Category Archives: Investment

Gambling with my Future

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I’ve been focused on gambling lately.  Not casinos.  Not the overwhelming number of sports betting apps that John Oliver did a deep-dive on recently (though that is definitely worth a watch if you have the time!).  I’m talking about the kind of gambling that most Americans do, whether they want to or not.  The stock market. With only a small portion of U.S. based jobs offering traditional pensions, the great majority of retirement savings is now done through 401(k) and 403(b) investment funds.  And whether you realize it or not, that hinges on the stock market.

The market has been a bit volatile lately.  On-again/off-again tariff threats have destabilized the business world, as no one can predict what is around the next corner.  Inflation is persistent.  Unemployment is on the rise.  And these things have helped to push the stock market into a downward spiral.  And that can be a bit scary if you are checking on the balance of your retirement account.  As I am currently in my final few years before my hopeful retirement, this should have me concerned.  Looking at my savings balance drop, despite additional contributions going in, is a bit unnerving.

Pessimists see the glass as half empty.  Optimists see the glass as half full.  I tend to take the differing view that the glass is refillable.  And that is a helpful view to have during times of uncertainty.  As my balances drop with the stock market, my current investments are earning less.  But at the same time, my new contributions are buying investments “on sale,” at lower prices than they would have been if the market were climbing. And I know that the market won’t stay down forever.  My retirement fund has already survived the Dot.com Bubble, the Great Recession, and the Covid Crash.  And it has always bounced back and grown even stronger.  And I fully expect that the current market will turn around before I retire (though poor timing may push my retirement a couple of years further out). But it will bounce back.  It always bounces back given enough time.

The trick to surviving a volatile stock market is not to panic.  Don’t freak out and sell.  You haven’t actually lost any money if you haven’t sold your investments.  Let me say that again.  You haven’t actually lost any money if you haven’t sold your investments.  The stock market is a long game.  That’s why it is used so much in retirement savings.  You buy in regularly.  The market ebbs and flows.  And you don’t sell until the time is right for you.  Over time it equals out.  You buy low.  You buy high.  You sell low.  You sell high.  Time is a great equalizer.  You can’t time the stock market so you are always buying low and always selling low.  If you try, you will almost certainly fail.  The secret is to buy and hold.  And keep buying and holding.  And in time you will likely walk away with more than you invested.

Making Bets

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Gambling seems to be everywhere these days.  The commercials for betting apps inundate my TV.  With the Super Bowl in Las Vegas (the casino capitol of the country) this year, the number of things you could bet on seemed to be never-ending….right down to the color of Taylor Swift’s shirt.  Casinos are popping up in shopping malls.  Sports betting is an app on your phone.  Lottery tickets are available from a vending machine at the convenience store.  It’s pervasive.

Betting on things is generally not the best idea.  It’s definitely not a solid plan for a stable income.  You should never bet money that you can’t afford to lose.  The lottery is a tax on people who are bad at math.  The odds are always stacked against you.  Yet that doesn’t stop me from occasionally buying a Power Ball ticket and dreaming of what I would do if I won several million dollars.  It’s not an investment strategy.  It’s a source of entertainment. I don’t do it often, and I go into it knowing I’m probably going to lose.

There are ways to make bets that are not necessarily detrimental.  One year I used my income tax refund to buy some stocks.  I picked a few companies whose products I used and bought 10 shares of each.  One of those companies was a DVD rental by mail company called Netflix.  Those 10 shares cost me $170, and I sold them several years later for a few thousand dollars.  That was a good bet, which funded the installation of central air conditioning in my house.  I don’t remember what the other stocks I bought at that time were….because they were not good bets.

There are more educated, less risky ways to bet on things.  My retirement fund is largely in stocks, but it is managed by people who do that for a living—people that do research and keep things balanced appropriately for where my risk level should be at this point in my career.  It’s definitely beyond my skillset.  But there is still some risk involved in anything that involves the stock market.  There’s still some level of betting involved.

