I hope everyone has recovered from the holidays – and especially the madness of Black Friday.
Here is another addition of Finance Friday – hope you enjoy!
Quote I am pondering:
A quote that has been on my mind – you will see why as you read about the stock market in the following section – is this quote from Warren Buffett.
He said, “be fearful when others are greedy, and greedy when others are fearful.”
He was specifically talking about the stock market. Often what happens in investing is people do it based off of emotion. They hear about how “hot” the stock market is and they don’t want to miss out.
This is called: FOMO – or, The Fear of Missing Out.
This mentality of FOMO is what causes the bubbles we see in our stock market. Warren Buffett warned that when others are greedy and investing without thought, this is when you should be fearful.
The other side of this is when others are fearful and are fleeing stocks, this is the time to be “greedy” – or in other words, then is the time to buy.
The idea is that investors are emotionally driven, and if you can take the emotion out of it you will be better off.
Personally, some of the biggest financial mistakes I have made are centered around emotional investing…
There is a lot of wisdom in this quote by Warren Buffet, who is considered the best investor of our time – if not ever.
Stock Market Update:
Another interesting week in the stock market.
After the holiday the market is doing the exact opposite of what it did last week – which is going straight up.
Yesterday the Federal Reserve made a statement saying they may not be hiking rates as quickly as they once thought.
As you will remember from last week this was a key point to watch in determining what the market would do. Yesterday, after this announcement, the Dow Jones and S&P proceeded to go up 2.5%, while the Nasdaq went up 3%.
Why is this important?
Think about what the Fed is saying. They said: The market is not doing as well as we thought so hiking rates too quickly could cause further stress on the stock market.
And what happened, the stock market went up – way up!
Why did the market not go down on the admission from the Federal Reserve that the market is not strong enough for rate hikes?
The answer is simple: we are more concerned about how the Fed will step in and save the day than we are about the real strength of the economy.
This, in my opinion, is important to consider in 2019. Having the Fed hike rates ultimately – in my opinion – would have told us the economy was strong, and that we can get back to normal rates.
Their statement yesterday is concerning to me – they see underlying weakness in the market.
The market should have gone down, not up. I am always shocked by how the market interprets news – and often it has nothing to do with the economy and everything to do with how it can be manipulated to go up.
As Warren Buffett said in the quote above, “be fearful when others are greedy…”
When trying to determine which debts to pay off first, look at two important pieces.
Which one has the highest interest rate and which has the highest monthly payment – these are not always the same thing.
If you have a debt that has a high monthly payment and is less than a year from being paid off, focus on this debt first.
Having this debt paid off will free up significant additional money each month to pay towards other debts. These debts are usually car loans, payday loans, student loans, or other installment loans.
If there are no large payment debts that are close to being paid off, consider paying the debts that have the highest interest rates first.
This will help you save as much interest as possible over the term of your debt elimination process.
Run a couple scenarios and see which helps you become debt free first – this is ultimately what matters most.
Book I am Reading:
Still reading through Tools of Titans by Tim Ferriss.
If you enjoy learning from other successful individuals, I would strongly encourage you to pick up this book.
He covers three main sections: Health, Wealth, and Wisdom.
This comes from the quote attributed to Benjamin Franklin, where he said, “early to bed and early to rise, makes a man healthy, wealthy, and wise.
One section I really liked came from Robert Rodriguez. He talked a lot about making your own path and not fearing failure.
He said, “Failure is not necessarily durable. Remember that the things that they fire you for when you are young are the same things that they give you lifetime achievements awards for when you’re old.”
Great perspective to keep in mind.
This book is packed with great insights like this.
Interesting Topic (hopefully):
This week I had the pleasure of going to court for my first time.
The worst part about having to go is that it was for a minor traffic violation – one which had a mandatory court appearance. I would have gladly paid the fee in leu of going to court if they would have allowed me.
Nonetheless, I was fascinated with the process of the court proceedings – and actually learned a lot.
I was in a room with about 40 other individuals. Many were there for traffic violations, but some had more serious charges – like theft.
What stood out to me through this process was the complexity in which people operate their lives.
Some of the stories I heard were shocking to say the least. Many individuals had a warrant out for their arrest because they hadn’t paid a $100 ticket.
I thought about how we often add complexity to our lives that we don’t need to.
I am convinced if we can keep our lives simple and organized they will be more enjoyable as a result. It’s all of the excess and complexity that ultimately causes us the undue stress.
There are always two perspective I suppose. Maybe some of the individuals in that room thought I was boring and needed to spice up my life a bit. Who knows.
I think I will stick with the simplicity. As fun as that sounds to go to jail because of a speeding ticket, I think I’ll pass.
I hope everyone has a great weekend and obeys the traffic laws so you don’t end up in court like me!