Practical Money by Raj Giri

Super-Charging Your Fixed Income With ETFs

Raj Giri — Tue, 14 Apr 2026 14:40:15 GMT

Introduction

If you’ve been reading this newsletter for a while and you’re not earning at least 3% on your cash, then we need to have a talk. Not an angry talk—more like a disappointed financial dad talk. Because at that point, it’s not the market failing you… it’s you ignoring me. Even though the "easy" money from high-interest savings accounts is beginning to evaporate as the Federal Reserve continues its suspenseful, extremely dramatic, slow-motion pivot—eyeing a target range of 3.0% to 3.5%, there are other alternatives to make the most out of your cash.

Whether it’s the loose change sitting in my checking account or my emergency fund in savings, every dollar I have is at least earning a minimum of 3.5%.

In this newsletter, I’ll go over my simple fixed income investments, from boring-but-beautiful cash options to slightly spicier plays like CLO ETFs that actually pay you for your patience.

A quick reminder, because the lawyers told me to: this is not financial advice. I am not a fiduciary, a CPA, or even particularly good at assembling IKEA furniture. This is just me sharing my strategies, investments, stocks, index fund strategies, what I'm buying, and where I plan to take those investments. Everyone’s financial goals are different—some of you want a yacht, others just want to stop looking at your 401(k) statements. No financial decisions should be made solely on this newsletter, which is for informational and entertainment purposes only and is not a substitute for advice from a qualified professional who actually knows your situation and charges by the hour.

Also, if you find this newsletter helpful, please share it with one friend who might find it useful by using the button below.

Checking / Cash Management Accounts

Ah yes, the checking account—where your money goes to earn absolutely nothing… unless you’ve evolved.

I’ve mentioned this before, but our default “checking account” is technically not a checking account, but it works almost exactly like one, minus the stale lollipops and the judgmental silence of a physical branch.

We use the Fidelity Cash Management Account, which has features similar to those of a traditional checking account, including the ability to write checks, make deposits, use a debit card, and access ATM withdrawals (with fees reimbursed, because paying to access your own money is a scam). We deposit all of our checks using their app, and really don’t have any need to go into a branch.

Best of all, you can choose to have your cash parked in the Fidelity Government Money Market Fund (SPAXX), which, as of this writing, has a 3.27% yield… 32,600% higher than the 0.01% yield we received with our old Chase checking account. Or you can have your cash in their FDIC-Insured Deposit Sweep Program, which offers a lower 1.84% annual percentage yield; it still trumps the Chase checking account yield by 18,300%. You can check out my 2024 newsletter about this account and learn how you can earn an even higher yield by using a different money market account like FZDXX.

However, it is a brokerage account and not a bank account. There are things you can’t do that you can with a regular bank, like depositing cash, opening a safe deposit box, getting documents notarized, exchanging foreign currency, etc. If you need services like that, you can use a branch account in conjunction with a Fidelity Cash Management Account.

Some alternatives to the Fidelity Cash Management account include:

Robinhood Checking (3.5% APY): We use this for our rental properties. You receive a 3.5% APY with a direct deposit of at least $1000 / month.
Empower Personal Cash (3% APY)
Vanguard Cash Plus (3.1%): New customers receive a 0.25% boost effective through September 30, 2026, which raises the APY to 3.35%. There is a $25 annual fee that is waived if you sign up for e-delivery.
Wealthfront Cash Account (3.3% APY)

HYSA (High-Yield Savings Accounts)

This is the boring-but-essential bucket, a place where you can keep an emergency fund that contains 3-6 months of essential living expenses. It’s the financial equivalent of a fire extinguisher-you hope you never need it, but when you do, you really do. I also use this account for taxes, and my quarterly estimated tax payments are made automatically from this account.

I wrote an article listing my favorite HYSAs back in 2023 here. CIT Savings remains our main HYSA with a 3.75% APY on balances of $5,000 or more (they are currently offering a six-month 0.35% boost for new customers for six months, bringing the APY to 4.10%).

Some other alternatives include:

Sofi Savings (3.3%): I’ve used this account in the past, and it was solid. For a limited time, they are offering a 0.70% boost for new customers, bringing the yield up to 4%.
AMEX High-Yield Savings Account (3.2%): Another account we’ve had in the past. This is a good option if you’re looking for more of a brand name.
Lending Club (3-4%): You earn a rate of 4% APY by depositing $250+ per month. Months without the deposit receive a 3% APY.

Money Market Funds

Money market funds (MMFs) are like HYSAs that went to business school. They are often used by investors with larger balances or brokerage accounts. MMFs often yield slightly more than HYSAs, though they carry a sliver more risk as they are not FDIC-insured (though they aim for a stable $1.00 NAV).

I use Money Market Funds to park cash in my stock and ETF investment accounts. It’s a good place for idle cash that I may deploy later, but which doesn’t need to sit around earning nothing while it waits for me to make a decision.

Some MMFs I’ve invested in include:

Fidelity Money Market Fund Premium Class (FZDXX) - 7-day yield of 3.44%; there is a $100,000 minimum to invest. An alternative with no minimum to invest is the Fidelity Government Money Market Fund (SPAXX), which has a 3.29% 7-day yield.
Schwab Value Advantage Money Fund (SWVXX): 7‑day yield of about 3.46% with no minimum to invest.
Vanguard Federal Money Market Fund (VMFXX): 7‑day yield of roughly 3.56% with a minimum investment of $3000. While it has the best yield of these three listed, its tech is archaic, and the customer support lags far behind Fidelity and Charles Schwab.

Treasuries, Agency Bonds, Corporates and CDs

This is where things start sounding like a CFA exam. I ladder these for a steady monthly income—because nothing says “I’ve matured financially” like getting excited about bond ladders. I broke down my fixed-income portfolio of treasuries, agency bonds, and CDs back in September of 2024, as well as how I ladder them for monthly income; you can read that here.

Treasuries remain one of the core building blocks of fixed income because they are backed by the U.S. government. Short-term Treasury bills are often used for cash management, while longer-duration Treasuries can offer more yield if you are comfortable with interest-rate risk.
Certificates of deposit, or CDs, are another straightforward choice for investors who want a known rate and maturity date. Bank CDs can be attractive when you want to lock in a rate and don't mind your money being "in jail" for a few months.
Agency bonds are issued by government-related entities such as Fannie Mae, Freddie Mac, and other agencies. They usually offer a bit more yield than Treasuries, though the exact tradeoff depends on the issuer, maturity, and structure. Think “Treasuries with a personality.”
Corporate bonds are issued by corporations; they represent debt obligations of these entities. These bonds typically offer higher yields than government or agency bonds due to their increased risk profile because companies can, in fact, mess things up.

A simple way to think about the three is this: Treasuries for safety and simplicity, agency and corporate bonds for a modest yield pickup, and CDs for rate certainty if you can lock up the money.

I took a deeper dive into agency and corporate bonds in 2024; you can read that issue here.

My Leftover Cash: SGOV and CLO ETFs

As noted, I use high-yield savings accounts for cash set aside for emergencies and taxes. I use Money Market Funds for cash in my investment accounts that I plan to use for stocks, ETFs, and options.

For the rest of my cash, I invest it in two vehicles: SGOV and JAAA. About 30% is in SGOV, with the other 70% in JAAA. Here’s a breakdown of the two.

SGOV

The iShares 0-3 Month Treasury Bond ETF (SGOV) is basically Treasuries with a gym membership—lean, efficient, and easy to trade. It holds 0–3 month U.S. Treasury bills, which are about as close to “boring and safe” as the market gets. You get yields that are close to Treasuries without managing individual bonds. The fund’s price barely moves, and it distributes income monthly. It’s what you buy when you want your money to do something… but not too much.

SGOV has grown into a massive vehicle, with over $84 billion in assets under management. Its 30-day SEC yield currently sits at 3.6%, while individual 0-3 month U.S. Treasury bills are hovering slightly higher at between 3.6% - 3.7%. However, with SGOV, you can buy and sell it as you please.

Some alternatives to SGOV include:

WisdomTree Floating Rate Treasury ETF (USFR): Floating-rate Treasuries that adjust with rates. The current SEC 30-day yield is 3.6%.
SPDR Bloomberg 1-3 Month T-Bill ETF (BIL): One of the oldest and most widely used T-bill ETFs. The current SEC 30-day yield is 3.5%.

CLO ETFs (JAAA)

If SGOV is your financial mattress, the Janus Henderson AAA CLO ETF (JAAA) is the mattress with a memory foam topper and maybe a slightly higher chance of mild discomfort. It has a 30-day SEC yield of 4.8% and pays monthly distributions.

JAAA invests in AAA-rated tranches of CLOs (Collateralized Loan Obligations). In plain English, these are bundles of corporate loans sliced into different risk levels. JAAA owns the top-rated slices, which historically have had extremely low default risk. The fund has grown to $26+ billion in assets — a testament to investor appetite for its risk/return profile.

The result: a yield usually around ~5%. So you receive a higher yield than Treasuries, monthly income, and historically low default rates at the AAA level. This is still credit exposure, not government debt. During credit stress, the price can wobble a bit (think 1–3%, not stock-market chaos). Its maximum drawdown since inception was approximately -2.64%, compared to just -0.03% for SGOV.

JAAA is appropriate for investors who understand structured credit and are willing to accept modestly more volatility in exchange for a higher yield. It is not a cash equivalent.

Other alternatives in this category include:

PGIM AAA CLO ETF (PAAA): 4.8% 30 Day SEC Yield
BlackRock AAA CLO ETF (CLOA): 4.86% 30 Day SEC Yield
Panagram AAA CLO ETF (CLOX): 4.81% 30 Day SEC Yield

These funds aim to squeeze a little more income out of fixed income without dramatically increasing volatility.

Conclusion

If you need the money for a house down payment in three months, don’t get cute; stick to VMFXX or a top HYSA. If you are looking to park "dry powder" for a year and want to maximize income while waiting for a stock market dip, a combination of SGOV (for tax efficiency) and JAAA (for the yield boost) is my winning 2026 playbook. Here’s the simplest way I think about it:

Want total safety? Stick with HYSAs and Treasuries
Want flexibility? Use money market funds and SGOV
Want a relatively safe higher income? Add JAAA, corporate, and agency bonds
Want certainty? Lock in rates with CDs or Treasury ladders

That's it for this week! As always, no financial decisions should be made solely on this newsletter, which is for informational and entertainment purposes only and is not intended to be a substitute for advice from a professional financial advisor or qualified expert. If you haven’t already, please subscribe to this newsletter below and never miss an update:

Practical Money: The Best FREE Credit Cards For 2026 Returning 3-6%

Raj Giri — Tue, 10 Mar 2026 11:33:38 GMT

Photo by Jim Chen on Unsplash

Introduction

As the kids say, it’s been a minute. My apologies for the long gap between newsletters; things have been busy on this end. But life is calming down as spring approaches, which means two things: better weather and more time for me to obsess over credit card reward structures. I plan to grace your inbox at least twice a month until I get distracted by a shiny new high-yield savings account.

Back in 2024, I posted my favorite credit cards of that year with a minimum of 2% cashback. 2% is now officially chump change. We’ve leveled up. If you aren't getting at least 3%, are you even trying to win at capitalism?

One card that has been unceremoniously yeeted off this list: SoFi. In February, they started charging a monthly fee to many users. Some people still get the card with no fee, but I’m fairly certain I was selected for the fee because I committed the unforgivable crime of paying my balance in full every month. I closed the account faster than a SoFi stock price drop and found better options.

Also, in one of the first issues of this newsletter, I discussed how much I hate credit card debt. It is the financial equivalent of a “Kick Me” sign. In that newsletter, I discussed how I got out of debt coming out of college, as well as other strategies to get out of credit card debt, which you can read here.

Below are the credit cards I use regularly that offer at least 3% cashback, up to 5%, with no annual fee… well, technically, the Robinhood Gold Card sorta has a fee, but we’ll get to that in a minute. Nothing in life is free, except unsolicited financial advice on the internet. These are everyday cards; I’ll do a separate newsletter with credit cards we use for travel at some point.

Below those, I also list some other popular no-fee credit cards that I am currently not personally using. However, there is one that has 6% cash back in the category of your choice that I stumbled upon while doing my research for this newsletter, which immediately caught my attention because I am genetically incapable of ignoring free money. I plan to sign up for that one this week.

Oh, and I’m not paid by any of these companies. No referral kickbacks, no affiliate drama. If I ever do get sponsored, you’ll know because I’ll suddenly sound unnaturally enthusiastic. However, if you find this newsletter useful, please share it using the button below so I can continue yelling about credit cards on the internet:

A quick reminder, because the lawyers told me to: this is not financial advice. I am not a fiduciary, a CPA, or even particularly good at assembling IKEA furniture. This is just me sharing my strategies, investments, stocks, index fund strategies, what I’m buying, and where I plan to take those investments. Everyone’s financial goals are different—some of you want a yacht, others just want to stop looking at your 401(k) statements. No financial decisions should be made solely on this newsletter, which is for informational and entertainment purposes only and is not a substitute for advice from a qualified professional who actually knows your situation and charges by the hour.

First Steps When I Get A Credit Card

I don’t carry credit card debt. Every card I have is set to automatically pay the full balance each month, which means I never pay interest. Credit card companies hate this one simple trick. If having a credit card makes you more inclined to splurge on avocado toast or artisanal soap, just stick to cash or a debit card, my friend. The rewards are pointless if they cause you to overspend.

The first thing I do when I get a new credit card is set up autopay for the full balance. This removes the possibility of accidentally paying interest, which is how credit card companies actually make their money.

Another thing I do is maintain a Google Doc listing the benefits of every credit card I own. This sounds obsessive because it absolutely is. But many cards offer useful perks—rental car insurance, travel protections, purchase protection, foreign transaction fee waivers, etc. After you accumulate a dozen cards, it becomes impossible to remember which one does what.

The document keeps everything in one place, so I don’t have to spend 10 minutes Googling whether a card covers rental car insurance while standing awkwardly at the Hertz counter.

General Credit Cards I Use

Below are the credit cards I use regularly, and the reason for each. With these, I receive 3-5% cashback or rewards that I wouldn’t have received if I had used checks or a credit card.

Between the cards listed below, my store cards, and my travel cards, I have about 12 credit cards. Before you call a financial intervention, I should clarify that I only carry two cards in my wallet: the Robinhood Gold Card and the Capital One Savor card. The rest are either stored in my Apple Wallet or are in my desk drawer for whenever I need to actually use them, like when I purchase airline tickets or hotel reservations.

Alright, enough buildup. Here’s the list, starting from the bottom.

Robinhood Gold Card (3% cash back on everything)

This shiny new addition is one of the two credit cards I actually carry in my wallet. We use this for everything else when the cards below aren’t appropriate. There is no annual fee, no international transaction fees, and you get 3% cash back on everything (with a catch, more on that later).

There are some cool features with this credit card, like there is no credit card number on the physical card. It’s a mystery rectangle. If I lose it, I don’t have to update my 47 automatic payments because the “virtual” number in the app stays the same.

Also, you can create virtual cards in the app, which are basically new credit cards for whatever you want. You can create them for a one-time purchase or as an alternative credit card. For instance, I have a virtual credit card for my automatic payments, so if my regular card number from the app ever got compromised, I don’t have to spend an afternoon updating payment info across half the internet. We use this virtual card for our gym memberships, cell phone bills, insurance, our daughters’ dance classes, etc.

