POCKETBOOK: Week ending Jan. 26, 2018

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  • Personal income up and so is spending

Funny thing about our money habits—the more we get the more we tend to spend. When it comes to income, in December personal income rose 0.4 percent and in all of 2017 rose 3.1%, according to the Department of Commerce.
It’s hard to deny that there’s a bit of a rush in having more money thanks to an increase in salary, take-home pay or an unexpected bonus check. For  many, the answer to “What to do with the extra moola?” takes less than a nano-second to decide: Spend it.

Spending, lest you forget, is one of the big slight-of-hand strategies that may come with double-edged feelings: A gain on the one hand when received and the feeling of loss on the other after spent/redistributed.

But feelings are one thing and data another. In  December, for instance,  the savings rate   hit a 12- year low and  dropped to 2.4 percent—the lowest since September 2005.

What’s troubling about that low savings part is this: Are folks hitting their savings accounts because of holiday spending and believing that  the New Year would be hugely financially rewarding and as such they will be able to replenish their savings accounts? Or, are they tapping their accounts because their paychecks still aren’t enough to cover life/monthly expenses?

I’m inclined to go with the second and root for a national minimum wage for everyone to $25 bucks an hour. That’s doable, you know, and oh what a difference that would make to our lives and for the economy.

  • Market Quick Glance

New “up a lot” highs were recorded for all the indices followed here last week: Three on Friday and one, the Russell 2000, at the close of business on Wednesday, January 24.

Overhead: Two women were having lunch at a trendy restaurant and talking stocks when one asked the other how much higher she thought the stock market would go expecting a definite answer.

Her friend answered, “I don’t know but it’s gotta fall some time.”

“Well I know that,” the woman snipped back disappointed by  her friend’s answer.

To which the friend replied: “That’s all there is to know.”

Smart friend.

Below are the weekly and 1-year index performance results for four major indices— including the dates each reached new highs—according to CNBC.com based on prices at the close of business on Friday, Jan. 26, 2018.

DJIA +7.28% YTD up a lot from last week’s 5.47%

  • 1 yr Rtn +32.42% up from last week’s 32.12%

Another new high for the DJIA was reached on January 26, 2018 of 26,616.71. The previous high reached January 18, 2018 was 26,153.42.

-S&P 500 +7.45% YTD up a lot from last week’s 5.11%

  • 1 yr Rtn +25.09% up from last week’s 24.15%

A new high for the S&P 500 Index was reached on January 26, 2018 of 2,872.87. The previous high was reached on January 19, 2018 of 2810.33.

-NASDAQ +8.73 YTD up a lot from last week’s 6.27%

  • 1yr Rtn +32.72% up a pinch from last week’s 32.42%

Nasdaq hit another new all-time high of 7,505.77 on January 26, 2018. The previous high was reached on January 19, 2018 of 7,336.38.

-Russell 2000 4.72%YTD up from last week’s 4.05%

  • 1yr Rtn +16.90% down a pinch from last week’s +16.97%

The Russell 2000 reached a new all-time high on January 24, of 1,615.52. The previous high was reached on January 16, 2018 of 1,604.02.

 

-Mutual funds

Higher returns, again.

On Thursday, January 24, 2018, the year-to-date average cumulative total reinvested returns for equity funds that fall under the broad U.S. Diversified Equity Funds heading was 5.32 %, according to Lipper. That’s up a heap from the 3.87% return posted one week earlier.

The three fund types that enjoyed the greatest year-to-date increase in 2018 under the  U.S. Diversified Equity Funds broad heading were the same three from the previous week. Here’s a look at the changes in each:

-Equity Leverage Funds, +12.08% —last week +8.37 %.

-Large-Cap Growth Funds, +8.00%—last week +6.06%

-Multi-Cap Growth Funds, +7.47%—last week +5.59%

Visit www.allaboutfunds.com for more information about how various equity and fixed-income funds have rewarded investors over the short-and long-term, based upon Lipper data. Short-term meaning weekly and monthly performance returns; longer-term includes quarterly, year-to-date, 1-yr, 2-yr, 3-yr and 5-yr returns.

  • Consider a stop-loss

There’s a number  of questions investors need to ask themselves before buying any stock. Some include: Why have I decided to purchase this company’s stock, at what price, what kind of return do I expect, how long do I plan on holding the stock, and at what price will I sell it?

Knowing the answers to each is  all great and logical but logic isn’t necessarlity at home on Wall Street.

Given that fact, when it comes to the ups and downs of investing in stocks, one way to protect yourself when the market turns south is to use a stop-loss.

From investopedia.com:”A stoploss order is an order placed with a broker to sell a security when it reaches a certain price. Stop loss orders are designed to limit an investor’s loss on a position in a security.”

The market is not going to go up forever. At some point in time a correction is going to come along and if you don’t want to stomach seeing your stocks plunge say 15, 20, 25% or more, consider utilizing a stop-loss strategy. It may be the smartest investment move you make.

Like always, there is a down side as no one ever knows how low a stock price can go, when the fall will happen or how long it will take for that stock price to recover.

Nonetheless, a stop-loss order is worth considering.

 

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