Interest rates 101: How they influence the market? - financialflagship

https://www.tradingview.com/chart/DJI/BlLg2BvD-Interest-rates-101-How-they-influence-the-market/?&utm_source=Weekly&utm_medium=email&utm_campaign=TradingView+Weekly+99+%28EN%29

As individuals, we face decisions every day that implicate saving money for future use or borrowing money for consumption. If we want to make an investment, one important task for us is the analysis of transactions with present and future cash flows. When we place value on any asset, we are trying to determine the worth of a stream of future cash flows.

Money has time value which means that individuals prefer a given sum of money the earlier it is received.

Consider the following exchange: You pay $4,000 today and in return receive $3,500 today. Would you accept this arrangement? Not likely. But what if you received the $3,500 today and paid the $4,000 one year from now? Can these sums be considered comparable? Possibly, because the payment of $4,000 a year from now would probably be worth less to you than a payment of $4,000 today. It would be fair, therefore, to discount the $4,000 collected in one year; that means to cut its value based on the time that passes before the money is paid.

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How People Lose All Of Their Money - Wolf Report

https://seekingalpha.com/article/4415658-how-to-avoid-losing-all-your-money

Summary

• One of the most common misconceptions is that once you have money or certain capital, it's difficult to lose it. This is deeply flawed - it's entirely possible.
• Going from million/millions to zero is certainly possible, and there are just as many ways to do so as to go from zero to a million.
• I spend a lot of time researching and looking at both sides of the coin - and in this article, I'm talking about how to avoid losing all your money.

Photo by fizkes/iStock via Getty Images

Peter Bernstein: The Importance of Staying Power

The behavioral side of investing gets a lot of attention while the personal finance side often gets less than it deserves. That’s because how defensive you are with your finances helps determine how aggressive you can be with your portfolio. Put simply, it’s easier to roll with the market’s punches when everything outside your portfolio is in financially sound shape.

Peter Bernstein dwells on the impact of being wrong on investments because the consequences can go beyond losses. The nature of investing guarantees everyone will be wrong sometimes. That means unexpected gains in some cases (being wrong isn’t all bad) and losses in others.

How quickly you can recover from losses will have a big impact on your long-term wealth. There’s an obvious psychological hurdle to recovering from losses but the state of your finances impacts your ability to recover too. Bernstein calls it “staying power.”

In planning portfolio strategies, I have always been obsessed — perhaps too much so in some instances — with a rather negative but overwhelmingly important question: What are the consequences if I am wrong? I should stress that this question need by no means lead to an excessively conservative investment philosophy, for it has led me on a number of occasions to take much bigger risks for a client than a more conventional approach would have suggested as appropriate. But I do believe that no investment decision can be rationally arrived at unless they are a logical part of a strategy based upon the answer to this question.

This question really relates to the whole problem of risk, which is an inescapable component of the investment process. We simply do not know what the future holds. This means that we are perforce going to be wrong a certain amount of the time — but we also never know which decisions it is that will be the incorrect one (we are often right, in fact, for reasons that we never anticipated: is this actually being right or being wrong?). Hence, we must move ahead always on the assumption that the next decision may be the wrong one and with the realization that we must face the consequences if it is.

The consequences of being wrong essentially involve an examination of the opportunities to recoup any losses that may be incurred. And these opportunities will be determined by two different sets of conditions.

The first and most important condition is staying power. An investor who has a substantial income or a significant amount of cash reserves that can sustain him regardless of what happens to his cash reserves can let time work in his favor in recouping losses; the greatest disasters are really limited only to those investors who are forced to liquidate at moments dictated by external events — a loan to be repaid, a job lost, a tax bill not reserved for — rather than at moments dictated by investment considerations only…

The second condition for recouping losses is the nature of the investor’s decision-making ability. Given a reasonable period of time, because markets do fluctuate, it takes an extraordinary series of poor judgments to do a really bad job of investing. You may fail to make a killing or even to run with the fastest crowd, but it is really difficult to lose money at investing if you have the staying power to carry you over the bleak periods.

I make this rather bald statement on the basis of an important fact of arithmetic: you can lose no more than 100% of the money you invest in any one security, but you can make an infinite amount on it. This apparently obvious and superficial statement tells us something that is overwhelming significant for investors: a few good guesses can far outweigh many poor ones…

Thus, the consequences of the inevitable wrong decisions can be kept to a minimum if the investor has the staying power to remain in the game until the next throw of the dice and to avoid involuntary liquidation at the wrong moment. But the consequences can also one minimized if the investor has the time and opportunity to make a few lucky decisions that can readily offset the less fortunate ones.

The greater the staying power, the greater the risks the investors can take to try to find that magic killing.

Every market downturn has its share of casualties due to the combination of investing losses and selling. The voluntary response of panic selling gets warned about incessantly. And rightly so, because it creates the problem of having to buy back into the market. Which often leads to missing out on gains when the market recovers. But the possibility still exists that the mistake of selling can be corrected sooner rather than later.

Forced selling is equally important, if not more so because it can strike at any time if your finances are in poor shape. When you’re draining your portfolio to cover basic needs, it becomes impossible to recover from losses.

A sound base — suitable emergency savings, insurance, debt, and spending habits — provides the best defense against that possibility. In turn, you can be more aggressive in your portfolio.

And, who knows, maybe knowing you’ve got the financial security to withstand drawdowns, may offer the psychological trigger to avoid voluntary panic selling, as well.

Source: Economist on Wall Street

Personal Finance Advice That Changed My Life - Vitaliy Katsenelson

https://contrarianedge.com/personal-finance-advice-that-changed-my-life/

Today I am going to write about a topic I have never written about before: personal finance. I am writing about this not so much for you, faithful reader, as for my kids. My four- and twelve-year-old girls are probably too young for this discussion, but my eighteen-year-old son, Jonah, is right on the cusp of needing to learn about it.

When I got married in 2000, one of the best gifts given to my bride Rachel and me was lunch with my friend Mark Bauer. Mark and I became friends when we studied at the University of Colorado – he was always my dependable study partner. He is ten years older than me, which at the time meant he had double my maturity (I was twenty-eight).

A few months before our wedding Mark, asked if he could have lunch with Rachel and me. At lunch, Mark explained that many marriages come to ruin over money issues.

Mark told us,

"A tool that has been very helpful for me is a family budget. On the surface it sounds easy – you project your “revenue” (for your family that would be your and Rachel’s salaries) and then subtract your expenses, and that gives you your net income. If you have money left over then you have savings, and then you can afford to spend money on whatever your hearts desire."

At that point, I was a bit disappointed in Mark’s wisdom. I was a few months away from completing the CFA designation, and that was on top of my master's degree in finance. The simplicity of his advice was frankly a little insulting to me.

Mark read my unimpressed facial expressions but continued:

"The problem with a normal budget is that though it captures well ongoing daily expenses like a mortgage, the cable bill, groceries, etc., it ignores future expenses. Let’s take your car for example. It’s paid for, which is great. But in five years this car will need to be replaced and “suddenly” you’ll discover that you have a one-time $20,000 expense, which should not be sudden and is actually anything but onetime unless you are planning to drive this car for the rest of your life. But the car is just the beginning – you’ll take vacations, buy furniture, your kids will go to college, and then there’s retirement."

Now this discussion was starting to get more interesting.

Is 100 the New 80?: Centenarians Are Becoming More Common by Katharina Buchholz, Feb 5, 2021

 https://www.statista.com/chart/18826/number-of-hundred-year-olds-centenarians-worldwide/

Living a long life is a common wish of many – and some might just get what they wish for. Life expectancies in developed and developing countries alike have been rising continuously, causing the number of people who live to 100 years to rise also.

This year, the United Nations expect the number of centenarians to rise to approximately 573,000 worldwide.

The U.S. has the highest absolute number of centenarians in the world with [about] 97,000 living in the country. Japan comes second with [about] 79,000 Japanese who are 100 years or older, according to World Atlas. Japan is also where the world’s oldest person lives. Kane Tanaka from the Fukuoka prefecture is 117 years old, making her a so-called supercentenarian, which is a person living to or beyond the age of 110.

The world's oldest man, Saturnino de la Fuente of Spain, is turning 112 years old on Monday. He also hails from a country with a higher-than-average population of centenarian[s]. In France, Spain, and Italy, the share of the population who is over the age of 100 stands at around 0.03 percent - the highest in Europe.

Japan is the country with the highest rate of centenarians, at 6 for every 10,000 people or approximately 0.06 percent. Uruguay, Hong Kong, and Puerto Rico are also home to some of the highest levels of centenarians compared to [the] population with rates between 0.06 and 0.045 percent.

To navigate a Ph.D., recent graduates offer these five key pieces of advice - Abigail M. Brown

https://www.sciencemag.org/careers/2020/09/navigate-phd-recent-graduates-offer-these-five-key-pieces-advice

“Do you have any advice for future graduate students?” I asked. The student had recently defended his Ph.D., and I was conducting an exit interview—something I do with every graduating biomedical Ph.D. student at my university, where I am in charge of evaluating our medical school’s Ph.D. training programs. He sat back in his chair and thought for a minute before responding: He wished he had started to plan for his post-Ph.D. career earlier. My shoulders dropped and I let out a sigh. “Program directors recommend this to incoming students every year, but some don’t seem to hear it,” I said. “How do you think we can get them to listen?” This time, he didn’t hesitate. “They are graduate students in science,” he exclaimed. “Show them the data!”

That was my aha moment. I immediately began to document the responses to this question in subsequent interviews. It has been 3 years now, and the data I’ve collected confirm my suspicions—the same answers come up again and again. As a new cohort of Ph.D. students starts grad school this fall, here are the five pieces of advice graduates offer most frequently.