retire^[8], instead of basing it on their current expenses or using a retirement calculator.

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