Now to the caveats:

To be eligible for the credit card, you have to be a Robinhood Gold member, which is $5 / month or $50 annually. I have a Robinhood Gold membership because it includes a 3% IRA contribution match, 3.35% APY in their brokerage account, and several other perks. Since our IRAs are already with Robinhood, the IRA match alone easily covers the membership cost.
Important: To receive the full 3% cashback, you must redeem points into a Robinhood brokerage account. If you apply the points directly to your credit card balance, the redemption value drops to 0.7 cents per point. In other words, if you do the normal thing people expect to do with credit card points—pay your bill—you get 2.1% cashback instead of 3%. Don’t be lazy. Move the money.
There is a waitlist. It took months to get. It’s more exclusive than a nightclub I’d never be allowed into.
There is no customer support phone number. If you need help, you go through the app. If a phone call is required, you request one. In other words, the relationship is a bit like texting a teenager.

If this sounds like a good fit, you can get more details and join the waitlist at this link.

Capital One Savor Rewards (3% back on dining, grocery stores, entertainment, and streaming services).

This is our dining card. When we signed up, the card offered 4% cashback on dining and streaming, and we were grandfathered into that rate. Which means we will cling to this card until Capital One pries it from our cold, financially responsible hands.

For new customers, the card now offers 3% cashback on dining, grocery stores, and popular streaming services with no annual fee (our card has a $95 annual fee). If you have the Robinhood Gold card, you probably don’t need this since the Robinhood Gold card gives you 3% cash back on everything anyway. The card excludes superstores like Walmart and Target. Streaming services that qualify include things like Netflix, Hulu, Disney+, etc.

The card also has no foreign transaction fees, so we use it for dining when traveling internationally as well.

You can get more information about this card by clicking here.

Amazon Prime Card

This one gets a lot of usage. I have two daughters, which means Amazon packages appear at our house with the regularity of mail delivery. Also, my wife thinks Whole Foods is a second home, which is great for nutrition and terrible for wallets. Thankfully this card gives 5% cashback on Amazon and Whole Foods, which softens the financial blow slightly. You also receive 5% cash back on Chase Travel purchases.

We’ve got this card saved in our Amazon account, and it’s on my Apple Watch for quick access at Whole Foods—because nothing says “modern parent” like paying for groceries with a smartwatch.

You can get more information at this link. New Prime members currently also receive a $150 Amazon Gift Card if they sign up and are approved.

Target RedCard (5% back for purchases at Target & Target.com)

For everyday items that we don’t buy at Amazon, we shop at Target. Our daughters are also Target enthusiasts, which is the polite way of saying they somehow enter the store for toothpaste and leave with candles, throw pillows, seasonal decorations, three items you didn’t know existed, and somehow still forgot the toothpaste.

The Target RedCard gives 5% off all purchases at Target and Target.com. More details are available here. New members receive $50 in Target Circle rewards when they spend $50 on the card.

Honorable Mentions

These are cards we still have but rarely use.Think of them as the bench players of our credit card lineup.

Fidelity Rewards Visa Signature Credit Card (2% - 3% on everything)

This is our backup card, so if there is ever an issue with our Robinhood Gold Card, we use this instead. With the type of Fidelity account we have, we receive 2.25% cash back. With the rewards from this card, you can deposit them into any eligible Fidelity account. We have the cash back automatically deposited into our Fidelity Cash Management Account every month.

You can get more information about this card here.

Citi Double Cash Card (2% cash back on everything, our fallback card).

The OG 2% card, now sitting quietly in our drawer. Still fine, just outclassed. It earns 1% when you spend, 1% when you pay, and 0% excitement overall.

With 2% cash back, it is the worst-performing of the cards mentioned so far. It also has a 3% foreign transaction fee, and foreign currency purchases do not count for rewards, so don't take it to Paris unless you want to be insulted by the waiter and your bank.

You can get more details on this card here. New members earn $200 cash back as points after spending $1,500 on purchases in the first 6 months of account opening. The points can then be redeemed for $200 cash back.

Other Cards

Below are two other popular credit cards with no annual fees; we do not personally own any of them, although I will be signing up for the Bank of America Customized Cash Rewards card.

Bank of America Customized Cash Rewards (6% cash back in a category of your choice for one year)

I discovered this card while researching this newsletter and immediately thought: Well that seems suspiciously generous. I just stumbled upon this card while doing research for this newsletter, and I plan to sign up for it this week. You earn 6% cashback in a category of your choice during the first year, up to $2,500 per quarter in purchases. After the first year it drops to 3%, which is still solid. You also get 2% cash back at grocery stores and wholesale clubs, and 1% cash back on all other purchases. They are also offering a $200 online cash rewards bonus after making at least $1,000 in purchases in the first 90 days of your account opening.

We spend a lot on dining out, but I plan to use this card for the first $2500 each quarter, then switch back to the Savor card once that cap is reached. You can learn more about this card here.

Wells Fargo Active Cash Card

Another popular card with no annual fee where you earn unlimited 2% cash rewards on purchases. New customers also get a $200 cash rewards bonus when they spend $500 in purchases in the first 3 months. It’s simple, reliable, and requires almost zero thinking… which honestly describes most of the financial products people should use. You can get more details at this link.

Conclusion

That’s the lineup. The secret to credit card rewards is simple: Pay the balance in full, collect the cashback, and let the banks wonder why you’re not paying interest as they planned. Always remember: If you carry a balance, you lose. Because while 5% back is nice, paying 25% in interest is not. If you carry a balance, the cashback you earn just becomes a very complicated coupon.

Practical Money: Your Last Chance to Cut Your 2025 Tax Bill

Raj Giri — Mon, 15 Dec 2025 14:14:33 GMT

Introduction

Photo by Alexander Grey on Unsplash

The clock is ticking! As 2025 limps toward the finish line, it’s your final chance to make some final, panicked strategic moves to lower your tax bill—or at least make next April slightly less painful. Sure, many tax strategies require “long-term planning,” but for the rest of us last-minute savants, there are still a few power plays you can make before New Year’s Eve.

Don’t leave money on the table—those NFTs aren’t going to buy themselves. Below are some last-minute strategies I’m personally using before the year ends, along with a surprisingly awesome tax-loss harvesting tool from Fidelity that will automate the sadness of realizing your investments suck.

Also, a quick correction: In the last newsletter, I wrote that the contribution limit for traditional and ROTH IRAs in 2026 is $8,000, when it actually is $7,500. Individuals aged 50 or older can make a catch-up contribution of $1,100, bringing the total contribution to $8,600. That’s what happens when I write a newsletter before having my 9th cup of coffee.

Also, if you find this newsletter helpful, please share it with one friend who might find it useful by using the button below.

Maximize Your Retirement Contributions

It’s always important to pay future you, because you’re going to be expensive. One of the most powerful — and least exciting — year-end moves is stuffing more money into tax-advantaged retirement accounts. Thrilling? No. Effective? Very. Give the money to your Future Self, who is much better looking and deserves it, instead of the taxman. Here are some ways to do just that:

Maximizing 401(k) / 403(b) / 457(b) accounts: If you have an employer-sponsored retirement plan, this is your chance to lower your taxable income while pretending you enjoy delayed gratification. You generally have until the end of the year to make your final contributions. Usually to change your contribution amount to reach your limit, you’ll have to contact your employer’s HR department, which is its own special form of penalty. The 2025 contribution limit is $23,500 ($31,000 if you’re 50+ because, like me, you’re running out of time). The deadline for those contributions is December 31, 2025.

Think of it as paying your future self — who will almost certainly be more tired and less employable than you are now.
Contribute to an HSA: HSAs are criminally underrated. I only started using one last year and immediately regretted not starting sooner. If you have a High Deductible Health Plan, this account is a unicorn:
- Contributions are tax-deductible
- Growth is tax-free
- Withdrawals for qualified medical expenses are tax-free
That’s the holy trinity of tax advantages. And for the procrastinators among us (my people): you actually have until April 15, 2026, to make HSA contributions for 2025. That’s right, you can still put this off for a few more months. You’re welcome.
ROTH and Traditional IRA contributions: If eligible, consider a traditional or Roth IRA contribution. I wrote an entire newsletter about ROTH and Traditional IRAs - as well as the pros and cons of each - which you can read at this link. For 2025, you can contribute up to $7,000 (or $8,000 if you’re 50+). Like HSAs, you have until April 15 to get this done — so yes, you can kick this can down the road a bit longer.

Photo by Igor Omilaev on Unsplash

Tax-Loss Harvesting

Tax-loss harvesting is a sophisticated strategy to sell investments that have lost money to reduce the amount of income taxes you’ll owe. It’s like a financial participation trophy—you lost money, but at least you get a deduction! Many savvy investors utilize this at the end of each year to essentially tell the government, “See? I lost money, too. Share my pain.”

Here’s how it works:

Realized losses can offset realized capital gains
If losses exceed gains, you can deduct up to $3,000 against ordinary income ($1,500 if married filing separately)
The rest of your shame (the “remaining loss”) can be carried forward indefinitely, like a sad, financial IOU you can cash in later.

Studies have shown that tax-loss harvesting added nearly 1% in annual returns from 1928–2018. That may not sound exciting, but over decades it’s the difference between “comfortable retirement” and “working part-time at Home Depot for fun money.” I wrote a newsletter about using tax-loss harvesting to your advantage that you can check out here.

As always with tax-loss harvesting, you want to watch the Wash Sale Rule. To claim the deduction, you cannot buy the same or a “substantially identical” security within 30 days before or after the sale date. Think of it as a 61-day time-out the IRS imposes because they know you really want that stock back, and they’re just trying to make it awkward.

The Rare & Elusive Tax-Gain Harvesting: Here’s a little loophole for the overachievers: The 30-day wash sale rule only applies to losses. It does not apply to gains. So, you could sell a profitable security and immediately reinvest the proceeds in the same security. This maneuver allows you to maintain your original investment position and establish a higher cost basis, meaning you’ll pay less tax when you sell it for real later.

Fidelity’s Magical Tool: Outsourcing Sadness

This year, Fidelity introduced a new tax-loss harvesting tool for their customers that is pretty awesome. It lets you select specific shares of positions that are currently at a loss — instead of blindly selling everything and hoping for the best. This would have saved me a lot of manual work in the past, but hey, character building is important.

If you’re a Fidelity customer, you can check out the tool here:
https://digital.fidelity.com/ftgw/digital/tax-loss-harvesting/

I’ve already utilized it in my “Stocks” account, but you can check out a screenshot below of it harvesting losses from my “ETF / Index Funds” account. Note that this tool only selects shares that are currently underwater. For instance, with FBTC below, I own almost 1,000 shares, but it’s only selecting the 97 shares that are at a loss today. It’s like a compassionate AI saying, “I know you’re only feeling pain on a small portion of your assets today, let’s at least get a write-off for that.”

Prep Your Deductions: Itemize vs. Standard

Before year-end, take five minutes to estimate whether itemizing actually beats the standard deduction. For 2025, the standard deductions are:

Single: $15,750
Married Filing Jointly: $31,500
Head of Household: $23,625

If your itemized deductions are higher, congratulations! You get to spend hours tracking down receipts and file 50 extra pages to save a bit of money. If not, congratulations! Take the standard deduction and put those hours into watching something on Netflix instead.

If you have decided that you love paperwork and plan to itemize, here are some things to consider:

Prepay Taxes (Because Timing Is Everything): You may want to prepay state and local estimated taxes or your January property tax bill before December 31. The SALT deduction cap is temporarily raised to $40,000 for 2025, which is especially meaningful if you live in a high-tax state.
Charitable Contributions: Donating to charity can reduce your tax bill and make you feel like a good person — a rare double win. You might consider donating appreciated stock instead of cash; this can avoid capital gains tax while still generating a potential deduction.
Donor-Advised Fund (DAF): If you’re having a super high-income year, consider funding a DAF now to claim an immediate tax deduction for 2025, even if you don’t grant the money to charities until later. This is an excellent tactic for “bunching” multiple years of donations into one high-income year to exceed the standard deduction. It’s the ultimate “have your cake and deduct it too” strategy.
Accelerate deductible expenses: You can pull next year’s deductible expenses into this year (like by paying January’s mortgage payment) on your 2025 return. This can be especially helpful if you are close to the threshold where itemizing becomes more advantageous than the standard deduction.

Other Strategies

If you’re 73 or older, ensure you’ve taken your RMDs from retirement accounts. Missing the deadline could result in hefty penalties.
If you expect to be in the same or a lower tax bracket next year, deferring income into 2026 can reduce your 2025 tax bill. For instance, if you are receiving a year-end bonus, ask if you can be paid in January instead of this month. You can also push invoicing into the following year if cash flow and contracts allow.
Update your W-4 or quarterly payments. If you’ve had significant life changes in 2025—like a new job, marriage, or major purchase—ensure your tax withholding or estimated payments reflect your current situation to avoid surprises.
Look at credits. Credits reduce tax dollar-for-dollar and can be more powerful than deductions, especially at the last minute. They’re a dollar of tax reduction for every dollar of credit, which is better than a deduction, which is just tax-flavored money back. Some of the most valuable credits relate to dependents, education, and energy-efficient home improvements (so yes, maybe that solar roof was a good idea after all).

Conclusion

These are just some of the major items I look at every year; there are many, many others, mostly involving the fine print and a large bottle of wine. A few well-timed decisions before December 31st can lead to meaningful tax savings and fewer unpleasant surprises when filing your 2025 return.

It’s always best consult a tax professional. Not your cousin who “does taxes on TurboTax for fun.” A real one. You deserve to outsource your misery. They can tailor strategies to your specific situation and prevent you from confidently doing something very wrong.

Essential Planning: Key IRS Changes for Tax Year 2026

Raj Giri — Mon, 08 Dec 2025 17:30:49 GMT

Introduction

Photo by Kelly Sikkema on Unsplash

This year has flown by—again—which means it’s time for everyone’s favorite seasonal tradition: pretending we’re definitely going to get ahead on next year’s financial planning.

The IRS has released inflation adjustments for tax year 2026 (returns filed in 2027), and several new tax breaks from the “One, Big, Beautiful Bill” (OBBBA) will take effect. It’s the kind of legislation that makes accountants… well, maybe not excited, but at least moderately stimulated. These changes will affect how much you owe, how much you can deduct, and how many times you’ll mutter “Why didn’t I buy more index funds?” next April.

Also, in this issue, I take a minute to look at a common misconception about tax brackets. If your income jumps from the “comfortable-but-not-rich” 24% tax rate straight into the “oh-dear-god-I’m-a-tax-target” 32% tax rate, a lot of people assume the government will suddenly demand 32% of every single penny you’ve ever earned. Spoiler alert: that is not the case. Only the sliver of your income that falls into the new bracket is taxed at that rate. More on that in a moment.

A quick reminder, because the lawyers told me to: this is not financial advice. This is just me sharing my strategies, investments, stocks, index fund strategies, what I'm buying, and where I plan to take those investments. Everyone’s financial goals are different—some of you want a yacht, others just want to stop looking at your 401(k) statements. No financial decisions should be made solely on this newsletter, which is for informational and entertainment purposes only and is not intended to be a substitute for advice from a professional financial advisor or qualified expert.

Also, if you find this newsletter helpful, please share it with one friend who might find it useful by using the button below.

Photo by Julius Yls on Unsplash

Retirement Plan And Notes For 2026

For those of you who’ve been loyally dumping cash into your retirement accounts, congratulations! The IRS is rewarding your diligence by letting you put even more money away, where you can’t touch it.

