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The hours, minutes and seconds are ticking down — soon, it’ll be Christmas morning.
If you’re a parent, grandparent or someone who simply remembers your own childhood, you know how it goes: a moment of wide-open gazes, a flurry of wrapping paper, a spasm of wishes granted ...
It’s going to be awesome, as it usually is. Whether it’s Christmas or Kwanzaa you celebrate — or Hanukkah or Diwali you’ve celebrated — let’s first note that the joys of the season are about sharing with family and friends.
And I hope yours is and has been a joyous one.
Of course, 2020 has been a year like no other in living memory. If ever there were a time for reflection, relaxation and reconnection, this holiday season is it — be it via smartphone, computer screen or, blessings, in person.
It’s second nature for me to look back and look forward through the eyes of a market commentator. That’s what I do, advocating for “Safe Money” approaches to market and investing above all else.
It’s in that spirit that I offer three “gifts” of wisdom ...
First, events since January highlight the importance of teaching your children and/or your grandchildren about the value of saving rather than spending.
Start with advocating that your little loved one sock away some of their holiday money for the future rather than spending every last penny at Starbucks Corp. (Nasdaq: SBUX), on Amazon.com, Inc. (Nasdaq: AMZN) or via “in-app purchases.”
Talk to them about stocks, exchange-traded funds (ETF), bonds, mutual funds, precious metals, the asset class of your choice — and be sure to let them understand the virtues of, say, owning AAPL versus using (and getting used by) the most-fangled iPhone.
A little knowledge can go a long way — perhaps sparking interest that lingers and, maybe, matures into lifelong passion, outlasting whatever fresh new toy, engineered for obsolescence, is under the tree.
Second, in an interest-rate environment like this one, consider an introductory discussion about the “risk-free rate of return.” Do they know the meaning of the 10-year U.S. Treasury note and how one simple yield basically sets the tone for trillions of dollars’ worth of decisions made every day all over the world?
This is an initial step in opening their eyes to income-generating strategies that can help you fight back against things like “ZIRP” and, holy smokes, “NIRP.” Their eyes might glaze over; but you’ve planted a seed.
Now, for those of you with older little loved ones, add some sophistication to the conversation by explaining how to write options for premium payouts.
The key point is it’s essential to help them understand what “zero interest rate policy” and “negative interest rate policy” mean as a starting point for the financial world they’ll enter. “ZIRP Forever” is precisely what the Federal Reserve has told us we’ll continue to see.
Third — and this actually might be some fun — in a momentum-fueled market like this one, let them know that many high-flying, loss-making, shoot-the-moon initial public offerings (IPO) and other risky plays are grabbing most of the media coverage.
And, yes, many of them are generating sizable short-term gains. Your kids and grandkids are probably the demographic that’s fueling their stories.
But I’ve been through several market cycles in my nearly quarter century of writing about markets. I’ve seen what things like the dot-com crash can do to wreck portfolios and upend investors’ lives.
The echoes of the past are getting harder to ignore, and I don’t think any of us should.
Instead, this is a good time to talk about sharing and safety and, yes, prudent investing and things like the importance of diversification to building and preserving wealth over time ...
I don’t mean to proselytize too hard. But these things are important. And now’s the time to talk about them.
I hope you find these “gifts” helpful.
And I wish you and yours a wonderful holiday.
Until next time,
Mike Larson
