In his TED Talk, David Steindl-Rast makes the case for happiness being directly tied to gratitude. The monk and interfaith scholar says people who are more grateful tend to also be happier people. I’m referring to it not only because it is a great talk (to be fair, I’m a fan of TED Talks in general), but because today is Thanksgiving. (Happy Thanksgiving!) Today is supposed to be a day for being thankful. With this in mind, I’m going to list things we individual investors should be grateful for but may overlook. It’s intended to be an evolving list, with changes potentially made to it on future Thanksgivings.
Having a Portfolio—If you’re worried about valuations, monetary policy, economic growth, the impact Washington politics will have on economic growth, a return of downside volatility or anything else potentially affecting the value of your portfolio in an adverse manner, be grateful. I realize this seems counterintuitive, but consider the bigger picture: You have wealth to worry about. No matter how large or small your portfolio is, it’s money you do not have to spend today. Not everyone has this luxury.
Never Having to Report Performance—An advantage that we individual investors have over professional money managers is never having to report our performance. I cannot stress enough how big of an advantage this is. It gives us the ability to stick to strategies proven to work over the long term—even when they are out of favor on a short-term basis—without ever having to worry about keeping clients happy.
Being Able to Invest in All Exchange-Listed Stocks—In addition to not having to report performance, we individual investors are not restricted in what we can invest in. This gives us the ability to invest in stocks whose market capitalizations are too small for institutional investors to even consider because of investment objectives and/or the sheer amount of money they have to invest. The flexibility also allows us to take full advantage of the size, value and momentum premiums (and other return anomalies) identified by academic research. Our ability to invest in smaller companies is a big advantage.
Decreasing Costs—It’s never been cheaper to invest. Commissions have dropped with the major discount brokers now charging between $4.95 and $6.95 to trade stocks, exchange-traded funds (ETFs) and closed-end funds. Many mutual funds and ETFs can also be bought and sold on a commission-free basis. (Check with your broker for terms and the list of eligible funds.) Fund fees are declining, being driven by a price war in the ETF industry and the growing popularity of index funds. All of this means more money in your portfolio.
Compounding—There is no greater friend to investors than compounding. As many of you know, compounding takes a dollar’s worth of assets today and turns it into far more than a dollar’s worth of assets tomorrow. This is why lower costs are beneficial: Every dollar you save is a dollar you get to keep investing. Compounding grows your portfolio and then takes the increased value and grows it even more.
The Bull Market—Speaking of compounding, the current bull market is nearing nine years in length. Though it started with depressed values for stocks, the major indexes have realized significant gains since then. Those of us who have maintained a constant allocation to stocks throughout the bull market have profited handsomely. Thanks Mr. Market!
- Tax Breaks for Contributions of Appreciated Property – Donating appreciated securities you’ve held for more than 12 months allows you to both claim a tax deduction and avoid capital gains taxes.
- The Tax Advantages of Qualified Charitable Distributions From IRAs – If you have yet to take your required minimum distributions for this year and are planning to make year-end charitable donations, using a QCD can be advantageous.
- Highlights From the AAII Journal Archives: Cloonan Matter of Opinion Columns – Prior to starting the Model Shadow Stock Portfolio, AAII founder and chairman James Cloonan used to write this column. Here are some of his personal favorite highlights from it.
- The Level3 Withdrawal Strategy to Maximize Your Long-Term Wealth – This strategy combines a cash bucket with an all-stock portfolio to provide growth during bull markets and protection during bear markets.
Coming out of the holiday, only six S&P 500 companies are on the earnings calendar: Autodesk Inc. (ADSK) on Tuesday; Tiffany & Co. (TIF), PVH Corp. (PVH) and Synopsys Inc. (SNPS) on Wednesday; and Kroger Co. (KR) and Ulta Beauty Inc. (ULTA) on Thursday.
The week’s first economic report will be October new home sales, released on Monday. Tuesday will feature October international trade, the September Case-Shiller home price index and the Conference Board’s November consumer confidence survey. Revised third-quarter GDP, October pending home sales and the periodic Beige Book will be released on Wednesday. Thursday will feature October personal income and spending, as well as the November Chicago Purchasing Managers’ Manufacturing Index (PMI). On Friday, the November PMI, the November ISM manufacturing index and October construction spending will be released.
Seven Federal Reserve officials will make public appearances: Minneapolis president Neel Kashkari on Monday; New York president William Dudley on Monday, Tuesday and Wednesday; Governor and Federal Reserve chair nominee Jerome Powell will speak on Tuesday; outgoing chair Janet Yellen and San Francisco president John Williams on Wednesday; Dallas president Robert Kaplan on Thursday and Friday; and St. Louis president James Bullard on Friday.
The Treasury Department will auction $26 billion of two-year notes and $34 billion of five-year notes on Monday, and $28 billion of seven-year notes on Tuesday.
The latest survey results are shown below. Due to the timing of today’s holiday, I wrote this week’s commentary in advance and before the latest numbers were known. The current results were automatically updated by our content management software.
We did tabulate the results to this week’s special question yesterday, however. The question asked AAII members what their favorite Thanksgiving dish is. Turkey was by far the most popular choice, picked by nearly one-third of all respondents (32%). Six of these respondents specifically stated a preference for dark meat. Dressing and gravy beat out cranberry sauce (19% versus 14% of all respondents). Similarly, mashed potatoes were more popular than sweet potatoes (8% versus 5%), though stuffing beat both (10%). Desserts were popular with nearly a quarter of all respondents (23%) listing them; pumpkin pie topped the list (picked by 9% of all respondents). There was also one vote for a good merlot wine. Some respondents listed more than one Thanksgiving dish.
Here is a sampling of the responses:
- “The staples of turkey, gravy and mashed potatoes are a given, but a dressing to make the meal is an art form.”
- “Home-baked cherry pie.”
- “Turkey, turkey and more turkey … and dressing, cranberry sauce and pumpkin pie of course!”
- “Very traditional! Turkey, dressing, sweet potatoes and cranberry sauce. It’s the best meal of the year, and the best as leftovers.”
- “My mother-in-law’s cranberry sauce and spicy pumpkin pie … YUM!!!!”
- “Everything on the table!!!”
Bullish: 29.3%, down 15.8 points
Neutral: 35.4%, up 3.6 points
Bearish: 35.2%, up 12.1 points
Local Chapter Meetings
November 16, 2017 Choosing Between a Traditional and a Roth IRA
November 9, 2017 Tax Planning In an Uncertain World
November 2, 2017 My Decision to Stick With an Intermediate-Term Corporate Bond Fund
October 26, 2017 Portfolio Optimization Isn’t Necessarily Worth the Effort