The contribution limit for traditional and ROTH IRAs in 2026 is $7,500, up from $7000 in 2025. Individuals aged 50 or older can make a catch-up contribution of $1,100, bringing the total contribution to $8,600.
The contribution limit has also changed for employees who participate in 401(k), 403(b), and most 457 plans, as well as the federal government’s Thrift Savings Plan. Before, the limit was $23,500. Starting in 2026, that increases to $24,500.

For employees 50 and over, the catch-up contribution limit has increased to $8,000. So with the new limit of $24,500, you add that $8,000, and the contribution limit is $32,500 for employees 50 and up. Ideal for people who like to say, “I’m absolutely retiring at 60,” while silently knowing they’ll still be answering work emails at 72.

You can read more about changes for 2026 on the IRS’s official website at this link. (Warning: May induce drowsiness.)

HSA Changes For 2026

Good news for those of us trying to hoard cash for future medical bills (or just a nice tax-free retirement slush fund): the contribution limits for Health Savings Accounts (HSAs) are getting a modest bump for 2026.

If you have self-only coverage under a High Deductible Health Plan (HDHP), you can now stash away a maximum of $4,400 (up from $4,300), and the family coverage limit jumps to $8,750 (up from $8,550).

The $1,000 catch-up contribution for the over-55 crowd remains the same—because apparently, the cost of needing glasses doesn’t inflate as fast as everything else. Also, eligibility is expanding to include all Bronze and Catastrophic ACA plans and certain Direct Primary Care arrangements, meaning millions more people can now enjoy the triple-tax benefit of these accounts: deductible contributions, tax‑free growth, and tax‑free withdrawals for qualified medical expenses.

Photo by micheile henderson on Unsplash

Higher Standard Deductions

The standard deduction is a fixed dollar amount that makes your taxable income magically shrink. It’s like a participation trophy from the government—almost everyone qualifies for it, and you take it instead of itemizing deductions like mortgage interest or charitable gifts. The IRS adjusts it each year for inflation, and certain groups—such as people 65 or older or those who are blind—can qualify for an additional amount. Taking the standard deduction is usually the simpler and more beneficial choice unless your itemized deductions are higher, which means less math and fewer receipts labeled “charity donation” that were definitely brunch.

For 2026, the standard deduction will rise above inflation:

Married filing jointly: $32,200 (up from $30,700 in 2025)
Single / Married filing separately: $16,100 (up from $15,750)
Head of household: $24,150 (up from $22,700)

Because the standard deduction is now so high, your chances of benefiting from itemizing deductions like mortgage interest or state/local taxes are shrinking faster than your motivation to actually read the tax code. Unless you’ve made a truly obscene number of charitable gifts this year or bought a second mansion, you can probably toss that file folder of “deductible expenses.”

Photo by Alexander Grey on Unsplash

Updated Tax Brackets

The top federal income tax rate remains 37%, because of course it does. But the income thresholds for each bracket are shifting upward in 2026, giving you the illusion of paying less tax—kind of like when your favorite store raises prices but offers a “sale.”

The 37% bracket starts at $640,600 for single filers and $768,700 for married couples filing jointly. Other brackets (10%, 12%, 22%, 24%, 32%, 35%) are also adjusted upward for inflation, so more of your income will be taxed at lower rates compared to 2025. You can check out the updated 2026 tax brackets below:

A Common Misconception About Tax Brackets

The most common misconception is that if a raise bumps you into a higher tax bracket, all of your income is suddenly taxed at that brutal new rate. If you think this, please stop immediately. This myth has been used by fearful people to justify turning down raises for decades.

Here’s the truth: we have a progressive tax system, which means your income is taxed in layers, like a delicious but overly complicated tax lasagna. You do not pay your top bracket rate on every single dollar you earn—only on the dollars that fall into that specific bracket.

So, for instance, if a person is a single filer who earns $60,000, using the tax brackets table above, they would fall into the 22% tax rate. So the tax bill would look like:

First $12,400 → taxed at 10% = $1,240

Next $38,000 ($12,401–$50,400) → taxed at 12% = $4,560

Last $9,600 ($50,401–$60,000) → taxed at 22% = $2,112.

In this example, the total tax owed is $7,912 ($1,240 + $4,560 + $2,112). So even though this person is in the 22% bracket (the marginal rate), their actual effective tax rate (total tax paid divided by total taxable income) is only:

$7,912 / $60,000 = 13.2%

So, a person in the “22% bracket” actually pays just over 13% of their income in taxes. The entire $60,000 income is not being attacked by the highest percentage—just a small, carefully measured slice.

Conclusion

The real takeaway from these 2026 changes is this: don’t panic, but don’t be lazy. The higher contribution limits mean you can shove more money into your retirement accounts and shield it from immediate taxation, and the beefier Standard Deduction means you can probably stop stressing over whether that receipt for office supplies is truly deductible.

Take a moment to review these new numbers. Figure out where you fall in the updated brackets (congratulations on being even mildly richer!), and consider the timing of any big financial moves. After all, the only thing worse than paying taxes is paying too much tax because you missed a memo.

Practical Money: Do this NOW before selling any stock!

Raj Giri — Mon, 17 Nov 2025 15:55:53 GMT

Photo by Olga DeLawrence on Unsplash

Introduction

The end of the year is fast approaching, which means two things: holiday stress is peaking, and a select few savvy investors (who actually remember how their brokerage account is set up) are using tax-loss harvesting to stick it to The Man. The rest of you? Well, you’re probably about to hand over a gratuitous gift to the IRS because of a single, criminally boring, easily-changed setting. Spoiler alert: it’s labeled “disposal method,” and it’s not referring to kitchen trash.

In this issue, I’ll discuss various disposal methods—not the kind that require gloves and a shovel, but the ones that can make or break your capital gains taxes. I’ll even reveal my personal choice, which, spoiler, is not selling my life’s savings at a loss just for fun.

Disclaimer: This is NOT financial advice. I am just sharing my strategies, investments, stocks, and index fund strategies, what I'm buying, and where I plan to take those investments. Everyone’s financial goals are different. No financial decisions should be made solely on this newsletter, which is for informational and entertainment purposes only and is not intended to be a substitute for advice from a professional financial advisor or qualified expert.

Also, if you found this newsletter helpful, please share it with one friend who might find it useful by using the button below.

Tax-Loss Harvesting Quickly Explained

I took a deep dive into tax-loss harvesting a couple of years ago, including a bunch of examples, which you can read here. But in case you only have time for a tweet-sized summary: sell investments that have lost value, realize a capital loss, and use it to offset other gains. If you’re extra unlucky and losses exceed gains, you can deduct up to $3,000 against ordinary income, carrying the rest forward like an eternal party favor for future tax years. It’s like trading a sad stock for a big tax deduction.

The key is to remember the wash-sale rule, which prevents you from repurchasing the same or “substantially identical” investment within 30 days before or after the sale, or the loss won’t count. The IRS frowns on the “sell for a loss, buy right back immediately” strategy. They’re like that strict aunt who notices everything.

Photo by rc.xyz NFT gallery on Unsplash

Capital Gains and Cost Basis

Dealing with investments and taxes can feel like navigating a maze designed by a bored CPA, except with higher stakes and more IRS forms. Understanding terms like Capital Gains, Cost Basis, and methods of disposal like First-In, First-Out (FIFO) is crucial for accurately reporting your income and minimizing your tax bill.

Capital Gains and Losses

A Capital Gain is the profit you realize when you sell a capital asset (like a stock, bond, or mutual fund share) for more than its cost basis. A Capital Loss is the opposite, a painful reminder of your poor judgment. In 2025, there are two main types of capital gains:

Short-term capital gains: For assets held one year or less. Taxed as ordinary income (10% to 37% for 2025) based on your federal tax bracket, because apparently making money too fast is frowned upon.
Long-term capital gains: For assets held longer than one year. Subject to lower, preferential tax rates (0%, 15%, or 20%), depending on taxable income. The government appreciates the stability, apparently.

Cost Basis

Cost basis is how much you paid for something, plus fees—think of it as the “I broke even, right?” number. Keeping a correct cost basis helps make sure you’re not tipping the IRS more than necessary. The formula (brace yourself for the math):

Capital Gain/Loss = Sale Price − Cost Basis

Why it’s crucial: An accurate cost basis ensures you only pay tax on the actual profit, not on the entire sale price. If you reinvest dividends, for example, your cost basis increases, which reduces your taxable gain when you eventually sell. Your brokerage firm reports this information to you and the IRS on Form 1099-B.

Photo by Austin Distel on Unsplash

Disposal Methods

This is where the easy money is—or, rather, the easy money saving. This single choice can swing your tax bill from “Ouch” to “Hey, not bad.”

As an example, let’s assume that I own 400 shares of META that’s currently trading at $600 / share, and I plan to sell 100 shares. Let’s say I bought those shares over the years at these various prices (this is just an example; META never hit $900 in 2024):

2012: 100 shares at $5
2022: 100 shares at $200
2024: 100 shares at $900
2025: 100 shares at $800

Let’s also assume I’m living that glamorous top tax bracket life (20% long-term, 37% short-term). Now I’m selling 100 shares at $600 each. There are a bunch of disposal methods (Fidelity has 11). Here are the most popular and how they affect taxes.

FIFO (First-In, First-Out): The Default Disaster (Possibly)
This is the default method used by the IRS and many brokerage firms, loved by people who never change presets. The earliest shares purchased are sold first. This can result in higher capital gains (and higher taxes) if the oldest shares have appreciated the most.

So, for the META example using FIFO, since the shares bought at $5 were my oldest shares, FIFO requires those to be sold first, resulting in a very large gain. My cost basis using FIFO = 100 shares × $5 = $500.
Now I’m selling those 100 shares at $600/share.
My sale proceeds = 100 × $600 = $60,000.
My capital gain is the sale proceeds - cost basis = $60,000 - $500 = $59,500.

Since my long-term capital gains tax rate is 20%, I would owe $11,900 in taxes (At a 20% long-term capital gains tax rate: $59,500 × 0.20 = $11,900). Congratulations! I turned a $500 investment into a five-figure tax bill. The government thanks me for my service and my portfolio cries a little.
LIFO (Last-In, First-Out):
The most recently acquired shares are sold first. This may result in lower gains if recent purchases were at higher prices, but can also produce more short-term gains taxed at higher rates. Great for maximizing losses... if your most recent purchases were terrible.

So in this case, I would be selling 100 shares from the 2025 lot (which I bought at $800 / share).
My cost basis = 100 shares × $800 = $80,000.
Now I sell those 100 shares at $600/share.
My sale proceeds = 100 × $600 = $60,000.
My capital gain (actually a loss) is the sale proceeds - cost basis = $60,000 - $80,000 = -$20,000.

Since it’s a loss, the tax rate is irrelevant—I pay $0 in capital gains tax and can use the $20,000 loss to offset gains (or up to $3,000 against ordinary income). If I use the $3,000 loss against ordinary income, I can carry the remaining $17,000 forward indefinitely.
Tax Sensitive (Fidelity) / Tax Lot Optimizer (Charles Schwab)
This is the one I utilize, because I, too, enjoy not giving away more money than necessary. Most brokerages have some version of this. At Fidelity, it’s called “Tax Sensitive”, while at Charles Schwab, it’s called “Tax Lot Optimizer.” It sells shares that minimize your tax burden—usually the ones with losses first.
In this case, I would be selling the 2024 shares purchased at $900/share (the highest-cost shares). This produces the largest possible capital loss, which is the best outcome from a tax-optimization standpoint.
My cost basis = 100 shares × $900 = $90,000.
Now I sell those 100 shares at $600/share.
My sale proceeds = 100 × $600 = $60,000.
My capital gain (actually a loss) is the sale proceeds - cost basis = $60,000 - $90,000 = -$30,000.

I would owe $0 in taxes, and the $30,000 loss can offset gains elsewhere. If unused, I can deduct $3,000/year against ordinary income and carry the remaining $17,000 indefinitely.

So for tax implications, this is the best option. Here, the $900 cost basis generates a bigger loss than the $800 shares. By not selling the 2012 and 2022 shares, I retain shares with massive unrealized gains. These can be used strategically later, like selling in a low-income year at a lower tax rate, donating for a full fair-market-value deduction, etc.

A Pretty Sweet Tax Trick

In the example provided, I sold 100 shares of META. In each example, I would end up left with 300 shares. But depending on the disposal method, I could have gone from owing $11,900 in taxes to taking a $30,000 loss. Not bad for a few dropdown clicks in my brokerage account.

One more thing I could do. In 30 days (to dodge the dreaded wash sale rule), I can buy 100 shares of META back. If we assume that the stock stays around $600, I am right back to where I started with 400 shares of META, but I now have a massive $30,000 capital loss on my tax returns.

The moral of the story is that you can have your cake, eat it, and then convince the IRS that the crumbs were an expense.

How To Check Your Disposal Method

If you don’t know what setting your account is on, you’re almost certainly using FIFO, which is akin to leaving your house keys under the welcome mat for the IRS. Seriously, go check. Every brokerage hides this setting differently, like an Easter egg only tax nerds care to find, but searching “Disposal Method” on your brokerage website should get you there. Here’s how to do it for Fidelity and Charles Schwab:

Fidelity

Select your account and go to “Account Features”. There, you should see an option for managing Cost Basis Information Tracking:

Once you click on “Manage”, you will see the disposal method selected as well as the other ones offered:

Charles Schwab

With Schwab, once you’re logged in, select “Cost Basis Methods” under your Profile in the top right corner.

From there, you will see your current selection method. You can then adjust this to your heart’s delight (and your accountant’s relief).

Conclusion

Understanding cost basis and disposal methods isn’t exactly cocktail party conversation, but it can save you real money. Review your settings, talk to a pro, and don’t forget to check your disposal method before selling anything. Otherwise, you might accidentally send the IRS a very generous holiday gift.

Biggest Investment Mistake I Make, My Updated Stock Portfolio

Raj Giri — Tue, 07 Oct 2025 17:21:19 GMT

Photo by Arthur A on Unsplash

Introduction

The market has been on a roller coaster this year — and not the smooth, Disney kind. More like the rickety one at the local fair that makes you question your life choices halfway through.

After taking a huge plunge between February and April, the Dow, S&P 500, and Nasdaq 100 all hit record highs this month. In this newsletter, I’ll confess to an investment mistake that has haunted me for years (yes, still), and how I’m finally planning to stop tripping over the same rock.

Also, it’s been over a year since I shared my stock portfolio. Since then, I’ve made quite a few changes. A lot has changed since then — think “new season, new cast.” I’ll walk you through what’s different and why.

Also, if you found this newsletter helpful, please share it with one friend who might find it useful by using the button below.

My Big Investment Blunder

One of the best things I’ve been able to do in my decades of investing is to stay cool when the market is in a downturn and look at it as a buying opportunity. When other people are panicking, I’m the weirdo calmly adding stocks to my cart like it’s Black Friday at Costco.

In the newsletter I sent in March, when the market was tanking, I wrote about how it was a major buying opportunity and used an example of how I was loading up on NVIDIA at $105. I also added to pretty much every position I held. During that downturn from February to May, in just my stock account, I bought equities 68 times.

While I’m good at buying when the market is tanking, I have the opposite problem when the market is on fire. Suddenly I turn into that person at the buffet who “saves room for later” and ends up missing the good stuff.

