Financial Well-being

By analyzing overall characteristics of top performing *growth* style etf, such as iShares Russell Top 200 Growth ETF (IWY), with top performing *momentum* style etf, such as Invesco S&P 500 Momentum ETF (SPMO), I have learnt one thing for sure. Growth style seems to have produced similar return as momentum style for long term (5, 10 years) horizon with comparatively much *lower risk*.  Growth fund (such as IWY) has mostly beaten broad market index every year since it's inception in 2009. However, momentum one (such as SPMO) keeps disappointing every other year by underperforming broad market.  So, for more aggressive investing strategy (say 20% of your stock portfolio), when it comes to choosing between growth and momentum, growth seems to be better option.

Wow!!! My first ever dabbling in buying on dip  during 2022 market downturn turned out to be quiet exciting endeavor. I primarily bought iShares Semiconductor ETF (SOXX). Let me share my experience from this experiment. Since I don't do market timing in general, I was not sitting on any cash for such buy on low exercise. Rather I used borrowed  funds from HELOC at prime minus 1% (3% average APR during last year) rate. I kept buying little bit on dip each time SOXX went down by 8%. As SOXX dropped around 36% last year, I ended up buying for around 80K. So far, with spectacular recovery of semiconductor sector this year, this experiment has generated almost 20% gain on my investment in it. My plan is to start selling SOXX slowly as it reaches it's record high in near future and keep selling for each 8% increment thereafter. Idea is to slowly pay off HELOC and then repeat this excercise again during next market correction/crash.  Glad to see my first buying on dip experimen...

If one's retirement horizon is quite far away, they need not invest any retirement money in bonds. Bond's long term REAL (after inflation) returns are too low (just 2%) as compared to that of stocks (which is 7%). Note that above suggestion of not keeping any retirement savings in bonds for younger (below mid fifties) workers comes with a caveat. It's only meant for savvy  investors (with higher risk tolerance ) who are able to effectively manage pain of loss during stock market downturns and stay course  without losing any sleep. With 100% stock portfolio, pain of loss is expected to be most severe . So, unless you believe in long term potential of stocks and are willing to exercise patient, don't try 100% stock portfolio. Rather, like typical  retirement saver, stay with target date retirement funds (which typically has decent bond allocation) so that short term losses during crashes is emotionally  better manageable for your lower risk tolerance. Near retiree (...

John Mondragon at the Federal Reserve Bank of San Francisco and Johannes Wieland at the University of California, San Diego, estimate that remote work fueled a 15 percent rise  in house prices over the two-year period  that ended in November 2021.  That’s almost half of the total price increase  for that period. Source: https://squaredawayblog.bc.edu/squared-away/remote-work-has-pushed-up-house-prices/ So, when we hear people being irrationally exuberant about single family real estate as next great investing option (or say contemplating moving to even bigger home from juicy investment perspective), remind yourself that recent increase is highly correlated to remote work and has very little to do with long term housing fundamentals. If corporate America starts requiring more team collaboration (and hence less remote work) as going forward trend, outer suburb single family home valuations are likely to go through correction cycle during next recession.  Savvy inv...

Sitting on cash with an intension of buying later the dip is certainly speculative market timing  and rarely beats buy and hold  strategy.  However, if one wants to slowly  build position into some promising  (based on fundamentals such as excellent long term earnings growth  potential) asset class which happens to be currently overpriced  (say, significantly higher PE than Total Stock market index), then tactically  exchanging  Total Stock index position with that one could be good use of buying the dip strategy. I have been slowly building position (with max limit of 8% of my portfolio though) in semiconductor sector by buying 1% of my portfolio in SOXX on each 8% dip from my last buy. With technology sector being so volatile, 5 such limit orders got executed during last one year. With all these averaging of buying on dip, my average paid PE is close to 17 (same as current PE of Total Stock index). Source: How to Face Up to Buying the Di...

Large growth, which typically holds over 50% in technology , has entered into crash territory today with around 22% drop from it's peak from Dec last year. Broad market, such as Vanguard Total Stock index, is still in correction territory with just 13% drop from it's peak.  Market hates uncertainty . We have enough share of uncertainties lately, such as pandemic surge in China, geo political crisis in Europe caused by war in Ukraine, global food inflation and associated geo political crisis in developing nations, just to name few.   This makes Central Banks job even harder in taming inflation and hence increases potential for global stagflation . It's natural in such scenario to have investor emotions of cutting losses by resorting to panic selling of stock equities, before it drops even further. However, savvy investing is all about managing emotion of such pain of loss . Long-term stock investing's contribution to our financial well-being depends a lot on how...

"When it comes to savings, paying for college and home-buying , most say young adults today have it harder than their parents’ generation" Source: https://www.pewresearch.org/fact-tank/2022/02/28/most-in-the-u-s-say-young-adults-today-face-more-challenges-than-their-parents-generation-in-some-key-areas/ft_22-02-25_youngadults_01/ My advice to millennials in this group is to consider starting early  in investing as one of the best coping techniques for above lack of savings  challenge they are having. This might require some hard choices when it comes to discretionary  splurges, such as destination  bachelorette/birthdays/weddings, which seems to be extraordinarily higher for this generation than their parents. This takes a big slice away from some of mandatory savings one can start early well rounded financial well-being.

Congratulations to all those savvy investors who paid attention to valuable advices  by some of us and acted timely  to lock in one of the best mortgage rates in history. Some of us managed our short term greed  well and paid little bit extra in mortgage rate so as to stretch  our mortgage to longer 30 years  term as opposed to otherwise cheaper 15 years term. Our portfolio is likely to benefit through increased investing in stock equities (as opposed to slow growing home equity) in subsequent long 30 years  through magic of compounding. In counter intuitive way, perhaps some of us have been accelerating  mortgage payment with no regard to such low interest rate  opportunities. Such behavior could be correlated to so-called debt aversion  (or perhaps inability to manage pain of occasional losses during investing in stock equities). Unfortunately, such behavior is likely to cost quite a bit to their long term financial well-being. Savvy inve...

ETF  ProShares UltraPro QQQ (TQQQ) offers 3x ( T riple) daily long leverage to the NASDAQ-100 Index based Invesco QQQ Trust (QQQ) ETF . Using 3x leverage means that fund manager invests another ( borrowed  ) $2 for each $1 investors put in. This results into 3 times of index return in boom times like last several years. This all sounds great until market moves to crash  territory. All those gains as well as principal could be quickly wiped out during a crash. For example a 10-20% market correction  (which typically happens every alternate  year) would result into 30-60% drop in TQQQ. If one had doubled one's money in last couple of years, all that gain is wiped out with just a mild 15% correction. With such outsized  loss, one is likely to resort to panic selling  and so would miss out further during quick  recovery (typically 4-5 months for corrections). I strongly suggest to stay away from such souped up leveraged  investing. Savvy invest...