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3 Things 9-9-24

Thing One



Building Wealth



The following is from jimrohn.com. It's a blog post he wrote about building wealth called, "You Can Have More—If You Become More"




"Here’s the great challenge of life: You can have more than you’ve got because you can become more than you are.



I have found that income seldom will exceed your own personal development. Once in a while income takes a lucky jump, but unless you grow out to where it is, it will go back to where you are. Somebody once said if you took all the money in the world and divided it equally among everyone, it would soon be back in the same pockets.



However, you can have more because you can become more. You see, here is how the other side of the coin reads: Unless you change how you are, you will always have what you’ve got. The major thing that makes the difference is what you do—it is the human effort that counts.



In order to have more, you need to become more. The guy says, “If I had a good job I would really pour it on, but I have this lousy job so I just goof off.” If that is your philosophy, you are destined to stay there. Some people say, “If I had a lot of money, I would be really generous, but I don’t have much, so I’m not generous.” See, you’ve got to change that philosophy or you will never have “the lots of money.”



Unless you change, it won’t change. Amazingly, however, when we throw out our blame list and start becoming more ourselves, the difference is everything else will begin to change around us."



Thing Two



If You're Young You Don't "Need" Bonds



Anybody who's ever taken an investing course, either as part of a college curriculum or singularly, has undoubtedly been counseled on the prudence of a 60/40 (stocks to bonds) investment portfolio. We'd like to supplemtent that course by sharing an article from Yahoo Finance called, "Why millennials and Gen Z are too young to be loading up on bonds". It is a refutation of the 60/40 advice which is directed specifically at younger people (whom the author essentially defines as anyone born in or after 1981). See the excerpt below:



"..."Young people don't need bonds unless they get extremely uncomfortable," Smalley said during the latest episode of Yahoo Finance's Stocks in Translation podcast (listen below). "Bonds are there to reduce the volatility of a portfolio. But if you're young enough, really none of that matters."



In the 30 years from 1993 to 2023, the S&P 500 (^GSPC) had a compound annual growth rate (CAGR) of 7.8%. Reinvesting dividends would have boosted that return to 9.9%, according to Yahoo Finance calculations.



Over the same 30-year period, the Bloomberg US Aggregate Bond Index had a compounded annual growth rate of 3.3%. From its peak in late 2021 to its bottom a year later, it sunk 17.4% — a large drawdown by historical standards.



"Sometimes [the stock market's returns are] lumpy. Sometimes you get 30% a year. Sometimes, like in 2022, you're down 20%," said Smalley.


"If you're a young person and every two weeks you get paid by your company — if you're lucky enough you've got a 401(k) and you've got a company that will match a certain percent of that — you want the market to go down," Smalley added.



Bonds have also traditionally served as the go-to asset for reducing portfolio volatility and generating a steady income.



But younger investors, who have decades of earning potential ahead of them, don’t necessarily need that stability or the recurring income that comes from regular interest (or coupon) payments — a feature of bonds that many retirees depend on.



The diversification argument in favor of bonds has also been challenged in recent years.



And since 2021, stock and bond moves have been increasingly correlated, meaning they tend to both go up or down together. As the correlation between bonds and stocks increases, the diversification benefits diminish.



Bonds suffered one of their worst years on record in 2022 alongside the S&P 500's steepest annual drop since 2008. As a result, "mom and pop" investors in 60/40 portfolios were hit particularly hard.



During periods of high inflation and rising interest rates — conditions we’ve recently experienced — bonds just don’t offer the safety net they once did.



"If you're an investor and you're just starting out, the foolproof way to get where you need to be is to dollar cost average in index funds," Smalley said. "It will not fail you over a long period of time. Trading will fail you. It fails almost everyone.""



Thing Three



Just A Thought



"But most men do not know what a house is, and the mass are actually poor all their days because they think they must have one such as their neighbor's." - Henry David Thoreau

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