From May until this past week, I’ve only bought equities 19 times. That’s like going from running a marathon to doing a light jog because the weather’s too nice. Most of those buys were after a stock took a hit — basically me standing on the sidelines waiting for the “perfect” pullback that never came.

As an example, SOFI is one stock that I started buying in January. I added a lot during the downturn when the stock was under $15 / share. I’ve only added to my SOFI position twice since then. Today it’s trading at a little over $25. If I had just continued to buy when the market got on fire again, I would have caught it at $17, $18, $19, etc., and I’d be doing a happy dance. Instead, I’m doing the “shoulda, coulda, woulda” shuffle.

I made the age-old, utterly predictable, yet apparently irresistible mistake of waiting for the market to cool down when it’s on fire. It’s the mistake I see a lot of people make who want to start investing—they think it’s best to wait for prices to come down, and in that time, they miss all the glorious returns. Bless their hearts. I know their pain, because I’m one of them. I’m a seasoned investor who still acts like a first-timer when the market gets a little hot.

Fixing this mistake

In my past newsletters, I’ve mentioned that I keep a separate account for ETF investing (which is mostly for dividend income). In that account, I dollar-cost average into about a dozen ETFs weekly — like a responsible adult who sets the thermostat to “auto.” That account is boring in the best way. I invest in about a dozen ETFs weekly, rain or shine, bull or bear. This smooths out entry points and reduces regret.

With my stock account, I don’t dollar-cost average as I make separate decisions for each position, which is fine in theory but turns me into an overthinker in practice. So, I’m changing that.

I’ve set a reminder every Thursday to buy something. Big position, small position, whatever. It’s like dollar-cost averaging, but with a sprinkle of strategy. This way, I stop waiting for a “perfect” entry point that doesn’t exist outside of hindsight.

Photo by Austin Distel on Unsplash

Mistakes Other Investors Make In A Hot Market

Many people make the opposite mistake when the market is hot. When the stock market is soaring, people lose their minds. Everywhere you look, it seems like stocks are only going up. Suddenly, everyone’s a genius. I start hearing phrases like “can’t miss” and “my buddy’s cousin’s barber gave me a stock tip.”

While a hot market can be a great time to see your portfolio grow, it's also a time that calls for a cool, disciplined approach. The last thing you want to do is get burned by making impulsive decisions. Here are some steps I take during these times.

Stick to the plan. Hot market ≠ new rules. If you already have an allocation strategy (stocks, bonds, cash, alternatives), stay disciplined. A hot market doesn’t mean the rules change—it could very well mean that they’re about to be tested.
Dollar-cost average. As I noted earlier, I do this with my ETFs, as well as our various retirement accounts. Consistency over timing. Slow and steady beats “YOLO” nine times out of ten.
Avoid lottery-ticket stocks. Just because a stock doubled in six months doesn’t mean it’s going to double again. Sometimes it just… stops (or crashes hard).
Don’t confuse market luck with personal genius. This one’s hard. The mirror loves to tell us we’re investment prodigies. Spoiler: the mirror often lies.
Don’t gamble with money you’ll need soon. Markets don’t care about your vacation to Maui.
Keep an emergency fund. A hot market can cool down quickly—usually the moment you invest your rent money. Liquidity ensures you won’t have to sell at a bad time.

My Updated Stock Portfolio

In August of last year, I shared my stock portfolio. The only stock I dropped since then was Coca-Cola (KO) this past January. (Sorry, Coke, but you weren’t providing enough fizz for my portfolio.) Whenever I sell a stock, I make sure to buy something else, even if it’s just an S&P 500 index fund like VOO (the ultimate safe space).

I had a big position over the years in Coca-Cola, so instead of taking the proceeds from that sale and buying just one stock, I ended up buying 6 stocks: Broadcom Inc. (AVGO), Boeing (BA), Hims & Hers Health (HIMS), Robinhood (HOOD), Palantir (PLTR), and SOFI (SOFI).

Since then, I also bought UnitedHealth Group (UNH) when it took a nosedive, Amazon (AMZN) and FIGMA (FIG) after that stock dropped (and unfortunately continued to drop, proving that I am, in fact, still capable of being wrong. However, I may buy more soon, because what’s life without a little double-or-nothing?).

Below is my updated stock portfolio:

Conclusion

I think the long story short is to keep investing, whether the market is in a downturn or red hot. Just try not to be me and only be enthusiastic when the metaphorical ship is sinking.

Starting Over, How I'd Invest My First $10,000

Raj Giri — Mon, 28 Jul 2025 15:03:37 GMT

Introduction

Photo by Viacheslav Bublyk on Unsplash

Investing can be such a powerful tool to grow wealth and achieve long-term financial goals. As I’ve noted in past newsletters, I started investing about 30 years ago and made my fair share of mistakes starting out. Some were educational. Others were just… expensive therapy.

So let’s imagine I’m starting fresh today with $10,000. That’s a solid chunk of change — not life-changing, but certainly enough to do some real damage (in a good way). And since I’m now guiding my daughters on their own financial paths, I’ve been revisiting the basics with a bit more wisdom and slightly fewer YOLO moves. This newsletter will walk you through the essential steps I’d take today with my first $10,000, or rather, what I’d do today if my daughters handed me their $10,000 and said, “Here, make this grow, finance wizard.”

Also, if you found this newsletter helpful, please share it with one friend who might find it useful by using the button below.

Before You Begin Investing

Before you even think about buying stocks or funds, let’s get the grown-up stuff out of the way. You know, the stuff that keeps you from eating ramen for the rest of your life. Make sure you’ve got a solid financial foundation. This means:

Contribute to an employer-matched 401K plan, because turning down free money is a crime.
Build an emergency fund, so your next flat tire doesn’t turn into a financial meltdown.
Pay down high-interest debt, since credit card interest is basically a reverse compounding nightmare.
Max out IRA contributions. Your future retired self will thank you from a golf cart.

Define Goals

What do you want your $10,000 to achieve? Pay for a down payment on a house? Retire early? Build generational wealth? Brag to your friends at brunch?

Your goals will influence your investment timeline and risk tolerance. In this newsletter, I’m investing for long-term growth, not YOLO meme stocks.

Understanding Investment Basics

With your foundation in place, let's explore some key investment concepts.

Risk vs. Return: Want to double your money overnight? Cool—so does everyone else. But usually, higher potential returns = higher risk. Understanding your risk tolerance (how comfortable you are with the possibility of losing money, or how many nights you’re willing to cry yourself to sleep) is crucial. As a beginner, it's often wise to start with a more conservative approach. Think reliable, not reckless.
Diversification: Don't put all your eggs in one basket! This isn't just a folksy saying; it's sound financial advice. Diversification means spreading your investments across different asset classes (like stocks, bonds, and real estate) and within those classes (different industries, company sizes). This helps reduce risk. Because if one egg cracks, you still have an omelet. If all of them crack… well, then you’re just left with a mess.
Compounding: This is the real MVP. It’s when your money makes money, and that money also makes money, and eventually your portfolio is working harder than you do. Future you will thank you, probably with a nicer car.

Where I’d Actually Put the $10,000

OK, enough of the blah-blah, let’s get to the good stuff. For a beginner, simplicity and diversification are key. So I’d start with low-cost index ETFs. You don’t need to be a stock-picking savant—just piggyback off the market with funds that mirror major indexes. These glorious creations hold a diversified basket of stocks or bonds, aiming to mirror the performance of a specific market index (like the S&P 500 or Nasdaq 100). They offer instant diversification at a low cost. You don't need to pick individual stocks; you get exposure to hundreds or thousands of companies with a single investment.

Last year, I posted my lazy two-fund portfolio to get rich, which consisted of a broad market ETF in the Vanguard S&P 500 ETF (VOO), and a growth ETF in the Invesco QQQ Trust (QQQ, which mirrors the Nasdaq 100). Those would be my core ETFs for the $10,000 investment, although there are plenty of broad market and growth ETFs that would work.

While I find VOO to be safe over the long run, I would also want to add a safe ETF that consists of higher-dividend-paying companies, and one of my favorites is the Schwab US Dividend Equity ETF (SCHD).

I have descriptions of VOO and QQQ in my newsletter about the two-fund portfolio to get rich. As for SCHD, think of this as your responsible uncle who wears socks with sandals and lectures you on “value.” Less tech, more stable industries like financials, consumer staples, healthcare, and industrials. It’s less risky, which protects a portfolio when the market is in a downturn. However, it means that it will usually have weaker performance in strong bull markets, like the one we're currently riding (hopefully). SCHD has a dividend yield of 3.75% and has returned 5.61% this year, including dividends. Not going to make you rich overnight, but it won't make you homeless either.

Finally, you want to have cash available, and so I’d make sure to have a high-yield savings account. This is in addition to an emergency fund. I posted my top 5 high-yielding savings accounts here, with CIT Savings being the one I’m currently using.

Breaking Down The Portfolios

Under 30: The "YOLO with a Plan" Portfolio

If I’m starting under 30, time is on my side, and I’ve probably got questionable taste in crypto, so I’m going to be more aggressive. Think of it as having fewer responsibilities and more willingness to gamble (responsibly, of course). The mix would look something like:

60% QQQ: Because why not ride that tech wave like a pro surfer?
30% VOO: For some good old-fashioned market stability.
10% Cash: For emergencies, or that unexpected avocado toast craving.

30-40: The "Still Got It, Kinda" Portfolio

At this age, I still have time on my side, but I’d go with a more balanced approach, while still being a little aggressive. Because who wants to be boring? The mix would look more like:

50% VOO: The reliable workhorse.
30% QQQ: Still chasing some of that sweet growth.
10% SCHD: Time to sprinkle in some income and stability.
10% Cash: For, you know, adulting.

40-50: The "Mid-Life Crisis, But Financial Edition" Portfolio

This is the age range I’m at (barely), and it’s time to get more conservative because retirement is closer than when I turned 21. With that in mind, I’d go with:

50% VOO: Still the foundation.
20% QQQ: Acknowledging that growth is still nice, but not the only thing.
20% SCHD: Hello, dividends! My new best friend.
10% Cash: Because spontaneity at this age usually involves a new set of golf clubs, not a trip to Cancun.

50+: The "Rocking Chair and Dividends" Portfolio

This is obviously a wide range, but basically, the older I am, the more I’m in SCHD and cash. Because who needs excitement when you have consistent income? So for 50-60, it would look like this, with the SCHD / VOO percentages geared more heavily to SCHD the older I am (because who doesn't love a good dividend check?):

40% VOO: Still keeping a toe in the broader market.
40% SCHD: Hello, stable income! My really new best friend.
10% QQQ: A nod to the good old days of aggressive growth.
10% Cash: For, well, everything.

Conclusion

Again, this is what I’d do starting with $10,000, and I have absolutely no idea what anyone else should do because I don’t know their situation. I'm not a mind reader, unfortunately. But investing that first $10,000 is an exciting step towards financial independence.

Don't Panic (Yet): Building Your Financial Safety Net

Raj Giri — Mon, 05 May 2025 14:22:29 GMT

Introduction

Photo by Josh Appel on Unsplash

The markets have been on a wild ride for the last several months, and uncertainty in the job market has been high. So many people I know have either lost their jobs or fear that they may lose them.

In my opinion, the most crucial step in pursuing your financial journey is to establish an emergency fund. It may not be the most thrilling topic, but in today's unpredictable world, having a financial safety net is more important than ever. A well-stocked emergency fund can be the difference between weathering a storm and facing a financial crisis. Think of it as your "I can still afford avocado toast" fund. This newsletter will walk you through creating and maintaining this crucial financial cushion.

Also, if you found this newsletter helpful, please share it with one friend who might find it useful by using the button below.

The First Steps Before Investing

Before I ever start investing, the first thing I’d do is to contribute to an employer-matched 401K plan. Often, an employer will match 5-8%, so that’s an easy 100% return. It's like your employer is saying, "Hey, I'll give you money to save for retirement…because I know you'll probably need it after working here." I would make sure to contribute the full amount that the employer will match. Even if you’re unfamiliar with investing, you can put that money into a safe money market fund, and you’re making a 100% return with the employer match alone.

The next thing is to create an emergency fund. Life, as they say, is what happens while you're busy making other plans. And by "life," I mean unexpected medical bills, a leaky roof, car repairs that cost more than your car – these unforeseen events can derail your budget and lead to debt if you're not prepared. An emergency fund acts as a buffer, allowing you to handle these situations without resorting to high-interest loans or 25% APR credit cards.

Dave Ramsey has some great advice, which I agree with, and that is to first establish an emergency fund with $1,000. It’s enough to cover, say, a really good weekend in Vegas…just kidding! It's for actual emergencies. Once you have that, work on getting rid of credit card debt (my newsletter on squashing credit card debt is here), and then work on your emergency fund again.

How Much Should You Save?

A common recommendation is to aim for 3-6 months of essential living expenses. But let's be real, "essential" is a highly subjective term. For some, it's rent, food, and utilities. For others, it's rent, food, utilities, and their daily Starbucks fix. (No judgment here.) So the ideal amount varies depending on your individual circumstances:

Consider your job security: If you're in a stable industry, 3 months might suffice. If your industry is volatile, aim for 6 months or even more.
Factor in your dependents: The more people rely on your income, the larger your emergency fund should be. If you have kids, pets, or that weird roommate who eats all your food, you'll need more.
Evaluate your health: If you have chronic health conditions or high deductibles, a larger fund can provide peace of mind.

Calculating Your Essential Expenses

Track your spending: For a month or two, meticulously record all your expenses. Use budgeting apps, spreadsheets, or just a good old-fashioned notebook. (Remember those?) This is where you'll discover just how much you actually spend on avocado toast.
Identify essential expenses: Distinguish between needs (housing, food, utilities, transportation) and wants (entertainment, dining out). Rent? Need. Daily latte? Want. (Again, no judgment.) WrestleMania tickets? Need. (Just kidding.) Focus on the needs for your emergency fund calculation.
Calculate your monthly total: Add up all your essential expenses to determine your monthly needs. Multiply this by 3-6 (or your chosen timeframe) to arrive at your target emergency fund amount.

Where to Keep Your Emergency Fund

High-Yield Savings Account (HYSA): These accounts offer competitive interest rates instead of just mocking your balance. I listed my top 5 high-yield savings accounts here. CIT Savings remains my main high-yield savings account, and they currently offer a 4.1% APY with a balance of $5,000 or more. Some of the other accounts I listed were AMEX Savings, Sofi Bank, and Citibank, which all currently have a 3.7%-3.8% APY with no minimum balance. All the banks listed are FDIC-insured.

In general, it’s a good opportunity to double-check where you have your savings. For instance, a standard Chase Savings account has a 0.01% APY. If you were to store $10,000 in a CIT Savings account, you would have earned $410 in interest after one year. With a Chase Savings account, you’d have pocketed $1.
Money Market Account (MMA): Similar to HYSAs, MMAs often offer higher interest rates and may come with check-writing or debit card access. Some of the money market accounts I currently utilize are FZDXX at Fidelity (4.15% APY) and SWVXX (4.25% APY) at Charles Schwab.

Tips for Building Your Emergency Fund

Start small: Even small contributions add up. Begin with a manageable amount and gradually increase it.
Automate your savings: Set up automatic transfers from your checking account to your emergency fund each month so you don’t have to rely on willpower.
Cut unnecessary expenses: Identify areas where you can reduce spending, such as dining out less or canceling unused subscriptions. Do you really need that fifth streaming subscription? Probably not. Direct the savings towards your emergency fund.
Boost your income: Consider taking on a side hustle or freelancing to accelerate your savings progress.
Stay disciplined: Resist the temptation to dip into your emergency fund for non-emergencies. That new pair of shoes does not count. This fund is for unexpected crises only.