One of the smartest bets you can make is to bet on yourself.  Every time you pursue something new, you are betting on yourself.  Maybe you are taking a new job.  Maybe pursuing a new degree or certification. Maybe starting a business. Maybe something as simple as cooking a new recipe for the first time. Every time you attempt something, you are betting on yourself.  You won’t always succeed.  But you are taking the risk and putting yourself out there. And the person who bets on themself is miles ahead of the person who is afraid to try.

Regardless of what color shirt Taylor Swift wore to the Super Bowl, there are good bets and bad bets.  But betting on yourself is ALWAYS a good bet.

Investing in Yourself

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The stock market is all over the news lately as it continues its roller coaster ride through 2022.  It almost makes a person think twice about investing.  Luckily there is more than one way to invest.  The Cambridge Dictionary defines investment as “the act of putting money, effort, time, etc. into something to make a profit or get an advantage.”  That can mean sinking money into stocks and bonds.  But it can also mean a number of other things.

Last week I took a vacation.  I spent a week camping my way up and down the Appalachian Mountains, with a three night stop in Tennessee to listen to bluegrass music.  For me that was an investment in myself.  When I left home I was burned out and emotionally exhausted.  When I returned to work I was refreshed and rejuvenated.  Putting that time and money into some time away yielded me the advantage of restoring my mind to a better place, which ultimately makes me better at my job and many other things in my life.

Most of my readers are full-time law students.  Pursuing a degree is definitely an investment in yourself.  Earning a law degree requires an investment of three years of your life as well as a good deal of money.  It’s not a small investment.  But the idea behind investing is that what you get in return is of greater value than what you put in.  In exchange for three years, a bunch of money, and no small amount of stress, the return is a degree which can provide you with a rewarding and often lucrative career.

Another way to invest in yourself is to take good care of your physical health.  Get some exercise.  Eat some vegetables.  Go to the doctor on occasion.  Brush your teeth.  All of these things require some effort.  But the yield is a body better equipped to last you for a very long time.  I admit that I struggle with this one (the exercise part specifically), but I know this is something that will be worthwhile and a good investment for the long run.

Ongoing education is another way to invest in yourself.  This can take many forms.  Learning a new language.  Going to hear a speaker.  Attending a conference.  Using YouTube to learn a new MS Excel trick. Using YouTube to learn how to do a home repair.  Pursuing another degree later in life.  Doing continuing education to maintain a certification.  Reading a book that will teach you a useful skill.  Watching a documentary on PBS.  The important thing is to never stop learning.  Invest in yourself by investing in your brain.

The stock market is indeed scary right now.  But it’s never the wrong time to invest in yourself.  You are a thing of value.  If you add more time and effort to that, you become a thing of even greater value.  Every investment is a risk.  But an investment in yourself is always worthwhile.

 

Retirement: Invest Early and Often

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I’ve had my mind on retirement planning lately.  Ok….really I just went to an RV show, but a few years living full-time in an RV is part of my retirement dream.  So it sort of counts.  But I did actually have a conversation last week with a young Penn State Law alumna who is starting her first full-time job post-graduation.  She asked me about whether she should start putting money in her 401(k) right away, or if she should work on paying down other debts first.  This question is one that a lot of people grapple with when they are first starting out.  And my advice is always the same:  as soon as you are eligible, contribute to your retirement plan at least as much as is required to receive any employer match.  My father gave me this advice when I started my first job, and I have never regretted following it.

One advantage of starting as soon as possible is that the money starts coming out of your paycheck before you get used to getting paid.  It’s impossible to miss money that you’ve never received.  The money comes out of your salary pre-tax, so it’s not as big a hit to your bottom line as you might think.  It’s just one more thing that disappears before you see it—income tax withholding, Social Security withholding, health insurance payments, retirement contributions—it’s all money that you’ve earned but you never receive.  So you don’t count on it and you don’t really think about it, because the process for you is passive.

It is important, however, to contribute enough to get any employer match.  Usually it is something like you contributing 7% of your income and your employer pitches in another 5%.  The percentages will vary, but the concept is the same.  If you give enough, your employer gives you more.  They actually pay you to participate in the retirement plan.  Just for investing in your own retirement.  If you don’t contribute enough to get the match, you are literally throwing away free money that you could have received.

