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10 Financial Hot Topics for 2024: Boring and Painful

10 Financial Hot Topics for 2024: Boring and Painful

Did I really just introduce this week’s podcast by telling you it is boring and painful? Of course not, it’s a teaser for what’s to come! 😅

This week, Matt Robison and I discuss my take on Allan Roth’s recent insightful list of financial tips for 2024. These are things my client’s will ask me about on a regular basis so I thought it was high time we addressed them with Roth’s expertise and my niche experience in working with folks in various stages of financial planning.

Below, in no particular order, are the top ten things you might be thinking about this year with regard to your finances. Spoiler alert: you should be oscillating between being bored and feeling pain when it comes to your investments. Scroll down to number five to find out why!

  1. Are you for real? Something I see confounding many people is the difference between real and nominal returns. Real returns account for inflation, unlike nominal returns, which are the raw percentages often reported in market performance. While a 10% nominal return might sound appealing, it’s the real return, after adjusting for inflation, that truly matters. For example, a 5% return on a CD is effectively 1.5% if inflation is 3.5%. Keeping an eye on real returns helps maintain your purchasing power over time.
  2. Save your Cash for the jukebox. Johnny Cash once lamented about the Ring of Fire. You’ll find yourself in that hot seat if you are holding onto cash. Sure, logging into your checking account and seeing a large balance can FEEL good, but it’s one of the riskiest assets due to inflation eroding its value. While it’s essential to have an emergency fund, excess cash should be invested to preserve its purchasing power. Balancing between liquidity for emergencies and investing for growth is key.
  3. If only the good die young, only the dumb die rich. The goal of saving and investing isn’t just to accumulate wealth, but to enjoy life. Many people find it hard to shift from saving to spending, even in retirement. Planning and setting aside funds for enjoyment can help ensure you live a fulfilling life without financial regrets.
  4. Know your nervous tendencies. Market downturns test investor resolve. Historical data shows that many people panic and sell during market crashes, despite knowing they should stay invested or even buy more. Anyone else remembering March 2020, or all of 2008? Building a resilient portfolio and understanding your risk tolerance can help you stay calm during volatile times.
  5. Looking at your portfolio should make you oscillate between feeling boredom and pain. Hear me out: if your investments are consistently exciting, you might be taking on too much risk. A well-balanced portfolio should be largely uneventful, punctuated by occasional market corrections. Embracing the boring phases and enduring the painful ones is part of a sound investment strategy.
  6. Diversification is about quality, not quantity. Owning many funds doesn’t guarantee diversification. True diversification means having assets spread across different sectors, geographies, and asset classes. Review your portfolio to ensure it’s not overly concentrated in similar investments. Learn more from a prior episode here.
  7. & 8?  007: Bonds. So the two bond topics are similar, but also, not. Since Matt thinks I was stretching the list to make it an even ten, I’ll concede to combining the bond knowledge. First, there’s a misconception that bond funds are riskier than individual bonds. While individual bonds provide fixed returns and return of principal at maturity, bond funds offer diversification and professional management.
  8. That said, bond funds can be more volatile than individual bonds due to their constant buying and selling. However, what they lack in consistency, bond funds make up for in liquidity and diversification benefits. Understanding the nuances can help you choose the right fixed-income investments.
  9. TIPS for protecting against inflation: Did you know there was an investment that protects you from inflation? Treasury Inflation-Protected Securities (TIPS) or similar instruments offer protection against inflation, ensuring your real returns aren’t eroded. Consider adding them to your portfolio.
  10. Keep listening to my podcast! Ok, that was a shameless plug, but the need to educate yourself can’t be overstated. The financial landscape is always changing. Staying educated and being willing to adapt your strategies is essential. Engage with financial advisors, read up on new trends, and continuously refine your approach to meet your financial goals.

Hopefully you didn’t find this episode boring and painful. Remaining financially vigilant is an ongoing effort. These ten insights give you a robust framework for making informed decisions in 2024. By staying educated and proactive, you can optimize your financial health and enjoy the journey to financial well-being. For more in-depth discussions on any of these topics, feel free to reach out or follow up with detailed inquiries.

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10 Financial Hot Topics for 2024: Boring and Painful

Episode 147 •

01st July 2024