Reasons for Individual Investors to Be Grateful in 2022

Special Note: We’re offering a special Thanksgiving weekend sale on AAII Growth Investing, a new and better approach to growth investing that finds stocks likely to outperform the market in any economic condition.

In his TED Talk, David Steindl-Rast makes the case for happiness being directly tied to gratitude. The monk and interfaith scholar says that people who are more grateful tend to also be happier.

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 is an evolving list, with changes made every Thanksgiving. 

Higher Interest Rates for Savers—After more than a decade of extraordinarily low interest rates being paid on savings accounts, money market accounts and the like, interest rates are finally going up. This is very good news for those with cash savings. You still need to shop around, however. The national average of savings accounts was a paltry 0.16% at the start of November according to Bankrate.com. In comparison, Discover is offering AAII members an annual percentage yield of 3.05% on their savings. (If you have debt, shop around as well. You may be able to get a lower interest rate, which can help you pay down your debt quicker.)

Having a Portfolio—Yes, it’s been a rough year to be an investor. Both stocks and bonds are down. The S&P 500 index remains in a bear market. Diversification has hit a severe pothole. Inflation remains high. Interest rates have been raised a lot and the Federal Reserve is expected to continue hiking them. If you’re worried about one or more of these factors affecting the value of your portfolio in an adverse manner more than they already have, 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.

Further Progress on the Pandemic Front—The coronavirus has yet to go away, but we do have newer ways of protecting people from getting seriously ill. New bivalent vaccines from Pfizer and Moderna were released a few months ago. Treatments like Paxlovid and Molnupiravir can help to lessen the severity of an infection. We are also seeing signs of supply chain issues easing—even with the ongoing impact of China’s “zero-COVID” policy.

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 their 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—We’re continuing to see expense ratios decline for both exchange-traded funds (ETFs) and mutual funds. There are 222 ETFs and 76 no-load mutual funds available to individual investors with expense ratios of 0.09% or lower. That equates to a mere $0.90 (or less) for every $1,000 invested. This trend, along with the popularity of indexing, has put pressure on mutual fund fees. Additionally, no-commission trading for stocks and ETFs has made it feasible for workers to dollar-cost average into IRAs and Roth IRAs via paycheck-related contributions.

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 the elimination of commissions and the downward pressure on mutual fund and ETF expense ratios are beneficial: Every dollar you save is a dollar you get to keep investing.

Being a Proactive Manager of Your Wealth—If you’re reading this, then you are a person who has chosen to be in control of your finances. Regardless of whether you do everything yourself, work with an adviser, use index funds or actively pick stocks, you have made the decision both to be engaged and to continue learning. Be proud of yourself and be grateful that you have the ability to do so.