Play The Current Housing Boom With ETFs

Unless you've been living under a rock, you know that the housing industry is booming. Inventory is low, and prices are high! Over asking is now a standard term and contingency waivers are the only way you win those bidding wars with other buyers. Oh, and not to mention, if you find a house for sale, you better see it the first day it is listed, or you can forget about ever getting a chance because the number of days on the market is essentially zero at this point.

So how can you invest in this market without having to deal with this headache of a situation and risk overpaying for an asset class that historically only goes up 2% year-over-year?

Enter the world of Exchange Traded Funds!

There are several Exchange Traded Funds that you can buy today that will give you access to the businesses that are not only performing well right now but are still drooling at the current prospects that lay in front of them. In particular, the home builders. Continue reading "Play The Current Housing Boom With ETFs"

How To Play This Volatile Market

Over the past few weeks, I have been on the phone with tons of different market participants. Some are professional investors, people investing a little of their own money, financial advisors who manage a few million and others who manage hundreds of millions, and to first-time investors in their 20's, 30's, and 40's and even one as young as 17 years old.

While everyone wants to talk about what is going on or wants to know what to do or has a strong opinion on what to do within the market, only one thing holds true of every person I have spoken to; no one truly knows what is going to happen next.

Let me emphasize that, "No one truly knows what is going to happen next."

This is true for the people I have been speaking with, investors who managed billions in hedge funds or retirement funds. The Jim Cramer's or other talking heads on CNBC, the President of the United States, nor Congress, nor the Pope himself, knows what is going to happen next.

Although some people may tell you they do or just be very convincing that they do, let me assure you, they don't know what the market is going to do tomorrow, next week, next month, or the rest of the year.

And let's be clear, this would all be true whether or not we're in the midst of a pandemic or not.

However, you can't blame people for making predictions or looking at the past performance of stocks following significant economic turmoil. Comparing the past and trying to find similarities to help us make 'predictions' is very common and can be useful at times, but that doesn't mean we should blindly follow those predictions. (This is even true for my suggestions.)

So, if no one knows what's going to happen, then what should we do? Continue reading "How To Play This Volatile Market"

Thankful For Another Great Year On Wall Street

This past Thanksgiving, millions of Americans sat at the dinner table and proclaimed what they were thankful for. For some, it was loved ones, new family members, a promotion at work or a new job altogether, but at the very least, the food that was about to be eaten was mentioned. The success of the stock market in 2019 was undoubtedly one of mine, but I may be in the minority when it comes to people who said such out loud.

However, with the major indexes again trading at new all-time highs, something we have now had occur more than 20 times in 2019, 18 times in 2018, 62 times in 2017 and another 126 times from the start of 2013 until the end of 2016, its hard not to think about how much further this bull market can run.

Adding new money to the market seems very risky today based on how far the market has come the past few years and considering we have seen so many new all-time highs over the past few years.

However, new all-time highs is a very normal thing for the market. Since 1928, the U.S. stock market has seen new all-time highs on 5% of the trading days. Think about that! That’s on average, one in every 20 trading days, the U.S. stock market is hitting an all-time high. From that perspective, a new all-time high sort of seems like not that big of a deal.

Another crazy thought is that since World War II, the U.S. stock market has spent nearly 40% of its time within 5% of all-time highs. Ok, so almost half the time stocks are trading within reach of an all-time high. Furthermore, 54% of the time stocks are trading within 10% of all-time highs.

However, that means 46% of the time stocks were more than double digits below their highs. Continue reading "Thankful For Another Great Year On Wall Street"

Dividend Stocks Yielding More Than Bonds

A weird thing happens when investors start seeing signs of a recession or just start convincing themselves that a recession is inevitable and coming soon; interest rates begin to fall, which means bond yields begin to drop. Most investors are told when they start investing that stocks are risky, but they offer better long-term growth, while bonds are safer, but they don’t offer investors as much potential growth.

While these statements may be true during certain situations, they certainly don’t always hold true. Sometimes, stocks may be both less risky and offer higher growth than bonds. I personally believe now be may one of those times.

As things sit now, bonds are offering rather low yields. The three-month treasury is paying 1.78%, the 12-month treasury is paying 1.75%, while the even longer five-year treasury is only offering a yield of 1.56%. The ten-year treasury is at 1.68%, and the 30-year treasury is sitting at 2.13%. These returns are hardly likely to keep up with inflation over those longer periods. Buying an investment that may just keep up with inflation seems somewhat risky to me.

Even the bond ETFs that have performed well year-to-date and pay yields to their investors aren’t currently offering anything much better than what investors can get from Treasuries. The Vanguard Long-Term Corporate Bond ETF (VCLT) which is up 21% year-to-date is offering one of the best yields at 3.5%. But this ETF is rather risky considering if, and when interest rates turn around, this fund will get hit.

On the other hand, certain stocks are currently offering higher yields, while also offering the chance for stock price appreciation, regardless of which way interest rates run. Let’s take a look at a few of my person favorites equity Exchange Traded Funds, which offer both growth and healthy, reliable yields. Continue reading "Dividend Stocks Yielding More Than Bonds"

ETFs Will End The Use Of Mutual Funds

When Jack Bogle started the Vanguard Index Fund, he essentially changed the investment management game forever. He found a way to reduce the fee’s they charged investors, which in turn, brought Vanguard more investment money than they could have ever imagined.

If the move to lower investment fees was the first landed punch in the fight against mutual funds, the rise of the Exchange Traded Fund is the nuclear bomb in the fight against mutual funds. And well to most market participants, the reason is clear, ETFs are way cheaper and easier for all parties involved.

But, why do lower fees matter? Yes, and the math, while perhaps not simple is straight forward. The idea is that if you invest the same amount each year, we will say $10,000, and in one scenario you pay 0.1% in fee’s and commissions and another you pay 1.5% in fees and commissions. Over 30 or 40 years of investing, the difference of 0.1% and 1.5% will add up because of compounding interest. How much of a difference, well that all depends on your annual return rate, how long you stay invested and how much you are investing, but it could add up to not thousands of dollars, or even hundreds of thousands of dollars, but millions of dollars.

Some quick back of the napkin math looks like this, just to prove my point. A 0.1% fee on $10,000 during one year is just $10. Now a 1.5% fee on $10,000 during one year is $150. Let’s say your account never grows higher than $10,000 over 10 years, (I know very unrealistic, but follow along.) If your fee’s where 0.1% you would pay $100 in fees throughout those 10 years, ($10 a year time 10 years). Now let’s say your fees where 1.5% on your $10,000 for 10 years, (and again it never changed from $10,000) you would pay $1,500 in fees over the 10 years. $100 in fees or $1,500 in fee’s, which would you rather pay? And again, that’s just on a $10,000 investment, imagine if you have $100,000, $500,000, $1 million or more invested. Continue reading "ETFs Will End The Use Of Mutual Funds"