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Ponderings For the Week of November 12 to 18, 2018

Stocks Continue Strong Advance, But Doubts Persist

Large-cap stocks gained another 2% for the week, compared to a mere ½% average advance for stocks of all sizes. This is a sign that investors prefer the relative safety of the behemoths whose price stability is superior to smaller capitalization and foreign equities.

As expected, the next two years will see a divided Congress. The strong Wall Street reaction to the election results suggests that a government that doesn’t accomplish a whole lot should be positive for stocks. But the immediate concerns plaguing the investment markets didn’t go away with the election, notably a December hike in interest rates by the Federal Reserve Board and the threat that tariffs have on both corporate profits and the cost of living for the masses. Some sort of tariff accommodation between the U.S. and China will be a most welcome holiday gift for corporations. If not, the implications for next year are painful and unnecessary.  

 

Saving Yourself from FOMO

FOMO – fear of missing out – is a very real phenomenon that has been the subject of considerable research. FOMO is becoming even more acute thanks to social media and the speed with which information becomes disseminated. You hear about someone’s financial success or a big increase in the stock market and worry that you’re being left behind. This can lead to bad or at least ill-timed decisions.

Like most good habits, inoculating yourself against FOMO takes discipline. The day-to-day vacillations in the investment markets and the feelings of envy of those who apparently benefited mightily from some investment are going to get in the way of your otherwise sensible approach to your own financial life. Sure, some stock sectors or individual stocks hit it big in a single day, but these are the ones that usually lose as much or more soon thereafter. Who cares about the big winners, anyway? If you maintain a consistent approach to your investing and are prudent in your financial life, you’re almost bound to eventually be a big winner, leaving those afflicted with FOMO in the dust. 

 

    

Smart Money Tips

 

  • This may not be a good time to be buying mutual funds in your brokerage accounts. With late year mutual fund purchases you risk buying just before the fund company pays a dividend. Most of them distribute dividends in December. This is not a concern with your retirement accounts, since you don’t pay taxes on them until you begin making withdrawals. But you could risk an unwanted tax bill if you buy a fund for your taxable brokerage account late in the year, particularly with the gains in stocks we’ve enjoyed thus far this year.
  • Buy generic. Instead of just picking out the name brand item you buy at the grocery or drug store, try out the store brand or generic version. You’ll probably discover that the generic is just as good as the name brand at less cost. In addition to groceries, you can further reduce your spending by buying generic over-the-counter medications and personal care products. Last but by no means least, buying generic prescription medication can be a big money saver.

 

 

 

 Ponderings Archive

October 22 to 28

October 29- November 4

November 5-11

 

 

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