Rising crypto prices can influence your investment strategy significantly.
This Week In Your Wallet: Building Long-Lasting Wealth
Hello and happy (almost) holiday weekend! It seems we’ve transitioned from spring to summer without much fanfare. I’m looking forward to celebrating the Fourth of July with barbecued chicken, ribs, a refreshing watermelon and feta salad, and of course, pie — lots of pie! Although I won’t be baking it myself since making pie crust is not my strong suit.
As I enjoy this warm, sunny day on the Jersey shore, I want to share some wallet-related insights that have caught my eye.
Do Asset Price Increases Equate to Lasting Wealth?
Moody’s.com economist Mark Zandi posed a critical question regarding wealth perception in yesterday’s publication. With asset prices, including stocks, real estate, and cryptocurrencies, making headlines, it’s a pertinent topic. Various factors contribute to these price surges, many we've explored previously. The stimulus funds from the pandemic were spent by those in need but saved by others, injecting a significant amount of cash into the economy and benefiting businesses across sectors. Additionally, low interest rates have made stocks more attractive compared to bonds, contributing to rising home prices due to limited supply.
Consider the more puzzling categories, like meme stocks. A recent survey from Betterment.com revealed that 91% of investors received stimulus funds, with nearly half investing some of it. In contrast to a 2020 survey where only 9% invested part of their stimulus, a significant shift has occurred. Furthermore, many respondents are not just investing but engaging in day trading, planning to continue this trend beyond COVID.
Cryptocurrency is also gaining traction, with the Wall Street Journal noting that it's increasingly appearing in the retirement plans of everyday investors. A survey by the Financial Planning Association showed that 49% of advisors were asked about crypto investments in 2021, up from 17% in 2020, with 14% recommending it compared to just 1% the previous year.
So, what’s Zandi’s conclusion? Are we truly as wealthy as we believe? He suggests, “Probably not,” pointing out that speculative asset markets are prone to significant corrections if conditions change unexpectedly. While this doesn’t necessarily indicate a time to sell, it calls for cautious buying.
P.S.: Regarding the Rising Tide…
It’s essential to remember that rising prices don’t benefit everyone equally. While discussing soaring asset values, the Washington Post highlighted the grassroots “freege” movement in Philadelphia. These community refrigerators, stocked by volunteers and local businesses, allow those in need to take what they want and leave what they can. The movement has expanded from 15 to about 200 locations across the U.S. since the pandemic, illustrating a growing need — despite a recent decline in hunger, many Americans still face food insecurity.
Trust, But Verify
This week brought two noteworthy updates regarding financial trust. First, the Stanford Center on Longevity, University of Minnesota, and AARP introduced a helpful resource called the Thinking Ahead Roadmap. This tool assists seniors in selecting trustworthy individuals to manage their finances, offering steps from choosing an advocate to organizing financial information.
Secondly, although we often worry about older relatives falling victim to scams, reports indicate that younger individuals are more vulnerable. As highlighted by The New York Times, this is partly due to their extensive online presence. Scams range from employment offers to dubious checks, making it vital to share this information with those who might benefit. You might want to pass this along.