But the most important reason to contribute early and consistently is the power of compounding interest.  The earlier you start saving for retirement, the longer your investments have to grow.  As an example of this, when I was in grad school in 1991 to 1993 (yep….I’m old) I had $150 per semester withheld from my assistantship funds and it went to the Ohio State Employees Retirement System.  I remember being really mad about it at the time.  Those were lean years, and that $600 would have made a big difference in my life at that point.  But I had no control, so there was nothing I could do about it.  After I started working full time, I rolled that $600 into an IRA.  I never added another penny to it. And due to the power of compounding interest, by the end of 2021 that $600 had grown into $8,600.  That’s more than 14 times the original investment.  And all I had to do was leave it alone for 30 years.  Now imagine how much growth would come from 12% of your starting salary, rather than just a few hundred dollars.  And keep increasing it as your salary grows.  Slow and steady wins the race when it comes to retirement savings.

It’s true, however, that the stock market has its ups and downs.  That $8,600 I had at the end of last year is currently only worth $7,300.  The stock market has not been in a great place recently.  But you should never let that deter you from putting money into your retirement fund.  I look at bear markets like I look at shopping the sales.  When the price is low, you get more for your money.  So right now my regular retirement investment is buying more shares than it was at the end of 2021.  My retirement investment is on sale!  Slow and steady.  The market will eventually turn around again, and the painfully large drop I have seen in my total account balance this year will bounce back, likely with a euphorically large gain (and so it will continue, up and down like a roller coaster for the rest of my life).

Even with the volatility in the stock market, because I’ve been consistent about contributing to my retirement fund over the last 30 years, I know that I’ll be able to retire comfortably to the RV of my dreams in only five to seven more years.  It seemed like an eternity away when I started my first job in financial aid in 1993.  But time has a way of passing more quickly than you expect it to.

When it’s time for you to select your benefits for that first big job, take my father’s advice and prioritize your retirement contributions.  You won’t regret it.

Crypto: Enter at Your Own Risk

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I watched the Super Bowl on Sunday.  I’m not normally a pro football fan (though I do faithfully watch Penn State football games).  But there’s something about the Super Bowl that I really enjoy.  It’s a purely American event.  I sit on the couch with my husband and eat pork rinds and pizza and chicken wings as we watch the game.  And when the game doesn’t hold my attention, the commercials generally do.  My personal favorite this year was the Doritos-loving Sloth.  But the thing that kept popping up in the ads this year was cryptocurrency.  I was stunned by the number of ads for both crypto and for places to store your crypto.  And it made me realize just how little I know about the topic.

I started in on research and was quickly in over my head.  The things I did gather is that there is the cryptocurrency itself (Bitcoin, Dogecoin, etc.) and the crypto wallets (Coinbase, Mycelium, etc.).  The currency that doesn’t physically exist is then stored in these wallets that don’t physically exist.  The whole thing is a bit unsettling to me.  There have been so many news stories about how crypto has been extraordinarily volatile.  So this is less like a savings account and more like an investment in the stock market.  Except even more volatile.  I’m normally not terribly conservative with my investment strategies, but crypto is not where I want my retirement funds to be invested.  I think if I were to venture into this world, I would not invest anything that I wasn’t prepared to lose altogether.  And that’s the same strategy I use for gambling (I like the nickel slots on rare occasion, as well as raffle and lottery tickets).  I go in prepared to lose.  It’s a form of entertainment rather than an investment.

I think the reason the crypto commercials left me feeling unsettled is because of the sheer number of those ads.  The last time I remember that many similarly-based Super Bowl ads was in 2000, for Super Bowl XXXIV.  Fourteen different tech companies (most of them no longer in existence) advertised during that Super Bowl, which is why it is still referred to as the Dot Com Super Bowl.  What makes this so unsettling for me is what happened just a few months later.  That is when the Dot Com Bubble burst.  A lot of people lost a LOT of money in the stock market that year.  A lot of tech companies lost significant value, and even more shuttered altogether. (Personally I breathed a huge sigh of relief that I had sold most of my investments in 1999 to put a down payment on a condo).

Cryptocurrency might be the way of the future.  Or it might not.  But right now, I’m looking at it more as a gamble than as an investment.