Why the market Is good — even in bad times
Here’s why Wall Street is so out of sync with Main Street:
- Small businesses are struggling, but they aren’t represented on stock indexes.
When you hear the stock market had a good or bad day, they’re talking about the major stock indexes like the Dow Jones Industrial Average, the S&P 500 and Nasdaq. These track the stock prices of America’s biggest corporations.
“But guess who’s not represented in a stock index? Your local baker. Your favorite watering hole. The guy who cuts your hair. Your child’s preschool,” says Robin Hartill, a certified financial planner and a senior editor and financial advice columnist at The Penny Hoarder. “Small businesses have laid off more people than larger companies.”
- The stock market only tells us what investors think will happen.
The stock market isn’t a snapshot of where we’re at. It just tells us where investors think we’re heading. Soaring stock prices show that investors think companies can make money moving forward.
- Investors think we’ll have a quick V-shaped recovery.
States have reopened. There’s optimism about a coronavirus vaccine. Many investors think those factors will give us a V-shaped recovery, meaning the economy will shoot right back up after crashing.
- Amazon, Apple and other tech giants mask reality.
Amazon, Apple, Microsoft, Facebook and Google parent company Alphabet account for more than 20% of the S&P 500.
“That means when stock prices for these companies soar, it can mask the struggles of smaller companies whose stock prices haven’t recovered much,” Hartill says.
What’s a typical investor supposed to do?
“The smartest thing you can do is to budget a certain amount to automatically invest each month, regardless of what the market is doing,” Hartill advises.
One way to do that: Use an investment app that offers an easy, automatic way to start investing.
We like Stash because it lets you choose from hundreds of stocks and funds to build your own investment portfolio.
But it makes it simple by breaking them down into categories based on your personal goals. Want to invest conservatively right now? Totally get it! Want to dip in with moderate or aggressive risk? Do what you feel.
Plus, with Stash, you’re able to invest in fractions of shares, which means you can invest in funds you wouldn’t normally be able to afford, like Amazon, Google or Apple, for as little as $1.* The best part? When these companies profit, so can you.
If you sign up now (it takes two minutes), Stash will give you $5 after you add $5 to your invest account. Subscription plans start at $1 a month.**
* For Securities priced over $1,000, the purchase of fractional shares starts at $0.05.
** You’ll also bear the standard fees and expenses reflected in the pricing of the ETFs in your account, plus fees for various ancillary services charged by Stash and the custodian.
The Penny Hoarder is a Paid Affiliate/partner of Stash. Investment advisory services offered by Stash Investments LLC, an SEC-registered investment adviser. This material has been distributed for informational and educational purposes only, and is not intended as investment, legal, accounting or tax advice. Investing involves risk.
This was originally published on The Penny Hoarder, which helps millions of readers worldwide earn and save money by sharing unique job opportunities, personal stories, freebies and more. The Inc. 5000 ranked The Penny Hoarder as the fastest-growing private media company in the U.S. in 2017.
Fine art as an investment
Stocks can be volatile, cryptos make big swings to either side, and even gold is not immune to the market’s ups and downs.
That’s why if you are looking for the ultimate hedge, it could be worthwhile to check out a real, but overlooked asset: fine art.
Contemporary artwork has outperformed the S&P 500 by a commanding 174% over the past 25 years, according to the Citi Global Art Market chart.
And it’s becoming a popular way to diversify because it’s a real physical asset with little correlation to the stock market.
On a scale of -1 to +1, with 0 representing no link at all, Citi found the correlation between contemporary art and the S&P 500 was just 0.12 during the past 25 years.
Earlier this year, Bank of America investment chief Michael Harnett singled out artwork as a sharp way to outperform over the next decade — due largely to the asset’s track record as an inflation hedge.
Investing in art by the likes of Banksy and Andy Warhol used to be an option only for the ultrarich. But with a new investing platform, you can invest in iconic artworks just like Jeff Bezos and Bill Gates do.