Maintaining Your Emergency Fund

Review your fund regularly. As your income and expenses change, so should your emergency fund. And if you do have to use it (because, life), replenish it as quickly as possible.

Conclusion

Building an emergency fund is like flossing: you know you should do it, but it's easy to put off. But trust me, it's worth it. It provides a safety net for life's unexpected events and gives you peace of mind knowing you're prepared. Start today, and you'll be well on your way to a more secure financial future. Your future self (and your stomach) will thank you.

Is it time to panic sell?!

Raj Giri — Mon, 31 Mar 2025 14:30:56 GMT

Introduction

Photo by Maxim Hopman on Unsplash

Tariffs, inflation, and recession, oh my! It’s been a wild last couple of months for the markets. We've all seen it: the crimson tide washing over our portfolios, the news anchors looking like they just witnessed a ghost, and that nagging feeling that you should have just invested in canned goods and a bunker. Despite the S&P 500 and Nasdaq Composite posting some gains earlier last week, the S&P 500 ended up negative for the fifth time in the last six weeks, while the Nasdaq is looking like it might end March with its worst monthly decline since December of 2022.

With tariffs set to roll out on Wednesday, this week could be even more chaotic.

I’ve covered this topic before, but in this newsletter I’ll discuss how I’m handling investing during volatile times like this, as well as re-introduce my “7000 strategy”.

Also, if you found this newsletter helpful, please share it with one friend who might find it useful by using the button below.

Handling Market Declines

It’s natural to feel uneasy when you see red across your portfolio. But before you start Googling “how to live off the grid,” remember this: market downturns are a normal part of investing.

There are a lot of unknowns with today’s economic climate, including tariffs, inflation fears, and the possibility of a recession. I won’t pretend to know if the current downturn will last another week, month, or year. However, historically, markets have always rebounded from downturns, rewarding patient investors who stay the course. Selling in a panic often locks in losses, while disciplined investors use downturns as opportunities to buy quality stocks at a discount—because who doesn’t love a good sale?

Instead of reacting emotionally, take a deep breath. Review your financial goals, assess your portfolio’s diversification, and maybe resist the urge to refresh your brokerage app every five minutes. Short-term volatility is the price we pay for long-term gains—kind of like eating your vegetables before dessert.

The Right Mindset During Market Declines

Stay Rational: Yes, your portfolio looks rough. No, that doesn’t mean selling everything and investing in canned goods.
Evaluate Opportunities: Down markets = discounted stocks. It’s like Black Friday but for your financial future.
Stick to Your Plan: Panic-selling never made anyone rich—except maybe the guy buying your shares at a discount.

Photo by BoliviaInteligente on Unsplash

An Example: How I’m handling my Nvidia stock

Nvidia is my largest individual stock holding, comprising about 30% of my stock account. Just two months ago, on January 6, 2025, the stock hit an all-time high closing price of almost $150 ($149.43 to be exact). At the time of this writing, it is trading at about $105, about a 30% drop.

I believe in the stock and don’t think it has peaked. If I do think it will hit $150 again, do I sell today at about $105, try to time the market and buy back in when it’s back on the rise, and risk losing gains along the way? Or do I buy more shares today, and have those shares grow 43% (while the drop from $150 to $105 is 30%, the stock needs to increase 43% to get back to $150) by the time the stock is back at $150?.

It’s a personal decision, but I’m buying. I’ve noted before that I auto-invest into a dozen ETFs each week. In addition to that, each week this month, I added more to all of my positions except for Tesla, with my latest buying spree being this past Friday. And I will continue to do so.

It can be scary continuing to put money into the market and see the arrows point downwards. But for me, it has always paid off over time. Here are some strategies I use to weather the storm:

Diversification is Key – Don’t put all your eggs in one basket (unless it’s a very, very diversified basket).
Revisit Your Risk Tolerance – If you’re losing sleep over your portfolio, it might be time to adjust your strategy (or at least stop checking it at 2 AM).
Think Long-Term – The most successful investors aren’t the ones who react to every dip; they’re the ones who zoom out and see the bigger picture.
Consider Dollar-Cost Averaging – Invest steadily over time and ride the waves instead of getting seasick.
Turn Off the Noise: Seriously, mute the financial news. Your mental health will thank you. Replace it with cat videos or cooking shows.

Re-visiting my “7000 Strategy”

I explained my benchmark strategy when I first started this newsletter, which is essentially setting a fluid S&P 500 benchmark that I believe is achievable within the next couple of years. It’s something I found useful in the past when the market would be dropping. When I started this newsletter, the benchmark was 4800, so if the S&P 500 dropped to 4000, that would mean I’m buying at a 17% discount, so any dollar I put in that day will be up 17% when the S&P 500 eventually hit 4800.

Since then, the market continued to rise. The benchmark moved to 5000, 6000, and then 7000 last November.

The S&P closed at 5580 on Friday, about 9% off its peak. For every share of an S&P 500 index fund I buy now, it will be up around 25% by the time the index hits 7000. How long until we get to 7000? With a new administration and market unknowns, anything’s possible. It could be next year, or it could take years. Either way, if it never happens, we’ll have more significant issues than missing my 7000 goal.

Conclusion

Market volatility is like a bad roommate: loud, unpredictable, and occasionally makes you want to move out. But remember, time and time again, the stock market has faced downturns, but history shows us that markets tend to recover. From the Great Depression to the 2008 financial crisis, those who stayed invested ultimately saw growth in their portfolios. In other words, the world didn’t end, and your investments won’t either.

Panicking leads to poor financial decisions. Instead, see downturns as opportunities and trust your long-term plan. And if you’re really feeling stressed, maybe take a walk, drink some tea, and try organizing your sock drawer. It's equally productive and less financially damaging.

How My Investments Fared In 2024, VOO Investment Update

Raj Giri — Mon, 27 Jan 2025 14:38:08 GMT

Introduction

Photo by Nicholas Cappello on Unsplash

With 2025 in full swing (and my therapist on speed dial), it's time to reflect on the market performance for last year. Remember all those doomsday predictions at the start of 2024? Yeah, about that… Turns out, the market decided to throw a party instead of a pity party, delivering returns that made even the most seasoned investors raise an eyebrow (or two).

In this newsletter, I’ll look at how my investments in my equity portfolios fared, and also provide an update on this newsletter’s VOO performance.

Also, if you found this newsletter helpful, please share it with one friend who might find it useful by using the button below.

2024 Market Trends

At the beginning of 2024, there was a lot of pessimism in the market. As I noted in the last issue, here are the brilliant forecasts from top analysts for where the S&P 500 would end up:

•⁠ ⁠JP Morgan: 4,200

•⁠ ⁠Morgan Stanley: 4,500

•⁠ ⁠Bank of America: 5,000

•⁠ ⁠Goldman Sachs: 5,100

•⁠ ⁠Citi: 5,100

The S&P 500 had a solid year, closing at 5881.63, a 25% gain and a slap in the face to even the most optimistic prediction.

Tech stocks continued their reign of terror (in a good way), with the NASDAQ soaring 29%, thanks to AI and renewable energy – because apparently, we’re all going to be living in the metaverse powered by solar panels. The Dow posted a modest 13% gain, as value stocks outperformed growth stocks in the latter half of the year.

Over the past two years, the Dow has gained 28%, while the S&P 500 has grown 53% and the Nasdaq has grown a whopping 85%.

How My Portfolios Fared

I keep separate brokerage accounts for stocks, retirement, ETF investing (which focuses on dividends but also has funds like VOO and QQQ), fixed income (bonds and CDs), etc. I’ve broken down my positions in each of those accounts in previous newsletters. Here’s a breakdown of how my equity accounts fared (excluding the boring stuff like bonds and real estate):

Stocks at Schwab: This account is focused on individual stocks with the goal of beating the S&P 500. I provided my most recent stock portfolio back in August. Since then, I’ve added Palantir (PLTR) and Boeing (BA). Led by NVIDIA and CAVA, this account returned about 54%, more than double the S&P 500.

ETFs / Index Funds at Fidelity: This account is about that sweet, sweet dividend income, not necessarily beating the S&P 500. It has 16 ETFs / index funds, with 9 focused on dividend income. The last time I posted the funds in this portfolio was last May, and I’ll post an update soon with three ETFs I’ve added since then. For 2024, this portfolio saw a $19.5% gain while providing steady dividend income since I’m morphing into a retiree eyeing early bird specials.

401K at Empower: This is my old 401K account sitting at Empower. This one is simple because the entire account is 1 fund that tracks the S&P 500. The rate of return for 2024 was about 25%, proving that even when I’m not paying attention, my money can still make money.

ROTH IRA at Robinhood: Since I closed my business, I’m back to making annual ROTH contributions by doing a backdoor ROTH IRA conversion, which I wrote about here. In that newsletter, I revealed my simple two-fund portfolio that I use for this account: the Vanguard S&P 500 ETF (VOO) and the Invesco QQQ Trust (QQQM).

Unfortunately, I don’t see a way in Robinhood to get a chart for the performance for 2024, but it’s a little inflated anyway because I moved my account there last April when they had a promotion to offer a 3% match—proof that sometimes, corporate gimmicks actually work. But without the match, the VOO / QQQM combo was up 25% in 2024.

VOO Update

For those new to this newsletter, for a real-world example of dollar-cost-averaging and how I utilize it, I bought the Vanguard S&P 500 ETF (VOO) which tracks the S&P 500 in July of 2022, and have been automatically investing in it every week (I do have VOO in several of our portfolios) while reinvesting the dividends. You can read the details on how much I initially invested and how much I’m adding every week here.

Here is an updated look at how it’s performing after the initial $5000 investment on June 16th, 2002. As seen in the chart below, it has returned about 31% and is up over $30,000, bringing the total value to close to $127,000—a testament to the magic of compound interest and my decision to not panic-sell every time the market sneezed.

Conclusion

2024 was a wild ride. The market defied expectations, my portfolios thrived, and VOO continued to be the responsible adult in the room—but let’s not get too comfortable. The world of investing is a fickle beast, and 2025 could just as easily throw curveballs. While challenges and uncertainties undoubtedly loom on the horizon, I’ll continue to diversify, dollar-cost-average, and try not to lose all my money on meme stocks.

So, here’s to another year of market madness and portfolio growth. If 2025 doesn’t cooperate, well, there’s always lottery tickets—or a career selling inspirational financial quotes on Etsy.

How To Get Started Investing In 2025

Raj Giri — Wed, 15 Jan 2025 14:26:46 GMT

Introduction

Photo by Stephen Dawson on Unsplash

Happy New Year! Thank you to all of you who helped this newsletter nearly triple in readership last year.

I’ve gotten many ~~Twitter~~ X DM’s and emails since I started this email with people saying they want to invest, but don’t know where to start. Investing can seem intimidating, like some exclusive club for Wall Street wolves who wear monocles and understand what a "derivative" actually is. (Fun fact: I don’t really know either, and I’m doing just fine.) But the truth is, it's for everyone. Yes, even you, the person who still hasn't figured out how to use the self-checkout.

Everyone’s risk tolerance and financial goals are different, so there is no blanket way on how to start investing. However, I am helping a family member get into investing and will share the steps we’re taking below.

This is a quick reminder that this is not financial advice. I am just sharing my strategies, investments, stocks, and index fund strategies, what I'm buying, and where I plan to take those investments. Everyone’s financial goals are different. No financial decisions should be made solely on this newsletter, which is for informational and entertainment purposes only and is not intended to be a substitute for advice from a professional financial advisor or qualified expert.

Also, if you found this newsletter helpful, please share it with one friend who might find it useful by using the button below.

What To Do Before You Start Investing

Before you decide to start investing, you first want to get rid of consumer debt (I wrote about how I got out of credit card debt here) and create an emergency fund that can cover 3 to 6 months of living expenses. For the emergency fund, I would put it in a high-yielding savings account that’s FDIC-insured (I wrote about my top 5 high-yield savings accounts at this link). “High-yield” here means 4-4.5%, which is down from the highs of recent years, but it’s still pretty decent. Also if your job has a 401K account with employer matching, contribute the full amount that your employer will match as that’s an easy 100% return.

Also, know your risk level. Letting your money sit in a savings account is like watching paint dry... except slower and less exciting. Inflation is a sneaky beast that erodes your purchasing power over time. Investing, on the other hand, gives your money a chance to grow and outpace inflation. However, if you’re watching your investments daily and hastily selling when the market is down and buying when it’s high, a savings account may be the better way to go.

Before diving headfirst into the stock market, take a good look at your financial situation. How much can you realistically afford to invest? The general rule of thumb is to invest 15% of your gross income.

Also, set some goals. What are you investing for? Retirement? A down payment on a house? A lifetime supply of tacos? Having clear goals will help you determine your investment timeline and risk tolerance.

Open An Investment Account

I’ve found that this is the step a lot of people get hung up on, but it's like ripping off a financial bandaid. It’s the step where you’re committing to investing. There are plenty of online brokerages that make it easy to open an account and start investing with relatively small amounts of money. Some popular options that I have experience with include Fidelity, Charles Schwab, and Vanguard. I wrote a newsletter last year comparing the three. I’m a fan of Fidelity and Schwab, not so much with Vanguard, but they all work. For my family member, we’re using Fidelity. To get started with any of the three, just do the following to get started:

Fidelity: Fidelity has a clean interface that is user-friendly and great customer service. To open an account, go to Fidelity.com and click the “Open an Account” button on the home page:
Schwab: Schwab also has a clean interface albeit a little more complex, and they also have great customer service. Go to Schwab.com and click the “Open an Account” button on the right hand side of the top bar:
Vanguard: Solid, but their website feels like it was designed by someone who thinks AOL is still cutting-edge. Also, they have the weakest customer service of the three. To get started there, go to Investor.vanguard.com and click “+ Open an account” on the right-hand side of the top menu:

Choose The Type Of Investment Account

Next, you want to decide on the type of account. For the purpose of this newsletter, I’m going to keep it simple and look at brokerage accounts and IRAs (Individual Retirement Accounts).

In general, I recommend people max out their retirement investments before opening a regular investing account. For my family member, we’re opening a regular brokerage account. Here’s a quick look at the two:

1. Brokerage Accounts

A brokerage account is a versatile investment account that allows you to buy and sell a wide range of securities, including stocks, bonds, mutual funds, and ETFs. Think of these as your investment playground. These accounts come in two main types:

Taxable Brokerage Accounts: Earnings such as dividends and capital gains are subject to taxes in the year they’re realized.
Managed Brokerage Accounts: These accounts are managed by financial professionals who make investment decisions on your behalf, often for a fee.

Best for: Investors seeking flexibility and access to a broad range of investment options.

2. Individual Retirement Accounts (IRAs)

IRAs are designed to help you save for retirement with tax advantages:

Traditional IRA: Contributions may be tax-deductible, and earnings grow tax-deferred. Withdrawals are taxed as income in retirement.
Roth IRA: Contributions are made with after-tax dollars, but withdrawals in retirement are tax-free, provided certain conditions are met.

Best for: Individuals looking to build retirement savings while taking advantage of tax benefits.

