Being disciplined is smart. Put money away each month and start as early as possible. You know, when I was in college, they told us that US Equity had the highest return of any asset class. They told us that US Equity returned, on average, between eight and eleven percent annually.
Neither one of my parents went to college. My mom didn’t even finish high school. My dad was career Navy. WW II generation. Scarred by the Great Depression (when they were kids) generation. They knew the value of a buck.
Being the enterprising young man that I was, I didn’t always believe everything I read in textbooks or what my teachers told us. So, then they showed us stock charts of the S&P 500 and the Dow and so forth and sure enough, over time, you could see that an 8-11% return, before taxes, was accurate information. That along with the power of compounding, the same math that Warren Buffet used to get excited about investing when he was young, had me convinced that investing in US Equities was a smart thing to do. It was a lesson I learned in college and took to heart,
The tech bubble crash ruined the 8-11% average for many, many years and the credit crisis economic meltdown did the same thing. The 8-11% thing was true over 100 years mostly because the US was an economic power post WW II and a net exporter, etc. None of that is even close to true today. The US is still a big economy but certainly isn’t a net exporter and other countries have labor cost advantages and manipulate their currencies which, give him credit, only one candidate for president even brings up.
With our “new normal” economic growth it is hard to expect a decent return even if you take on risk by investing directly in public company stock. Still, you can’t keep it under a mattress and you have to try to beat the rate of inflation somehow. The fintech industry segment refers to companies that use technology to change the way we bank and borrow, get investment, tax and estate planning advice, and so forth. Forbes 2016 Investment Guide issue listed the Fintech 50 and had a headline of the future of money. Keep in mind that the Fed Reserve does an annual study of median US net worth and found that 47% of the people in this country wouldn’t have enough money to deal with a $400 emergency.
Half.
Half the people in this country, probably more, live paycheck to paycheck and that is probably not counting the ones who don’t even work or have steady work.
Traditionally, no one gave money advice to that market segment because … well, mostly because they had very little money to give advice too. But the fintech industry could change that and God knows the average person in this country needs better money management advise. It isn’t just the elderly who are poorly educated about money either but think of it like this. Your smart phone can tell you how many calories you burn each day by walking and can then evaluate how your diet helps or hurts your weight gain goals. You don’t need an expensive personal trainer and nutrition expert for all that data anymore. That is what fintech does for finances.
The Forbes article listed companies such as:
Credit Karma
Kensho
SoFi
Stripe
Acorns
Betterment
Braintree
EquityZen
Fundrise
Etc.
All of them could be transformative and eat into markets traditional controlled by banks, investment advisors, etc. And all of them could be gone by the next annual issue of Forbes so picking the winners and losers is not easy. But, that is investing for you. I’m neutral right now and, sadly, slightly embarrassed to admit this, have a large investment, my core position, in Bank of America. I need to unwind that ASAP but not sure what other ship to jump into.
