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Payne Points of Wealth Podcast

If You’re Sitting in Cash Your Biggest Risk is the Cost of Opportunity, Ep#9

By October 15, 2020 No Comments

Politics still have things stirred up but the market seems to be handling it better than people are. Use this volatility as your ally because it seems like fear versus market action is disconnected right now. Just because YOU think the market is going to drop due to election results (whatever they may be) doesn’t mean it WILL.

Never discount the American consumer’s ability to spend money. It’s not smart to bet against it. What happens when we get a vaccine or when we get comfortable again? People start traveling, taking cruises, and flying again. The lockdown economy made a ton of money while everyone was in solitary confinement but what about the un-locked-down economy? It’s about to boom again. No matter who’s in office. Tune in to this week’s episode for the full scoop on this and more!

You will want to hear this episode if you are interested in…

  • News in plain sight: POTUS & FLOTUS’ covid effect on the market [0:39]
  • Your political bias and your portfolio [1:45]
  • Are things going to hell in a handbasket? [3:40]
  • What’s driving the economy? [5:03]
  • Will consumers start to spend again…did they ever stop? [7:24]
  • The Tipping Point [10:53]
  • Holding stock in the company that cuts your checks… is it a good idea? [15:52]
  • Hidden Facts of Finance [21:30]
  • Old school over new school in gains [28:06]

Appreciation isn’t the only return

A big thing that people miss in terms of a portfolio of investments is that the return comes not only from appreciation but also from income. When you have a portfolio of high-quality bonds— and you should ONLY own high-quality bonds— and you also have high-quality stocks in that portfolio, you’re actually making money every day. People have these buy low and sell high ideas and that’s garbage! Stay invested! A better way of looking at it is to get paid while you wait for your money to double. That’s the way you should look at it. What it comes down to is your biggest risk is not the election, it’s that person you look at in the mirror every day. It’s their political convictions that are getting in the way and stopping you from being a good unbiased investor. If you miss a big move up in stocks, you never get that return back and if you’ve already missed the summer melt-up, don’t miss the next move up too! Stop sitting in cash, get in, and stay in!

This week on the tipping point

Vanguard released its annual report called How America Saves, with several interesting facts about the investment world. Studies showed that 78% of investors use target date funds in their 401k with 54% using only target date funds. Another interesting fact is that 74% of all Vanguard 401k plans offer a Roth option, but only 12% of participants in those plans had elected the Roth option. The last stat we want to mention is that in the 10 years between 2010 and 2020, the number of people holding company stock in their 401k dropped by 16%. What might be the reason for this? And would you consider it a positive trend? You’ll want to catch the episode to get our thoughts— good, bad, and the ugly— on these stats.

This week’s hidden facts of finance

Ball Corporation recorded the lowest coupon ever for a junk bond with a maturity of five years at 2.8, seven 5% in August. The Double-B rated market, AKA junk bonds, is about 55% of the high yield bond market. As of the end of July, bond buyer beware. When you look at bonds and your portfolio, you want to have two things… you want to have a bond that comes due and you want to have a fixed coupon. Well, this bond does have a fixed coupon of 2.875%, but it may not come due. The problem with junk is that they can go out of business. They have a higher probability of failing. When you invest in bonds you want safety. Returning your money’s important return of your money is paramount. Listen to the full segment to hear the rest of our hidden facts of finance!

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