Photo by Ishant Mishra on Unsplash

Choose Your Investments

This is where things can get a little more complex, but I’ll keep it simple. Here are a few basic investment options:

Stocks: Represent ownership in a company. They can be volatile (think mood swings on steroids) but also offer the potential for high returns.
Bonds: Represent a loan to a company or government. They're generally less risky than stocks but also offer lower returns, but you won’t lose sleep at night.
Mutual Funds and ETFs: The lazy person’s guide to diversification, which is why they’re my personal favorite. These are like baskets of stocks or bonds, offering diversification and professional management.

I have a mix of all of the above, but my recommendations for most of my friends and family are low-cost index funds and ETFs. Last October, I wrote about my 2-ETF fund portfolio to get rich, which consists of the Vanguard S&P 500 ETF (VOO) and QQQ (Invesco QQQ Trust). For my family member, we are starting with just VOO since it is less volatile, and once they become more comfortable, we will likely move to the 2-ETF fund portfolio and add QQQ. Baby steps, people.

Take expert advice with a grain of salt

I do pay attention to finance news, but I also try to block out a lot of the noise. For last year, this is what the top analysts predicted for where the S&P 500 would end up:

•⁠ ⁠JP Morgan: 4,200

•⁠ ⁠Morgan Stanley: 4,500

•⁠ ⁠Bank of America: 5,000

•⁠ ⁠Goldman Sachs: 5,100

•⁠ ⁠Citi: 5,100

The S&P 500 ended up closing at 5,881.63, beating even the most bullish prediction from Goldman Sachs by 15%. The S&P 500 ended up surging 23% in 2024, building on the 24% gain it had in 2023. However, JP Morgan and Morgan Stanley predicted the S&P 500 to dip last year, while Goldman Sachs, Bank of America and Citi only predicted a 5-7% gain. If you stayed out of the market last year, you might have missed out on some pretty nice returns. So while it’s great to stay educated, at times you also need to block out the noise.

Start Small and Stay Consistent (Rome Wasn't Built in a Day, and Neither Is a Fortune)

You don't need to invest a huge lump sum to get started. Even small, regular contributions can add up over time thanks to the magic of compounding. With this new account, we have set up an automatic monthly contribution to VOO.

Conclusion

Investing doesn't have to be scary or complicated. It’s more like assembling IKEA furniture: frustrating at first, but satisfying when it all comes together. Dip your toes in the market, and before you know it, you’ll be the friend casually mentioning your "investment strategy" at brunch (humble brag included). It’s not about being perfect — it’s about showing up and taking that first step.

IRA and 401K Changes Coming, Year-end Tax Strategies

Raj Giri — Mon, 09 Dec 2024 16:20:42 GMT

Introduction

Photo by Kelly Sikkema on Unsplash

As I’ve noted in the past, I am a huge proponent of ROTH IRA and 401K accounts. You can read my newsletter about the benefits of ROTH IRAs here, and how to invest in them even if your income is too high. Also, you can check out my newsletter on 401Ks at this link. In this issue, I discuss some changes coming to retirement accounts in 2025.

There are also still a few weeks to make last-minute moves to save money on taxes, and in this newsletter, I go over some of the things I make sure to do as the year comes to a close.

A quick reminder that this is not financial advice, just myself sharing my strategies, investments, stocks, index fund strategies, what I'm buying, and where I plan to take those investments. Everyone’s financial goals are different. No financial decisions should be made solely on this newsletter, which is for informational and entertainment purposes only and is not intended to be a substitute for advice from a professional financial advisor or qualified expert.

Also, if you found this newsletter helpful, please share it with one friend who might find it useful by using the button below.

Photo by Yiran Yang on Unsplash

Retirement Plan Changes And Notes For 2025

The contribution limit for traditional and ROTH IRAs in 2025 is $7,000, the same as in 2024. Individuals aged 50 or older can make a catch-up contribution of $1,000, bringing the total contribution to $8,000.

However, the contribution limit has changed for employees who participate in 401(k), 403(b), and most 457 plans, as well as the federal government's Thrift Savings Plan. Before, the limit was $23,000 if you’re under 50. Starting in 2024, that increases to $23,500, a whopping $500 increase—don’t spend it all in one place!

For employees 50 and over, the catch-up contribution limit remains $7,500. So with the new limit of of $23,500, you add that $7,500, and the contribution limit is $31,000 for employees 50 and up.

You can read more about changes for 2025 on the IRS’ official website at this link.

Photo by Andre Taissin on Unsplash

Year-End Tax Strategies

As the year winds down, it’s the perfect time to review your finances and make strategic moves to lower your 2024 tax bill. Here’s a roundup of some essential year-end tax strategies that I consider:

Maximizing 401Ks. The goal here is to pay your future self. If you have a 401K or other employer-sponsored account, you generally have until the end of the year to make your final contributions. Usually, you have to contact your employer if you want to change your contribution amount to reach your limit. For 2024, you can contribute up to $23,000 (or $30,000 if you're 50+ with catch-up contributions).
Contribute to an HSA to save on medical expenses and reduce taxable income. The maximum H.S.A. contribution for the 2024 tax year is $4,150 for single coverage and $8,300 for family coverage with an additional $1,000 catch-up contribution if age 55 or older. Procrastinators, rejoice! You have until April 15th to make those contributions for 2023.
If eligible, consider a traditional or Roth IRA contribution. For 2024, you can contribute up to $7,000 (or $8,000 if you're 50+). Like with HSA contributions, you have until April 15th to make those contributions for 2023.
Tax-loss harvesting is a strategy to sell investments that have lost money to reduce the amount of money you'll owe for income taxes. It’s a strategy to turn lemons into lemonade that many investors utilize at the end of each year. There have been studies showing that tax loss harvesting yielded almost an additional 1% annual return each year from 1928 to 2018. I personally am not selling any investments this year, but I did last year, and I detailed how I utilized tax-loss harvesting in this issue.
With tax loss harvesting, if you have losses in your investment portfolio, you might consider selling them to offset capital gains. While the 30-day wash sale rule prevents you from repurchasing the same or substantially similar securities, it doesn’t apply to gains. So, you could sell a profitable security, immediately reinvesting the proceeds in the same security. This maneuver allows you to realize your gain tax-free, maintain your original investment position, and potentially lower your future tax liability by increasing your cost basis.
If you’re 73 or older, ensure you’ve taken your RMDs from retirement accounts. Missing the deadline could result in hefty penalties.
Donations to qualified charities can provide a tax deduction. Consider gifting appreciated assets directly to charity can provide significant tax benefits. Don’t forget to get receipts for contributions over $250.
Update your W-4 or quarterly payments. If you’ve had significant life changes in 2024—like a new job, marriage, or major purchase—ensure your tax withholding or estimated payments reflect your current situation to avoid surprises.
Consult a tax professional. These are just some of the major items I look at every year, there are many, many others. Tax laws are complex, and 2024 has seen some updates, including the IRS’s adjusted tax brackets for inflation. A professional can help tailor strategies to your unique financial situation.

Conclusion

While taxes may not be the most exciting topic, every dollar saved is another step toward your financial goals. Remember, these are just a few strategies to consider. It’s essential to consult with a tax professional to tailor a plan that meets your specific financial needs and goals. But act as soon as you can to ensure you’re making the most of available tax breaks before the December 31 deadline.

Revising My S&P 500 "6000" Benchmark, Does The Election Change Anything?

Raj Giri — Wed, 13 Nov 2024 23:47:58 GMT

Introduction

Photo by Yashowardhan Singh on Unsplash

Last year, I explained my “4800 strategy”, which you can read here. In a nutshell, I set a fluid S&P benchmark and anytime I buy into an S&P 500 index fund under that benchmark, it’s basically on sale. Since then, the S&P 500 has crossed not only 4800, but it also passed 5000 shortly after. I reset the benchmark to 6000 in February, which was hit this week so it’s time to set a new benchmark.

I’ll also look at whether the recent stock market surge changes my investment strategies and a small change I am making following the election results.

Also, if you found this newsletter helpful, please share it with one friend who might find it useful by using the button below.

Photo by Tyler Prahm on Unsplash

The S&P 500 Crosses 6000. Resetting the benchmark.

I explained my benchmark strategy last year, which is essentially setting a fluid S&P 500 benchmark that I believe is achievable within the next couple of years. It’s something I found useful in the past when the market would be dropping. If my benchmark was 4800 as it once was, and the S&P 500 dropped to 4000, that would mean I’m buying at a 17% discount, so any dollar I put in that day will be up 17% when the S&P 500 eventually hit 4800.

The S&P closed at a record high of 6001.35 on Monday after hitting 5000 this past February, so a 20% gain in 9 months. I mentioned in my newsletter in February when I reset my benchmark that I could see the S&P 500 hitting 6000 this year if the economy stayed bullish. It dropped slightly since Monday but is still hovering around the 6000 mark.

The official S&P 500 benchmarks used to be every 100, so 100, 200, etc. Once it hit 1000, it became every thousand, so 1000, 2000, etc. But every time it’s raised, the percentage to hit the next benchmark is less. For instance, to go from 1000 to 2000 is a 100% increase. But to go from 4000 (which the S&P 500 first crossed on April 1, 2021) to 5000 (which it crossed on February 9th) was a 25% increase, which took under 3 years. To go from 5000 to 6000, a 20% increase, took 9 months.

Now, it’s time to move on from “6000” and make friends with “7000.” How long until we get there? With a new administration and market unknowns, anything’s possible. It could be next year, or it could take years. Either way, if it never happens, we’ll have more significant issues than missing my 7000 goal.

Waiting For The Market To Cool Before Investing?

When the market is this hot, a lot of people have second thoughts about investing and think it’s better to wait until prices come down. I personally go by the age-old saying, “Time in the market trumps timing the market.” Basically, I prefer being in the game rather than standing on the sidelines.

Timing the market involves buying and selling stocks based on short-term predictions. Although it sounds tempting, accurately forecasting the market’s highs and lows is extremely challenging—even for the pros! Studies show that missing even a handful of the best-performing days in the market can dramatically reduce overall returns.

A study by JP Morgan revealed that from 2001 to 2021, missing the best 10 trading days reduced an investor’s returns from 9.5% annually to only 5.3%. Considering that the top 10 days only make up 0.2% of trading days over 20 years, the risk of being out of the market during these days is very high. The moral? Don’t miss out. Stay invested and enjoy the ride (but maybe buckle up).

Staying Careful

On the flip side of sitting a hot period out, it’s also important to maintain a level head and a long-term perspective when the market is on fire. I always try to stick to my investment framework, which helps avoid knee-jerk decisions driven by short-term hype. Even in a bull market, there are risks to consider:

Overvaluation: When stocks rise rapidly, they may become overvalued, leading to potential price drops in the future.
Market Corrections: Even the strongest bull markets experience periods of decline.
Emotional Investing: The excitement of a bull market can lead to impulsive decisions, such as buying high and selling low.

I believe that the best time to start investing was yesterday, but the second-best time is today. If you dollar-cost average your investments (you can read about dollar-cost-averaging here), it helps average out the cost and mitigate the impact of market volatility, regardless of whether it’s a bull or a bear market. Successful investing is a marathon, not a sprint. So regardless of how hot the market is right now, I’m going to continue to dollar-cost average in our various investment accounts.

VOO Update

For those new to this newsletter, for a real-world example of dollar-cost-averaging and how I utilize it, I bought the Vanguard S&P 500 ETF (VOO) which tracks the S&P 500 in July of 2022, and have been automatically investing in it every week (I do have VOO in several of our portfolios). You can read the details on how much I initially invested and how much I’m adding every week here.

Here is an updated look at how it’s performing after the initial $5000 investment on June 16th, 2002. As seen in the chart below, it has returned about 32% and is up $28,,039,90, bringing the total value to $115,869.48.

These returns are higher than the norm because last year was a hot year, and this year has been on fire so far as well. Over the last 30 years, the average annual return for the S&P 500 has been about 10%.

Will The Election Results Change My Investments?

As you can probably tell, my core investment strategy will not change. This century, the stock market has seen significant increases under every presidency except for George W. Bush’s. Just comparing from President Biden’s inauguration through the end of October 2024, the S&P 500 has been up 51%. The market under President Trump was also positive, as it was up 44.5% from Trump's inauguration through the end of October 2020. The S&P 500 was up 66.1% through the comparable time period for former President Obama. For former President George W. Bush, the index was down 15.8%.

The one area where I am making a minor change is my fixed-income portfolio. I had been regularly buying bonds and CDs when the Feds started raising interest rates in 2022. I had pretty much stopped once they started cutting rates in September, however, bond yields surged after Trump’s re-election last week. Bond yields pulled back a little today following the Federal Reserve’s inflation report, however, they remain high. I plan to buy another 20-year Treasury this month and will continue to add longer-term bonds as long as yields stay high.

Conclusion

The old saying about how “time in the market” beats “timing the market” has always proven to be true for me. The lesson I teach my daughters is to stay invested and continue buying at regular intervals, and never let a hot or cold market intimidate you.

Why Early Retirement (FIRE) Didn't Work For Me

Raj Giri — Tue, 05 Nov 2024 16:00:58 GMT

Photo by Anukrati Omar on Unsplash

Introduction

It’s been a month since my last newsletter. I got swamped with a new contract I was working on, which has since ended (although I still have a couple of others). I thought I had retired in 2022 at the age of 46 after I sold WrestlingINC.com, but that changed this year.

Many of you may have heard of the FIRE (Financial Independence, Retire Early) movement, which has gained significant momentum in recent years. In this newsletter, I’ll discuss why FIRE hasn’t worked for me… yet

Also, if you found this newsletter helpful, please share it with one friend who might find it useful by using the button below.

Photo by Fabian Blank on Unsplash

FIRE Explained

For decades, I’ve always had a goal to retire by 50. I have no idea why, it was just a nice, round number. I hadn’t heard of the FIRE movement until a few years ago, and I realized I had unknowingly been practicing many of the FIRE concepts.

The FIRE (Financial Independence, Retire Early) movement is based on the idea of achieving financial independence through disciplined saving, investing, and minimizing expenses. People pursuing FIRE aim to accumulate enough wealth so that they can live off their investments and retire early—much earlier than the traditional retirement age. The essence of FIRE revolves around high savings rates, frugal living, and smart investing.

There are different types of FIRE types, but the most common are:

Lean FIRE: Living on minimal expenses and retiring with a lower annual budget, usually between $30,000 - $50,000 / year.
Fat FIRE: Saving aggressively to enjoy a more luxurious lifestyle in retirement with more than $100,000 / year in passive income.
Barista FIRE: Achieving partial financial independence, with the flexibility to work part-time to cover remaining expenses. It’s kinda like the halfway house of FIRE, where you’re partially independent but might have to pick up a side gig to keep it going.
Coast FIRE: Saving aggressively early on to cover expenses for a set period, then reducing work and relying on investments to fund retirement. This strategy offers flexibility and reduced stress compared to traditional FIRE.

