👋 Hey there, welcome to the WalletBurst monthly newsletter for the month of January 2022.
In light of this ugly past month in the markets, I wanted to share this simple quote about investing for the long term:
"Our favorite holding period is forever."
- Warren Buffet
📆 Given that we are near the beginning of the year, a common question investors may have is should I max out my 401k earlier in the year or contribute normally to max it out by the end of the year? Nick Maggiulli at OfDollarsAndData wrote Should You Max Out Your 401(k) Earlier in the Year? answering that question. The takeaway from his article is that when comparing individual years, maxing out your 401k early offers a very small benefit, but if you repeat this strategy each year over a ten year or greater period, then the maxing out early strategy outperforms by about 5% of the value of your total contributions. Definitely something to think about as we start out the year!
💼 I enjoyed another article of Nick’s titled: The High Cost of An Easy Job. Here are a few snippets from his article:
🎲 Lawrence Yeo wrote a great illustrated piece titled Speculation: A Game You Can't Win where he delves into the psychology of investing in speculative assets. Here is an excerpt:
"...financial freedom isn’t about money, it’s about attention. The less you have to think about money, the more free you actually are. Speculation is the antithesis of that statement. When holding periods are short and expectations are high, almost all your available attention is funneled into your portfolio on a day-to-day basis."
His argument really spoke to me, and left me thinking about how I need to apply it to my investing strategy going forward. While I think there is room in every portfolio for a bit of speculation, perhaps I could benefit from the lowered stress that less volatility brings.
📈 The official numbers confirmed something we all knew - inflation has been running very high over the last year. The US Labor Department published data in January showing that the CPI inflation rate for the USA over the 12 months ending in December 2021 was 7.0%, the highest since June of 1982. Check out the chart below from tradingeconomics.com to see how this compares historically.
CPI inflation rate in the USA. Source: tradingeconomics.com
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