How To Achieve FIRE

Determine Your FIRE Number
The “FIRE number” is how much you must save to live off your investments. A common rule of thumb is to save 25 times your annual expenses. For example, if you expect to spend $40,000 a year in retirement, your FIRE number is $1 million.
Cutting Expenses
One of the pillars of FIRE is living below your means. This might mean downsizing, eliminating non-essential spending, and finding ways to enjoy life without high costs. Whether it's cooking at home, embracing DIY, turning your thermostat down to a brisk 60, or traveling frugally, minimizing spending allows for higher savings rates.
Maximizing Income
It’s not just about saving; earning more is also key. This can come from career advancement, side hustles, investment income, wrestling sites, Etsy shops—you name it. The more you earn, the more you can save, accelerating your path to FIRE.
Invest Wisely
Most FIRE advocates invest in low-cost index funds for their long-term growth potential and low fees (I recently revealed my two-fund ETF portfolio to get rich here). Others may diversify with real estate, dividend ETFs / stocks, or entrepreneurial ventures. The key is to find investment strategies that work for you and offer sustainable growth.

Photo by Priscilla Du Preez 🇨🇦 on Unsplash

Why FIRE Didn’t Work For Me

I’m a big proponent of the main concepts of FIRE (cutting expenses, maximizing income, and investing wisely). However, there were some major downsides once I was able to retire.

A lot of people picture early retirement being sipping Mai-Tais on a beach miles away from nowhere. But with having a wife and kids, that wasn’t very realistic. Not only do I love spending time with them, but there are other responsibilities like being the kids’ personal Uber driver. I couldn’t just say, “Peace out, I’m heading to Tahiti for a few weeks!”

Another big thing was… there was not much to do. None of my friends who live around me are retired. It’s like having a sick day every day while all your friends are still at school. It might be fun for a day or two, but it gets boring quickly. I was up at 6 am, reading a bit, dropping the kids to school, hitting the gym, maybe catching some YouTube videos, and, bam—it was barely lunchtime. After lunch, I felt like the dog in the photo above. There was nothing I liked enough to do daily. I could have played golf more, but I like golfing with friends and they were all working. I’m not a winter sports guy, so the winters were extra boring. I was slowly becoming a professional Netflix binger.

I went through a year and a half trying to make it work, but finally threw in the towel this past January and started doing some consulting. I’m not working full-time, but close enough. Maybe once the kids are both in college, I’ll take the full plunge. But for now, FIRE is on hold.

Other Disadvantages Of FIRE

In addition to boredom, there are also some other potential downsides of FIRE:

Strict Lifestyle Constraints: Achieving FIRE often requires aggressive saving and significant lifestyle sacrifices, which can lead to burnout, social isolation, and reduced quality of life if not carefully balanced. If that’s your thing, more power to you. But for a guy like me who enjoys the occasional latte or trip to a restaurant without checking the coupon apps, it can be a struggle.
Market and Inflation Risks: FIRE depends on investment returns and low inflation to maintain wealth over decades, making it vulnerable to economic downturns, high inflation, and unpredictable medical costs which can quickly turn FIRE into FIZZLE.
Unexpected Life Events: Retiring early with a fixed budget might not account for unforeseen expenses like health issues, family support needs, market shifts, or a surprise wedding for one of the kids, which can create a financial strain or force a return to the workforce.

Conclusion

The FIRE movement does have some solid principles—saving money, investing, and avoiding unnecessary expenses. But unless you’ve got a lineup of hobbies or a nomadic itch, it might feel like a whole lot of “what now?” once you reach that magical number.

My 2 Fund Portfolio To Get Rich

Raj Giri — Thu, 03 Oct 2024 13:04:15 GMT

Photo by Tyler Prahm on Unsplash

Introduction

I started this newsletter last year to provide a real-world example of how sticking to basic investing principles over time can pay off. I also started a separate Vanguard S&P 500 ETF (VOO) investment specifically for this newsletter to show exactly how it performs in today’s market. During that time, I’ve revealed my stock investment portfolio, my ETF portfolio, and my fixed income portfolio. In this newsletter, I’ll reveal my IRA account portfolio, which consists of just two ETFs.

Also, if you found this newsletter helpful, please share it with one friend who might find it useful by using the button below.

Photo by Anne Nygård on Unsplash

IRA Account Portfolios: VOO & QQQ

Over the years I’ve had several types of IRA accounts, with SEP-IRAs, Traditional IRAs, and ROTH IRAs.

After years of doing conversions and rollovers, I currently have a Traditional IRA (with no balance, used for ROTH conversions), and a ROTH IRA. Every year I contribute to my Traditional IRA and then do a backdoor conversion for the full amount to my ROTH.

My wife currently has a Traditional IRA and a ROTH IRA. In all of these accounts, we have two ETFs with the same weighting: 50% Vanguard S&P 500 ETF (VOO) and 50% Invesco QQQ Trust (QQQ, which mirrors the Nasdaq 100).

By investing in these two ETFs, half of the portfolio is already matching the market with VOO, since it mirrors the S&P 500 and its long-term average return is typically around 10% annually. However, by having the other half of the account in QQQ, it has historically outperformed the market, especially in periods of rapid tech innovation and adoption. Over the past decade (2013-2023), QQQ has averaged around 18-20% annual returns.

Here’s a quick look at both ETFs.

Vanguard S&P 500 ETF (VOO)

VOO is designed to mirror the performance of the S&P 500, one of the most widely followed indexes in the world. This index consists of the 500 largest publicly traded companies in the U.S. and serves as a benchmark for the overall health of the stock market.

Key Features:

Diversification: VOO provides exposure to a wide range of industries, from tech to healthcare to consumer goods. It’s an excellent choice for those who want broad market exposure.
Lower Risk: Because it holds a wide range of companies, VOO is generally considered less volatile than more concentrated ETFs.
Low Fees: Vanguard is known for offering low-cost ETFs. VOO’s expense ratio is just 0.03%, meaning you keep more of your returns over the long term.
Solid Performance: Historically, the S&P 500 has delivered an average annual return of around 10%, making it a reliable choice for long-term growth.

QQQ (Invesco QQQ Trust)

QQQ tracks the performance of the Nasdaq-100 Index, which is heavily weighted in the technology sector. While this ETF includes some non-tech companies, it’s primarily known for its exposure to tech giants.

Key Features:

Tech Focused: QQQ provides access to leading companies in technology, such as Apple, Microsoft, and Nvidia. As tech continues to drive innovation, QQQ investors benefit from the growth of the sector.
Higher Growth Potential: With its tech-heavy portfolio, QQQ has the potential for higher returns compared to broader market ETFs like VOO, though it comes with higher volatility.
Innovation and Disruption: QQQ includes many companies at the forefront of disruptive technologies such as artificial intelligence, cloud computing, and e-commerce, making it an attractive option for investors seeking exposure to growth sectors.
Competitive Fees: The expense ratio for QQQ is 0.20%, higher than VOO, but still low compared to actively managed funds.

Why Invest In Both

By investing in both VOO and QQQ, I take advantage of two complementary strategies:

VOO for Stability: As a broad market ETF, VOO provides diversification across sectors, helping mitigate risk during market downturns. It’s a foundation for steady, long-term growth.
QQQ for Growth: QQQ’s focus on tech and high-growth companies adds a layer of aggressive growth potential to your portfolio. While it may experience more volatility, its performance has historically outpaced the S&P 500.

Changes In The Future

I’m still in my 40s… barely. As I get closer to retirement, I plan on changing the weighting of these portfolios. Since I already have separate accounts for fixed income and ETFs, I’m not planning to add any bonds or high-dividend ETFs to my IRAs, but I will likely change the mix to 60% VOO / 40% QQQ when I’m in my mid-50s, then 70% VOO / 30% QQQ in my 60s, etc.

For my daughters (ages 13 and 15), I’m doing the opposite. They both have ROTH IRAs with small balances, and those are weighted 70% QQQ / 30% VOO and I hope they update those splits as they get older.

Conclusion

Over time, the combined VOO and QQQ portfolio has consistently outperformed the S&P 500 alone, offering higher long-term returns with moderate added volatility. The key driver of outperformance has been the tech sector's success, captured by QQQ. However, it’s important to remember that this portfolio carries more risk, particularly during periods of tech sector underperformance. While VOO and QQQ can be excellent building blocks for an investment portfolio, it's essential to consider your risk tolerance and investment goals.

This Newsletter's VOO ETF Cracks 100K, When Will It Hit $1 Million?

Raj Giri — Mon, 23 Sep 2024 13:01:20 GMT

Photo by Giorgio Trovato on Unsplash

Introduction

The S&P 500 and Dow closed at a record high last week after the Fed announced that they are cutting rates by 50 basis points. On Thursday, the S&P 500 rose 2.5% to close at 5,713.64. The S&P 500 had a small dip on Friday while the Dow added another 38.17 points, or 0.09%, to close at 42,063.36. Remember last year when I was talking about 4,800 being a good benchmark to use when investing when the market is falling? The S&P 500 was at 4,264 the day that the newsletter went out, so it’s up 34% from that day.

With that, our VOO investment for this newsletter is close to a new high, so I thought it would be a good time to give an update. I also go into more detail below about why I often recommend investing in an S&P index fund to friends and family, depending on their investment goals.

Also, if you found this newsletter helpful, please share it with one friend who might find it useful by using the button below.

Photo by Anne Nygård on Unsplash

VOO Investment Recap

For newer subscribers of this newsletter, here’s a recap of the VOO investment I’ve been making for this newsletter.

When I started the idea of this newsletter in 2022, I thought it would be a good idea to give a real-world example of what automatically investing in an S&P 500 index fund can do. The S&P 500 is a stock market index that tracks the performance of 500 of the largest publicly traded companies in the U.S. These companies span across multiple sectors, from technology to healthcare, finance, and energy. Think of big names like Apple, Microsoft, Amazon, and Johnson & Johnson. Together, they represent a significant portion of the U.S. economy, making the S&P 500 a strong indicator of overall market health.

There are so many finance YouTube channels and newsletters telling you how much you could have made if you started investing in the market X years ago, so I thought it would be cool to do a real example for the newsletter since I’ve been doing it for decades in my other accounts with great success. So specifically for this newsletter, I decided to buy and dollar-cost-average (dollar-cost-averaging is explained in this newsletter) into the Vanguard S&P 500 ETF (VOO) which tracks the S&P 500.

The market was in turmoil in the summer of 2022. When I made the initial $5000 VOO purchase on June 16, 2022, the S&P 500 was down 24% for the year. Since then, I automatically bought more shares weekly, originally $500 / week before upping it to $750 / week on May 11, 2023. I also re-invest the dividends. I don’t make any withdrawals or additional investments into it. You can read more about the details of the VOO investment here.

VOO Hits 100K

It’s been 2 1/4 years since the initial investment and it recently crossed $100,000. With the market gains last week, the VOO investment is up 28%. The cost basis total (including dividends) is $82,249.98, with the current value sitting at $105,059.94, a $22,809.96 gain so far.

When Will It Hit A Million?

Historically, the S&P 500 has delivered an average annual return of about 10% before adjusting for inflation. It should be noted that this is an average over many decades. The actual return in any given year can vary significantly. For example, some years see double-digit growth, while others experience negative returns, especially during market corrections or recessions. Despite this volatility, the long-term trend has been upward.

So using the Compound Interest Calculator at Investor.gov, starting with the current value of $105,059.94, assuming a 10% average annual return, and keeping our investments at $750 / week (which averages to $3250 / month factoring in 52 weeks), this investment will be $1,022,463.79 after 11 years.

As always, it’s important to remember that past performance is not indicative of future results, and there will be years with positive returns and years with negative returns.

Why Invest In An S&P 500 Index Fund

VOO is just one of many ETFs that track the S&P 500, with some others including SPDR S&P 500 ETF Trust (SPY) and iShares Core S&P 500 ETF (IVV). There are also great index funds that track the S&P 500 like Fidelity 500 Index Fund (FXAIX, which I invest in), Vanguard 500 Index Fund Admiral Shares (VFIAX) and the Schwab S&P 500 Index Fund (SWPPX). When I choose an index fund, I look at the following:

Expense Ratio: I try to look for funds with low expense ratios.
Tax Efficiency: I prefer tax-efficient funds like ETFs, that minimize capital gains taxes.
Tracking Error: I look at the short-term and long-term returns and make sure that the fund closely tracks the S&P 500 index.

While I often recommend S&P 500 ETFs and index funds to some friends and family, it’s not something I blindly recommend to everyone as it depends on a person’s investment objectives. Below are some of the reasons why a good portion of my portfolio is dollar-cost-averaging in S&P 500 ETFs and index funds:

Diversification: By investing in an S&P 500 index fund, I’m automatically investing in a wide range of companies across various industries. This helps to mitigate risk.
Low Costs: Index funds typically have lower expense ratios compared to actively managed funds, meaning more of the investment goes towards buying stocks.
Historical Performance: Over the long term, the S&P 500 has generally outperformed most actively managed funds.
Ease of Use: Investing in an S&P 500 ETF is straightforward. You can buy and sell shares just like any other stock.

Conclusion

Practical Money: The Fed Cuts Interest Rates, Changes I'm Making

Raj Giri — Wed, 18 Sep 2024 20:55:31 GMT

Introduction

The Fed announced today that they're cutting rates by 50 basis points to a range between 4.75%-5%. The last time the Fed cut rates by this much was in 2008 during the financial crisis. They also indicated cuts of 50 more basis points by the end of the year.

The market initially reacted positively to the news, before ending the day down with the DOW dropping 0.25%. In this newsletter, I’ll look at what the Fed’s interest rate cuts mean for the economy, and how it will impact my investments.

Also, if you found this newsletter helpful, please share it with one friend who might find it useful by using the button below.

Photo by Austin Distel on Unsplash

What The Rate Cuts Mean

The Federal Reserve’s decision to lower interest rates is largely influenced by softer-than-expected inflation and concerns over a potential economic slowdown. Despite efforts to tame inflation with higher rates in recent years, inflation has gradually moderated, giving the Fed room to pivot. Additionally, ongoing concerns about slower global growth have weighed on the decision.

With rate cuts, the Fed aims to stimulate borrowing, investment, and consumer spending to counteract these headwinds and ensure a “soft landing” for the economy rather than a deep recession.

Here are some potential impacts of the rate cut:

Economic Stimulus: By making borrowing cheaper, the Fed aims to encourage businesses to invest and consumers to spend.
Consumers: Can expect cheaper loans, credit card rates, and mortgages, though savers will see lower returns on deposits.
Job Growth: Increased economic activity can lead to higher demand for goods and services, creating more jobs.
Investors: Lower interest rates can make stocks more attractive to investors, potentially driving up market prices. However, long-term fixed-income returns could suffer with lower bond yields and money market interest payments.

Photo by Jean-Luc Picard on Unsplash

How The Cuts Affect My Investments

In the past, I’ve revealed my stock market portfolio (which is primarily for growth), as well as my ETF portfolio (primarily for dividend income with some growth). Earlier this month, I also revealed my fixed-income portfolio for monthly income.

How I invest in my stock portfolio will remain unchanged. I will continue to buy and sell as needed, and try to buy at least a couple of times per month. My ETF account will mostly be unchanged. I will continue to dollar-cost-average weekly in my ETFs. The one change will be transferring funds from my fixed-income portfolio into this account. Which brings me to…

The biggest change will be to my fixed-income portfolio. I had been laddering a mix of treasuries, corporate bonds, agency bonds, and CDs over the years to generate monthly income (which is explained here). By the time we see the next rate cut, I plan to stop buying any more bonds or CDs unless there is a really attractive rate.

Many of the agency bonds, CDs, and corporate bonds that I own are callable, which means the issuer can redeem them before maturity. Earlier this month one of my 5-year agency bonds that was set to mature in 2028 - Federal Home Loan Bank System (FHLB) - was called. I received my full initial investment and a final partial interest payment, in addition to a full interest payment made back in June. As interest rates drop, I expect more of these to get called (why would they pay higher interest when they can get the same loan at a lower rate?), and I will transfer those funds to my ETF portfolio. With those funds, I will purchase more shares of my high-dividend investments like SCHD, JEPI, JEPQ, SPYD, and O.

Conclusion

The impact of a rate cut can vary depending on a variety of factors, including the overall health of the economy, consumer confidence, and global economic conditions. It does affect my investment plans, and I believe it’s important for people to stay informed about how the Fed's monetary policy may affect their personal finances. It’s always beneficial to consult with a financial advisor to discuss how rate cuts might impact your specific situation.

If you haven’t already, please subscribe to this newsletter below and never miss an update:

Practical Money: Beat Treasury Yields With Agency And Corporate Bonds

Raj Giri — Mon, 09 Sep 2024 14:58:10 GMT

Photo by Freddie Collins on Unsplash

Introduction

The Federal Reserve is expected to start a series of interest rate cuts at the U.S. central bank’s meeting next week. With these cuts, rates for things like credit cards and mortgage rates will come down. However, it also means lower returns on savings accounts, CDs, and other savings instruments. You’ll already see lower yields for CDs and bonds as the upcoming cuts are already being factored in.

In my last newsletter, I discussed investing in treasury bonds and CDs as part of my fixed-income portfolio. In this newsletter, I’ll discuss investing in agency and corporate bonds, which typically offer higher yields than treasury bonds and CDs.

One important thing to note: most agency and corporate bonds are callable, which means the issuer can redeem them before maturity. Just last week, one of my 5-year agency bonds that was set to mature in 2028 - Federal Home Loan Bank System (FHLB) - was called. I will receive my full initial investment, however, there will be no more interest payments outside of the final partial one I’ll receive this week (I did receive one full interest payment back in June).

A quick reminder that this is not financial advice, just myself sharing my strategies, investments, stocks, index funds, what I'm buying, and where I plan to take those investments. Everyone’s financial goals are different. No financial decisions should be made solely on this newsletter, which is for informational and entertainment purposes only and is not intended to be a substitute for advice from a professional financial advisor or qualified expert.

Also, if you found this newsletter helpful, please share it with one friend who might find it useful by using the button below.

Agency Bonds vs. Corporate Bonds

Bonds are debt instruments issued by governments, corporations, or other entities to raise capital. They essentially represent a loan from an investor to the issuer, who promises to repay the principal amount at a specified maturity date and often pay interest periodically. They are considered a lower-risk investment compared to stocks, but even among bonds, risks and returns can vary widely.

Two common types of bonds that I invest in are agency bonds and corporate bonds.

Agency Bonds

Issued by government-sponsored enterprises (GSEs) like Fannie Mae, Freddie Mac, and Ginnie Mae, agency bonds are backed by the U.S. government. This backing provides a strong guarantee of repayment, making them generally considered safer than corporate bonds.

Key characteristics of agency bonds:

Government backing: While most agency bonds are seen as safe, GSE-issued bonds don’t carry the explicit full faith and credit guarantee of the U.S. government like U.S. Treasury bonds. In case of a major financial crisis, they could be at risk. While not as risk-free as U.S. Treasury bonds, they are considered safer than most corporate bonds.
Regular Income: Like all bonds, agency bonds provide regular interest payments, making them attractive to income-seeking investors.
Lower interest rates: Agency bonds typically offer lower yields compared to corporate bonds due to their lower risk profile.
Liquidity: Often highly liquid, especially those issued by major GSEs.

Photo by Adeolu Eletu on Unsplash

Corporate Bonds

Issued by corporations, corporate bonds represent debt obligations of these entities. These bonds typically offer higher yields than government or agency bonds due to their increased risk profile.

Types of Corporate Bonds:

Investment-Grade Bonds: Issued by companies with high credit ratings, these bonds offer lower yields but come with less risk. All the corporate bonds that I’ve purchased fall into this category.
High-Yield (Junk) Bonds: These are issued by companies with lower credit ratings and thus come with a higher risk of default, but they offer much higher yields. I personally have not ever bought a junk bond.

Key characteristics of corporate bonds:

Credit risk: Companies, especially those issuing high-yield bonds, can default on their debt, leading to loss of principal.
Higher interest rates: Generally offer higher yields than agency bonds to compensate for the increased credit risk.
Interest Rate Risk: As with agency bonds, rising interest rates can reduce the value of existing corporate bonds.
Diverse Options: With corporate bonds, investors can choose from a wide range of industries, allowing for sector-specific investments.
Liquidity: Can vary widely depending on the issuer's size, credit rating, and market conditions.

Choosing Between Agency and Corporate Bonds

Deciding whether to invest in agency or corporate bonds depends on a person’s investment goals and risk tolerance.

Risk-averse investors: May prefer agency bonds for their lower credit risk and potential for stable returns.
Risk-tolerant investors: May be drawn to corporate bonds for their higher yields and potential for greater capital appreciation.

Important Considerations

Credit rating: A bond's credit rating, assigned by agencies like Moody's and S&P Global, indicates its creditworthiness. Higher-rated bonds generally have lower yields.
Maturity: The length of time until the bond matures affects its price sensitivity to interest rate changes. Longer-maturity bonds are typically more sensitive.

Below are things to consider when deciding to invest in Agency or Corporate bonds:

My Fixed Income Portfolio

Once again, here is my fixed income portfolio that I posted in the last newsletter. While the treasury bonds and CDs have rates ranging from 4-5.3%, the agency bonds range from 5.4%-6%, while the corporate bond yields range from 6-7.1%.

January: 3-Year Treasury Note
February: 20-Year Treasury Bond
March: A mix of 7-year Treasury Notes, 5-year CDs, and a 15-year Agency Bond
April: 7-Year Treasury Note
May: 20-Year Treasury Bond
June: 5-Year CD
July: A mix of two 5-year CDs and a 15-year Agency Bond
August: One 20-Year Treasury Bond and one 5-Year CD
September: 5-Year CD
October: 1-Year CD maturing in October. I plan to buy a longer-term CD or bond after it matures.
November: 20-Year Treasury Bond
December: A mix of a 3-year Treasury Note, 5-year corporate bonds, 5-year agency bonds, and CDs with ranging maturities. As noted, one of my 5-year agency bonds was called last week.

Conclusion

Both agency and corporate bonds can play a role in building a well-rounded portfolio. Understanding the balance between risk and return is key to leveraging these instruments effectively. Agency bonds may offer security and a modest income stream, while corporate bonds could present opportunities for higher returns, albeit with greater risks. Instead of choosing between the two, I invest in both.

That’s it for this week! Just a reminder that no financial decisions should be made solely on this newsletter, which is for informational and entertainment purposes only and is not intended to be a substitute for advice from a professional financial advisor or qualified expert.

If you haven’t already, please subscribe to this newsletter below and never miss an update:

Practical Money: Time To Buy Bonds?, My Fixed Income Portfolio

Raj Giri — Tue, 03 Sep 2024 15:34:15 GMT

Introduction

With inflation continuing to cool, the Federal Reserve is expected to begin cutting interest rates this month, with more cuts expected in the near future.

Interest rate cuts lower the cost of borrowing money, which means you should see things like credit card and mortgage rates come down. However, it also means lower returns on savings accounts, CDs, and other savings instruments. Lower interest rates result in bond yields dropping since stocks become more attractive than bonds.

With interest rates expected to drop soon, it might be time to load up on treasuries and CDs while their yields are still high. In this newsletter, I’ll discuss investing in bonds and CDs and reveal my fixed-income portfolio, which consists of treasury notes and bonds, CDs, agency bonds, and corporate bonds (I’ll discuss agency and corporate bonds in a future newsletter).

Also, if you found this newsletter helpful, please share it with one friend who might find it useful by using the button below.

Photo by Boston Public Library on Unsplash

Understanding Treasury Bonds

Treasury bonds are issued by the U.S. government and are considered one of the safest investments available. They offer a fixed interest rate and a guaranteed return of principal at maturity. Treasury bonds are typically long-term investments, with maturities ranging from 2 to 30 years.

Key Benefits of Treasury Bonds

Safety: Backed by the full faith and credit of the U.S. government.
Predictability: Offer a fixed interest rate, providing a known return.
Liquidity: Can be bought and sold in the secondary market.
Tax Advantages: Interest from Treasury bonds is generally subject to federal income tax but is exempt from state and local taxes.

Understanding CDs

CDs are time deposits offered by banks and credit unions. They offer a fixed interest rate for a specified term, and the principal is returned at maturity. CDs are generally shorter-term investments than Treasury bonds, with maturities ranging from a few months to several years.

Key Benefits of CDs

Safety: Insured by the Federal Deposit Insurance Corporation (FDIC) up to $250,000 per depositor, per bank.
Predictability: Offer a fixed interest rate, providing a known return.
Liquidity: Some CDs offer early withdrawal options, but may incur penalties.
Convenience: Easy to open and manage.

How I Invest In Bonds And CDs, The Laddering Strategy

The decision between Treasury bonds and CDs depends on your individual financial goals and risk tolerance. For me, for long-term secure investments with a fixed return, I go with Treasury bonds. For shorter-term investments with a guaranteed return, I might pick CDs depending on the yield.

Until a few years ago, I had never bought a bond or CD due to their low yields. In 2022 with interest rates rising, I started laddering bonds and CDs. Laddering is a strategy to purchase multiple bonds and CDs with staggered maturity dates, creating a "ladder" effect. Instead of investing all your money in bonds and CDs that mature at the same time, you spread it out over a range of maturity dates.

Let's say you invest $10,000 in five bonds with maturities of one to five years.

Year 1: The one-year bond matures. You reinvest the $10,000 into a new five-year bond.
Year 2: The two-year bond matures. You reinvest the $10,000 into a new five-year bond.
Year 3: The three-year bond matures. You reinvest the $10,000 into a new five-year bond.
And so on...

Each year, when a bond matures, you get back the $10,000 principal plus the interest. By the end of the five years, you can start taking the income or you can reinvest and create a new ladder of bonds and CDs. It provides a predictable income and reduces risk, all while allowing flexibility in response to changing interest rates. With this strategy, I have interest income from bonds and CDs every month.

My Fixed Income Portfolio

Below is what I have invested each month. Note that most of these assets listed pay interest semiannually, so each month has a minimum of two interest payments. All of these have rates ranging from 4% -7.1%. Also note that Treasury notes and Treasury bonds are very similar, with the primary difference being in their maturity periods. Treasury notes have maturities of 2 to 10 years, while Treasury bonds have maturities of 20 to 30 years. Both notes and bonds pay interest every six months until they mature.

Also, I only buy new issues of treasury notes and bonds. I would be buying 20-year Treasury Bonds every month if I could, however, they are only issued four times per year (typically in the first half of February, May, August, and November).

Conclusion

Treasury bonds and CDs offer a safe and reliable way to invest. By understanding the key benefits and drawbacks of each option, you can make an informed decision that aligns with your financial goals.

No financial decisions should be made solely on this newsletter, which is for informational and entertainment purposes only and is not intended to be a substitute for advice from a professional financial advisor or qualified expert.

That’s it for this week! If you haven’t already, please subscribe to this newsletter below and never miss an update:

Practical Money: Stock Trades I've Made, Updated Portfolio

Raj Giri — Thu, 15 Aug 2024 21:41:49 GMT

Photo by Nicholas Cappello on Unsplash

Introduction

It’s been almost a year since I posted my stock portfolio, which you can view here. For the most part, my portfolio has stayed the same although I have continued to add to my positions. However, I have completely sold a few of those stocks and added some others. In this newsletter, I’ll reveal my updated portfolio and why I dropped some of my stocks.

Also, if you found this newsletter helpful, please share it with one friend who might find it useful by using the button below.

What A Wild Ride

A lot has happened since my last newsletter, which was just at the beginning of last week. That newsletter went out last Monday after the S&P 500 dropped 3% for its worst day in nearly two years while the Nasdaq composite plummeted 3.4%. At one point that morning the Nasdaq was down 6%!

The next day I went on a buying spree and added more to all of my stock positions (except for Tesla), and also added more to most of my ETFs even though my automatic ETF investments were going through days later on that Thursday.

Since then, the market more than rebounded. The S&P 500 over the past 5 days is up 4.5%, while the Nasdaq is up 6%. For the year, the S&P 500 is up 17% and is only 2% off its peak, while the Nasdaq is up 19% for the year and is almost back at its peak.

That being said, I’ve noted that in most of my accounts, I invest automatically weekly or monthly, so I don’t worry about market fluctuations. However in my stocks account, I manually invest. I try to add to my positions at least a couple of times per month. And if there is a bad week or month, I do try to buy a little more. With tech stocks taking a hit the last month, I decided to buy more shares of most of my stocks several times. I have gotten good at not freaking out when the market is in a downturn, and looking at it as a buying opportunity.

Below is a list of the stocks I’ve bought and sold since my last update last year, and a brief explanation for each.

Stocks I’ve Sold

Realty Income (O), Exxon (XOM)

I noted in my newsletter about tax loss harvesting strategies last December that I sold these stocks. I sold both positions entirely and used the losses to offset my capital gains on my taxes last year. As is the case with any stock I sell, I immediately use those proceeds to purchase something else to ensure I stay in the market. In this case, I used the proceeds from both to buy more shares of the Invesco NASDAQ 100 ETF (QQQ) index fund. With interest rates likely to start coming down beginning in September, I am looking to possibly get back into Realty Income (O) in the coming weeks.

Photo by Charlie Deets on Unsplash

Tesla (TSLA)

Tesla is one of my oldest stocks and until this year, I have never sold any shares. I am still keeping Tesla for the long haul, however, I decided to sell some shares in July when the stock was around $250, and used the proceeds to purchase more Microsoft shares (more on that below).

Nike (NKE)

In January, I sold all my shares of Nike. It only made up 1% of my stock portfolio and it had returned around 30%, but I felt it wasn’t worth owning anymore. I used the proceeds to add to my other positions in my portfolio.

Stocks I’ve bought

CAVA (CAVA)

CAVA is a fast-food chain that is basically like a Chipotle for Mediterranean cuisine. It was founded in 2006 and has grown significantly since its inception. As is the case with most of my stocks, I try to buy companies that I’m familiar with and use. I’ve tried CAVA several times and it’s quickly become one of my favorite fast-food restaurants. Have you tried their hummus? It's like a hug in a bowl. However, the nearest one for me is about 10 miles away, so I see the growth potential. I first bought the stock in May and have added to it several times. It is up about 9% as of this writing, and I plan to hold it for the long haul and keep buying more shares.

Microsoft (MSFT)

Microsoft needs no introduction. I’ve been close to buying Microsoft stock many times over the decades, but I felt that since I owned a lot of Apple and Google, it would be better to buy into other companies to diversify. I finally caved and bought Microsoft in May. I have since bought more shares several times. With tech stocks taking a hit the last month, it is down a little. I plan to continue to buy more shares and hold on to this stock long-term.

Updated Portfolio

With those trades, below is my updated portfolio as of the end of the day on Thursday, August 15th.

Conclusion

It’s important to note that all investment decisions should be based on your research and judgment. My stock decisions are based on my research and judgment No financial decisions should be made solely on this newsletter, which is for informational and entertainment purposes only and is not intended to be a substitute for advice from a professional financial advisor or qualified expert.

That’s it for this week! If you haven’t already, please subscribe to this newsletter below and never miss an update: