Here are the stock market holidays for 2024:

• New Years Day: Monday, Jan. 1st (observed)
• Martin Luther King Jr. Day: Monday, Jan. 15th
• President’s Day: Monday Feb. 19th
• Good Friday: Friday, March 29th
• Memorial Day: Monday, May 27th
• Juneteenth National Independence Day: Wednesday, June 19th
• Independence Day: Thursday, July 4th
• Labor Day: Monday, Sept. 2nd
• Thanksgiving Day: Thursday, Nov. 28th
• Christmas: Wednesday, Dec. 25th

Stock market holidays and early closings

In 2024, there are 10 days that the stock market closes and two days with early closings, limiting trading hours. During these holidays, traders and investors cannot buy or sell shares of companies listed on the stock exchange. The dates of these holidays are set far in advance.

Here are the U.S. stock market holidays and early closings recognized in 2024:

Bond market holidays and early closures

Similar to the stock market, the bond market observes several holidays throughout the year, during which the market is closed or has limited trading hours that affect your ability to purchase bonds. These holidays can impact trading activity, settlement dates, and other aspects of the bond market. In addition to observing the same holidays the NYSE and Nasdaq do, the bond market also closes on Columbus Day and Veterans day.

Here are the bond market holidays and early closings recognized in 2024:

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Stock market and bond market closing FAQ

What days is the stock market closed this year?

In 2024, the U.S. stock market is closed:

• Monday, Jan. 1st
• Monday, Jan. 15th
• Monday, Feb. 19th
• Friday, March 29th
• Monday, May 27th
• Wednesday, June 19th
• Thursday, July 4th
• Monday, Sept. 2nd
• Thursday, Nov. 28th
• Wednesday, Dec. 25th

Why is the stock market closed on Good Friday?

The stock market is closed on Good Friday due to both historical tradition and some practical considerations. While the initial reason for the closure was a religious observance, the lower trading volume and the desire for a long weekend break have made it a standard practice in modern times.

Is the stock market closed for Columbus Day?

No, the stock market is open on Columbus Day (Indigenous Peoples Day), which is on Oct. 14th, 2024. The bond market, however, is closed on Columbus Day.

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While this number can give you a general sense of how the stock market may perform over time, additional context is helpful for understanding what it means for your investments. 

First, keep in mind that the S&P 500 is a market index, not the stock market itself. It tracks the prices of the 500 largest U.S. companies, which make up 80% of the stock market’s total value. That’s why it’s considered a useful guide for tracking the performance of the stock market overall. 

Second, remember that the average stock market return is just that: an average of the market’s performance over many years. In any specific year, you’ll likely see a higher or lower return than the average. The value of your assets will also be impacted by inflation, the period of time your investment is in the stock market, and what assets you’ve invested in. 

It’s very difficult to predict exactly what your expected return will be in any given year. It’s even more difficult to predict the performance of a single investment. But if you’re investing for the long term, the average stock market rate of return can give you a sense of how you might expect your stock portfolio to perform over time. 

How are stock market returns measured?

Stock market indexes are commonly used to understand the stock market and its performance. In addition to the S&P 500, investors commonly look to the Dow Jones Industrial Average, which looks at 30 firms across industries, and the NASDAQ Composite, which looks at over 3,700 stocks listed on the NASDAQ exchanges, to judge market performance. These indexes reflect slightly different average rates of return because they each evaluate different collections of stock prices.

Average 5, 10, 20, and 30-year S&P 500 returns

If you look at the S&P 500’s historical annual returns by year, you’ll see that there’s quite a bit of variation from year to year. The last five years are a good example of why the average stock market return may not be a reliable indicator of market performance for any single year. For instance, 2022 brought a 19.44% decrease in performance, but 2021 saw a 26.89% increase. This is why the annualized return, which is the average return over a period of time, can be a more useful way to gain insight into the bigger picture of average stock market returns.

Factors that impact the stock market

Historically, the stock market has gone up in more years than it’s gone down. But the market’s performance is impacted by a number of factors in any given time period, including:

• Supply and demand
• The state of the economy 
• Inflation
• Interest rates
• Major world events like wars, unrest, and natural disasters
• Fluctuations in consumer spending

The stock market goes through a natural cycle of bear markets, which are market downturns, and bull markets, when returns tend to trend upward. Investors commonly watch these factors to recognize trends and attempt to predict potential market-wide performance. People might also watch these same factors on a micro level, focusing on how they may impact a particular business or sector they invest in. 

Average stock market returns and inflation

A 10% return on your investments won’t necessarily mean a 10% increase in the real-world value of your earnings. This is because inflation can cut into your money’s buying power. For example, the average inflation rate over the last 62 years was 3.8% per year. So, on average, an item that cost $100 in 1960 would cost about $1,004 in 2022.   

How does this apply to your investments? Say you invest $1,000, leave your money in the market for 10 years, and see a 10% rate of return on your investment; you would have earned $100 in returns. But depending on the inflation rate over those 10 years, your $100 may have less buying power when you sell your stocks than when you initially invested. It may be worth keeping in mind that the average stock market return tends to outpace inflation over time, which is one reason investors may see investing in the stock market as a hedge against inflation. 

The Bureau of Labor Statistics calculates inflation using the Consumer Price Index (CPI) by gathering spending data across a basket of commonly purchased goods and services. You can use a CPI Inflation Calculator to estimate the inflation rate over a specific period of time. 

Average stock market returns and market volatility

The stock market is volatile; stock prices are constantly rising and falling, sometimes dramatically. If you compare the market’s performance over two different periods of time, you’re likely to see that returns were impacted by what was happening in the world and the market during each period. 

In the last 30 years, for example, several events caused sharp changes in average market returns during specific eras, such as the “dot com bubble” burst in the 1990s, the “great recession” of 2007-2009, and COVID-19-related market upheaval in 2020. The overall stock market doesn’t need to experience a major crash or boom for volatility to impact the value of your assets.

What is a “good” stock market return?

What constitutes a “good” stock market rate of return depends on a variety of factors unique to each investor, including your financial goals, risk tolerance, and time horizon. For example, it’s common for younger investors to focus on securities that may have more risk in the short term but higher potential returns many years or decades down the road. On the other hand, investors who are closer to retirement may move money from more volatile assets to those with more overall stability, even if returns are lower. 

That said, many experts suggest that a 10% or higher rate of return is often considered “good” for stocks because it reflects or outpaces the average stock market return. After adjusting for inflation, a return of around 7% might be considered “good.”

For lower-risk investments, like government bonds, a return of 5% or higher might be considered a “good” return because investors see the benefits of stability as worth the trade-off for higher potential rewards. 

Maximizing returns with buy-and-hold investing

A buy-and-hold investing strategy is one way investors can take advantage of the stock market’s 10% average rate of return. This approach involves building a diverse portfolio and holding onto those investments for many years in order to ride out year-to-year market fluctuations.

Index funds can be a key component of this strategy, as they aim to mimic the performance of a broad market index. An index fund that tracks the S&P 500, for example, is likely to reflect the average stock market return reflected by that index.

Buy-and-hold investing also helps you take advantage of compounding. Compounding refers to multiplying your returns by continuously earning interest on the interest you’ve already earned. It’s another way to potentially magnify your earnings over time by simply leaving your money in the market. 

How to invest in the stock market

If you’re ready to start investing in stocks, the average stock market return is one concept that can help you understand the world of investing. You may also wish to familiarize yourself with other key stock market statistics as you build your knowledge. 

The good news is, you don’t have to become an overnight expert to dip your toes into investing. Stash’s emphasis on education empowers you to learn gradually, fostering financial confidence as you navigate your investing journey.

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In this article, we’ll cover:

• Characteristics of a bull market
• History of bull markets
• Bull vs. bear markets
• Considerations for a bull market

Characteristics of a bull market

Bull markets are typically a sign of investor confidence, a strong economy, high employment levels, and other positive economic indicators. The overall optimistic investor sentiment generally leads to high trading volumes and strong upward stock price trends, which is reflected by increases in broad market indexes.

• Positive investor sentiment: Investors have widespread confidence in the stock market and the future of the economy overall.
• Strong upward price trend: Asset prices continue to increase, with each peak (high) and trough (low) reaching progressively higher values.
• High trading volume: Investors trade more securities, indicating higher demand and lower volatility.
• Positive economic indicators: The economy shows signs of strength, such as low unemployment levels, increased consumer and retail spending, higher gross domestic product (GDP), and steady inflation.
• Sustained increases in broad market indexes: Broad market indexes such as the S&P 500 or the Dow Jones Industrial Average increase at least 20% over two months or more.

History of bull markets

Originally referring to a speculative purchase made with the expectation that stock prices would rise, the term “bull” was later applied to the person making such purchases. The animal imagery caught on in the 18th century, and we’ve associated the term “bull market” with the stock market ever since. Bull markets can last anywhere from a couple of months to several years. They typically last longer and occur more frequently than bear markets.  

The longest bull markets in history

While the average length of a bull market is 2.7 years, the timespan of such a period varies widely, as does the associated market growth. Historically, bull markets have ended due to social or political unrest, credit crunches, inflation, recession, asset bubble unwinds, or other significant events. The three longest-running bull markets in U.S. history include the post-WW2 boom, the 1990s boom, and the Great Recession recovery.

• Post-WW2 boom: Began in June 1949 and lasted 86 months. By the end of the boom in 1956, growth had exceeded 266%.
• 1990s boom: Began in October 1990 and lasted 113 months. By 1999, increases exceeded 417%.
• Great recession recovery: Began in March 2009, lasted 132 months, and ended with the rise of the COVID-19 pandemic in 2020. This longest-running bull market in U.S. history saw indexes rise more than 330%.

Bull vs. bear markets

While a bull market is known for charging forward, its bear market counterpart is known for retreating, like a hibernating bear.  The SEC defines a bear market as a time when stock prices are declining and market sentiment is pessimistic. Generally, a bear market occurs when a broad market index falls by 20% or more over at least a two-month period. Many investors take a slightly different strategy when investing in a bear market, such as holding defensive stocks. 

What to consider in a bull market

While investing in a bull market can feel exciting and potentially lucrative, it doesn’t come without risk. There are several risk factors unique to bull markets that you may want to think through. 

• Overvaluation and potential market bubbles: During a bull market, some securities may trade at a rate that is unjustifiably and significantly higher than comparable assets. Overvaluation can lead to rapidly escalating market bubbles. When the bubble inevitably bursts, your profits could take a significant hit.
• Investor complacency and herd mentality: It’s easier to relax when the prices keep going up, but that can lead to a false sense of confidence in your investments. Nobody, not even seasoned professionals, can predict what the market will do. Going along with the herd during a bull market may not be the right choice for your long-term goals.  
• Volatility and potential for sudden market downturns: Market volatility is always a risk, even during a bull market. Sudden market downturns do happen during bull markets, and they can have a negative impact on your portfolio.
• Speculative behavior and excessive risk-taking: The possibility of extremely high returns can seem exciting, but it can expose you to big risks if you’re not thoughtful about your strategy. Understand your risk tolerance before you invest, especially in speculative stocks.
• Long-term sustainability and potential for market corrections: Remember that a full-on bull market may not be sustainable long term. Market corrections, or declines of more than 10%, but less than 20%, are possible. 

Take the bull by the horns

When a bull market is raging, some investors see rising stock values as a signal to buy as much as possible. While purchasing stocks may be the right move for you, remember that a long-term investing strategy is about building wealth over the long term, not just making a quick buck. A future-focused strategy is about time in the market, not timing the market. No matter what the market brings, Stash can help you build an investment strategy that creates opportunity and supports your financial goals. 

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The post What Is a Bull Market? appeared first on Stash Learn.

In this article, we’ll cover:

• The origin of the terms
• What a bull market means
• What a bear market means
• Characteristics of bull and bear markets
• How to invest in each market phase

The history of bull and bear markets

Etymologists, financial wonks, and everyday investors have all wondered why bulls and bears became associated with the stock market. It’s likely that the jargon originated in the 1700s or 1800s. The bear may have come first, in reference to speculative investors attempting to sell bearskins. Bull was likely chosen later, as a fitting alter ego to the bear. For whatever reason, the animal imagery caught on, and we’re still using it today to indicate the conditions of the stock market and economy in different phases of expansion and contraction. The concept and definition of bull and bear markets have evolved significantly over time, however.

What is a bull market?

According to the US Securities and Exchange Commission (SEC), a bull market is defined as a time when stock prices are rising and market sentiment is optimistic. Generally, a bull market occurs when there is a rise of 20% or more in a broad market index over at least a two-month period. When stocks are rising during a bull market, it usually indicates a time of economic expansion, that the economy is strong and investors are confident. Since 1932, the average length of a bull market has remained just under four years.

The longest bull markets in history

Since 1926, the S&P 500 Index has recorded twelve bull markets, during which the value of stocks in the index rose anywhere from 48% to 417%. The longest-running bull market in US history came to an end in March 2020 thanks to the COVID-19 pandemic. The three longest bull markets in US history were:

• Post-war boom: began in June 1949, lasted 86 months, and saw increases of 266%
• 1990s boom: began in October 1990, lasted 113 months, and saw increases of 417%
• Great Recession recovery: began in March 2009, lasted 132 months, and saw increases of 330+% 

What is a bear market?

In contrast to the bull market, the SEC defines a bear market as a time when stock prices are declining and market sentiment is pessimistic. Generally, a bear market occurs when a broad market index falls by 20% or more over at least a two-month period. 

Since WWII, bear markets have taken 13 months on average to go from peak to trough and 27 months to get back to breakeven. The longest bear market in history ended in March 1942, lasted 61 months, and cut the S&P 500 Index by 61%. By and large, investors look for a 20% gain from a low point and steady gains over at least a six-month period to understand when a bear market has ended.

Types of bear markets

Not all bear markets are created equally. It’s helpful for investors to know what type of bear market they’re in before trading securities. A bear market may be an indicator of normal fluctuations in the stock market, or it may signal that the economy is headed for a more serious downturn. The three types of bear markets include event-driven, cyclical, and asset-bubble unwinds.

• Event-driven bear markets: Event-driven bear markets occur when world events, like pandemics, wars, terrorist attacks, and natural disasters create chaos and uncertainty in financial markets. While these market downturns may be sudden and large, they usually have a less severe total impact and quick recoveries.
• Cyclical bear markets: Cyclical bear markets are driven by normal fluctuations in the business cycle. The market downturns are usually as severe as event-driven bear markets, but they tend to last longer.
• Asset-bubble unwinds: Asset-bubble unwinds occur when cyclical fluctuations in the market trigger asset bubbles to burst, leading to broad disruption in financial markets. The duration of these types of bear markets is specific to each situation, but historically they have lasted the longest and seen the largest total decline in stock values.

The key differences between bear and bull markets

How to invest in bull and bear market phases

As an investor, you’ll experience both bullish and bearish markets throughout the years. When stocks are rising during a bull market, it usually means that the economy is strong, investors are confident, and the demand for securities tends to go up. As a result, major markets typically trend upward. In contrast, during a bear market, investors are generally pessimistic about the economy and may be looking to sell their investments. 

Whether it’s better to buy stocks in a bull vs. bear market isn’t a simple question; every market is unique, as are each individual’s circumstances. Investing in any kind of market comes with risk, including the risk that you could lose money, so it’s important to understand best practices for investing in both bull and bear market phases. 

Investing in a bull market

When stock prices are rising and optimism abounds, how do you decide where to invest your money? Many investors are willing to take on more risk in a bull market, but you may want to think carefully about your personal risk profile and have a long-term strategy in mind.

• Invest in cyclical stocks. Cyclical stock prices are affected by macroeconomic or systematic changes in the overall economy, so they’re known for following the cycle of expansion, peak, recession, and recovery. They tend to do well during a booming economy.
• Invest in exchange-traded funds (ETFs), index, and mutual funds. These funds tend to replicate the movements of the index they follow, so if the index is doing well, your investments should be doing well, too. 
• Learn about dollar-cost averaging. Investing a fixed amount each month can be a smart move in bull-ish times. When the price of the security is high, you’ll buy a lower number of shares, and when it’s low, you’ll buy a higher number of shares. 
• Hold onto your investments. When the value of your investments goes up, the urge to sell at a profit may strike. However, if you’re following a buy-and-hold strategy to build wealth over the long term, you may want to think twice before trading your securities.

Investing in a bear market

During times of pessimism and low confidence, emotions can run high for investors. Some people are tempted to sell all their securities to avoid losing money or, conversely, buy up what they can at a lower price. But going to extremes is usually not the answer. Instead, refine your approach to investing during a bear market by using the following strategies: 

• Don’t sell unless you absolutely have to. When the value of your portfolio drops in a bear market, chances are that your invested money will return to its previous value once the market has subsided. It may take a few years, so patience is key.
• Take advantage of dollar-cost averaging. This is just as important in a bearish market as it is in a bullish one because it allows you to purchase more shares when prices are low without increasing the amount of money you invest on your regular schedule. 
• Automate your investments. Robo-advisors are digital financial advisors that automatically select and manage your portfolio based on your investment preferences. The algorithm takes care of trading and rebalancing your portfolio for you, taking the emotion out of investing during stressful times.
• Diversify your portfolio. Holding a wide range of investment types reduces risk because a large drop in an individual stock is balanced by gains in other securities. Diversity becomes especially important in a bear market when stock prices fall; your investments in less volatile securities like bonds may help cushion the blow.
• Invest in sectors that perform well during bear markets: Consumer staples, healthcare, utilities, and other essential sectors tend to do better during bear markets since they are in demand regardless of the condition of the stock market. These are known as defensive stocks.
• Focus on the big picture. Remember that the market will eventually turn around. Investing with the long-term in mind and avoiding knee-jerk emotional reactions can help you weather a bear market. 

Are we in a bull or bear market in 2022?

As of June 2022, the S&P 500 was considered by investing experts to be in a bear market, with the value of the stocks it includes having fallen 22.2% below its record high set earlier in the year. While the duration of a bear market is difficult to predict, the S&P 500 has regained and exceeded its value after every bear market in the past. Many experts recommend that investors hold onto their stocks and ride out the market dip. 

Rolling with the bears and bulls of the stock market 

Whether the market is charging forward or retreating for a little nap, investors can learn to navigate the ups and downs. Investment of any kind comes with risk, especially as the economy fluctuates. The Stash Way is an investing philosophy that focuses on regular investing with a diversified portfolio and using a buy-and-hold strategy that focuses on building wealth over the long term, all of which can help you navigate the inevitable ups and downs of bull and bear markets.

The post Bull vs. Bear Markets: What’s the Difference? appeared first on Stash Learn.

• How stock prices are set
• How supply and demand impact the stock market
• Factors that can affect stock prices

How do stock prices work?

When a company makes its initial public offering or IPO, it sells shares to the public at a set opening price, usually determined by an outside firm’s valuation of the company. Sometimes businesses also have a secondary offering to raise additional cash. 

Once a company has gone public through an IPO, people can buy and sell its shares on a stock exchange or stock market like the New York Stock Exchange, Nasdaq, and many others. Stocks traded on exchanges don’t have pre-set prices. Unlike a loaf of bread at the supermarket, which is priced in advance, a share of stock is priced through an auction. The price is not set until the buyer’s bid and the seller’s ask meet. The amount they agree on becomes the share price. 

Why do stock prices fluctuate?

Because of how stock prices are determined, people continue buying and selling shares for the same price as long as all parties’ valuation of a stock stays the same. But if the buyer or seller believes the stock is undervalued or overvalued, bids and asks will diverge again, and the stock price will change after a new agreement is reached. This push-pull causes share prices to fluctuate. 

Where can you check stock prices?

Stock prices are published online, and they are easy to find by searching for a company’s name or ticker symbol. For example, Amazon’s ticker symbol is AMZN. If you have a brokerage account, your brokerage may also list current stock prices.

Why do stock prices change after hours or over the weekend?

Stock markets are closed on evenings, weekends, and holidays, so you might expect that prices wouldn’t change between the close of one trading day and the opening of the next. However, it’s possible to buy and sell after hours through an electronic communication network (ECN), and those trades can shift prices significantly, creating volatility even when markets are closed. 

How supply and demand work in the stock market

Supply and demand determine the amounts of bids and asks. When buyers see a stock as desirable and of high value, especially when the supply of shares is small, they raise their bids. In addition, sellers may feel certain they’ll be able to find a buyer for attractive, scarce shares, so they increase their asks. This combination of high demand and low supply yields a higher price.

But if a stock is less appealing to investors, or if its shares are too plentiful, buyers aren’t willing to pay top dollar. Sellers must lower their asks if they want to make sales. Low demand and high supply  often lead to lower stock prices.

The rate and amount by which a stock’s price fluctuates depends on many factors. Some events, however, can cause big spikes or dips. For example, the release of a ground-breaking new product could suddenly increase demand, enticing buyers to pay more and prompting sellers to raise their asks. On the other hand, a very bad earnings report could cause demand to plummet, motivating sellers to drop their asks and buyers to reduce their bids. The effects of these circumstances can be magnified by investor behavior; if a company’s stock price shoots up because people are suddenly buying up shares rapidly, the resulting low supply might push the stock price even higher. 

Example of supply and demand

Berkshire Hathaway’s class A stock (BRK.A) is a clear example of how supply and demand can drive stock prices. Far and away the most expensive stock in the US, a single share of BRK.A cost almost half a million dollars in June 2022. Here’s why:

• High demand. The company is a massive conglomerate valued at over $275B, with a track record of success extending back to the 1830s. The famed Warren Buffett is its CEO. Investors believe shares will retain their high value and grow steadily.
• Low supply. Most companies increase the supply of stock by splitting their shares as stock prices rise so that more investors can afford to buy their stock. Apple, for example, has split its stock five times. BRK.A has never split, so the pool of stock available for sale is relatively small.

Factors that can affect stock prices

Many factors affect buyers’ and sellers’ perceptions about what a stock is worth, and, consequently, their bids and asks. They consider the company’s performance, as well as the larger context, including domestic and international conditions that could affect its stability. Investor psychology also plays a role. 

Company news and performance

A company’s achievements and stumbling blocks affect demand. For instance, when companies fail to live up to their earnings projections, their stock prices usually fall. When they meet or exceed them, their prices often get a bump. A highly-anticipated corporate acquisition can increase demand, whereas product recalls or lawsuits can cause stock prices to plunge.

Supply-chain issues, new regulations, departure of key executives, and company misconduct, like Facebook’s Cambridge Analytica scandal, can also drive share prices down. Other key indicators include revenue, net income, and price-earnings ratio.

Industry performance

A company’s performance relative to others in its sector can influence demand for its stock. Some experts believe that sector stock prices move in lockstep. Thus, if one energy company has a negative outlook, investors will see energy stocks in general as less inviting. Other commentators, however, suggest that a single poor performer incentivizes buyers to shift their investments to other businesses in the same sector.

Economic factors

People’s desire to buy or sell stock is also affected by the larger economic context, producing markets that are more bullish or bearish. Economic components of demand include:

• Inflation: Sudden or significant inflation tends to cause stock price drops. Businesses’ dollars aren’t going as far, and neither are their customers’. This prompts investors to be more particular about the stocks they buy or invest less, decreasing demand overall.
• Deflation: Deflation tends to depress demand. Frequently, people invest to make sure earnings on their wealth outpace inflation. When every dollar is suddenly worth more, they have less incentive to accept the risks of investing.
• Interest rates: The Federal Reserve, or the Fed, uses interest rates to control inflation. When inflation is higher, it raises interest rates to amplify demand, which can increase investors’ returns. If the economy is trending towards deflation, the Fed lowers interest rates to stabilize prices.
• Recession: During recessions, stock prices can fall dramatically. As businesses struggle and incomes decrease, demand falls off. Stock prices typically follow, although they may rebound as the recession wanes.
• Trade wars: In a trade war, one country raises tariffs and limits imports from another to gain a political or economic concession. In general, trade wars lower stock prices, although they can be beneficial for domestic policy, businesses, and workers.

World events

Wars, natural disasters, terrorism, and even exchange rates can influence companies and their investors, though the impacts are unpredictable. The 9/11 terrorist attacks in New York City, for example, were followed by a significant overall drop in the market. Hurricane Katrina’s immense devastation in 2005, however, had little impact. In fact, the materials sector, battery manufacturers, and others often profit in the wake of natural disasters. Finally, foreign exchange rates affect the cost of doing business in a country, which impacts business profitability and the share price buyers are willing to pay.

Investor Confidence

Investor confidence, or market sentiment, is an important part of how stock prices are determined. For example, early in the Covid-19 pandemic, chaos was widespread, and investors became extremely hesitant. This caused a huge short-term drop in the market, which some commentators believe was unwarranted given actual economic conditions. Human psychology inevitably comes into play when people invest their money, and the tendency to defer to herd mentality can contribute to market conditions, depending on the general tenor of the public’s sentiment at any given time.   

Will stock prices go up or down?

Financial experts frequently speculate about the direction a stock is going, but there are too many elements in play to know precisely what price a given buyer and seller will agree on. Even when the market as a whole is trending up or down, individual stock prices vary widely. 

That’s why many investors choose a buy-and-hold strategy, building diversified portfolios aligned with their risk tolerance and choosing investments that have historically performed well over the long term. While no investment strategy is without risk, buy-and-hold can help investors ride the waves of rising and falling stock prices.

Want to explore buy-and-hold investment strategies? The Stash Way^® is here for you to help you invest regularly for the long-term in a diversified portfolio.

The post How Are Stock Prices Determined? appeared first on Stash Learn.

What is an index?

Like the index in a recipe book, an index in the stock market is a list. But instead of recipes, it lists securities. And rather than helping you find terms in a book, it helps experts measure the market’s behavior.

What is “the market”?

The phrase “the market” gets tossed around a lot, often without much context. Let’s break down what it means. 

A stock market is a generic term for a physical location, like the New York Stock Exchange (NYSE), an electronic exchange like the Nasdaq, or any other mechanism to buy and sell securities, such as stocks, bonds, funds, and other investments.

The NYSE and the Nasdaq are the largest stock exchanges in the U.S., but there are many other stock exchanges in the country and all over the world. 

“The market” or “the stock market,” isn’t just one thing or one place. When people talk about the market, they often mean stock markets generally or a subset of stock markets, like U.S. stock markets. 

There are many stock markets, trading the stock of thousands of companies, some of which might have millions of shares. That means understanding and measuring the market can be a daunting endeavor. Stock indexes can help.

What’s an index for the stock market?

Because the market is so large and complex, it’s nearly impossible to measure the behavior of the whole thing. Indexes help solve that problem by looking at representative pieces of the market.

An index, in the stock market world, is a list of securities intended to represent the market, either as a whole or a subset of the market. Using a limited group of securities as a proxy for the market addresses the logistical challenges of measuring the entire market. And if the index is reliable, it can be used to understand the market more broadly.

Who creates indexes?

Anyone can create an index. But selecting representative securities, plus tracking, analyzing, and communicating about their behavior, is a highly specialized task. Thus, the reputation of the index provider determines how much weight the index carries with investors and experts.

These are some of the most important and referenced indexes in the financial world. If you remember any indexes, it should include these:

• S&P 500
• Dow Jones Industrial Average
• NASDAQ Composite
• Russell 3000

What kinds of indexes exist?

There are many indexes in the stock market landscape, and each has its own goal. For example, perhaps the most well-known and referenced index is the S&P 500. It’s a list of 500 large companies traded on the NYSE and Nasdaq, representing over 80% of the available market capitalization. It aims to give investors a window on the market overall.

The S&P 500 is not industry-specific. It includes companies such as 3M, Ford, and  Apple. It’s also not exchange specific; for example, Apple trades on the Nasdaq and 3M trades on the NYSE. Instead, its primary requirements for inclusion are size and trade volume.

Other indexes track sectors of the market, like technology, or industries, such as clean energy, aerospace, or fossil fuels. Some indexes may even focus on companies in the cannabis industry or companies working on artificial intelligence technologies.

Putting indexes to work with Stash

So how do you know what indexes to follow? It depends on your investment strategy. You may want to pay attention to what’s in an index. In the stock market, there are a tremendous number of companies and sectors, so consider focusing on indexes that contain securities most relevant to your portfolio. That can help you understand how your investments could behave in the future. And following big-picture indexes can be a way to grasp what’s going on with financial markets in general and give you insight to support a long-term investing strategy. 

The post What Is an Index in the Stock Market? appeared first on Stash Learn.

How does stock trading work?

Trading refers to the mechanism for buying and selling stock—also known as shares. Stocks are little bits of ownership in a company. Investors can trade stocks in two ways:

• on an exchange, such as the NYSE or Nasdaq
• over-the-counter (OTC)

There are a number of requirements for being listed on a stock exchange, and the stipulations vary among exchanges. For example, most exchanges mandate that a company’s stock price exceeds $1 per share to be listed initially and remain listed on the exchange, plus require that the stock meets a minimum market capitalization.

Sometimes, a stock might not live up to the requirements to get listed on an exchange—and listed stock can be delisted if it no longer meets the conditions. A delisted stock’s ticker is typically changed to a five letter symbol. For example, if the ticker was CRC when it traded on an exchange, the new ticker might be CRCQQ.

What’s an OTC stock?

Trading of OTC stocks is conducted by wholesale traders and market makers who specialize in buying and selling OTC stocks. These institutions either match buy and sell orders from investors or fill orders from their own inventory after investors choose what OTC stock to buy. 

If you’d like to learn more about the networks some dealers use for trading, the Financial Industry Regulatory Authority (FINRA) website offers a great deal of information. FINRA is a self-regulatory, membership-based organization.

What are the risks if you buy OTC stock?

Before you start making a plan for how to buy OTC stock, you may want to be aware that these stocks are almost always considered a high-risk investment. What an OTC stock seems to offer is an accessible way to start investing, but Stash recommends avoiding OTC investments altogether due to the high risks.

Some people, however, feel enticed by the idea of “penny stocks”—most of which are OTC stocks—and the allure of very low share prices. If you think you might want to buy OTC stock, you may want to carefully consider several risks:

• Lack of information. It can be difficult to get complete information about OTC stocks, which makes buyers more vulnerable to bad investments. Why? Companies whose stocks trade OTC are subject to fewer reporting requirements and regulations than exchange-traded stocks, although recent regulatory changes are intended to provide more information to investors.
  
• Unclear cost. In some cases, the price an investor receives when they buy or sell an OTC stock may vary significantly from the last price at which it traded.
  
• Greater volatility. OTC stocks generally have fewer investors trying to buy or sell at any given time. Limited demand reduces their liquidity—meaning it’s harder to convert the stock you own to cash by selling it—which drives volatility.
  
• Fraud and scams. Due to minimal reporting requirements and the limited liquidity of OTC stocks, investors may be more vulnerable to price manipulation and potential fraud. The SEC has identified a number of red flags that may help investors spot OTC stock fraud. 

Your portfolio: What’s OTC stock got to do with it?

Ultimately, your investment decisions are your own, and all investing involves the risk that you could lose money. If you choose to include OTC stock in your portfolio, extreme caution is generally warranted. 
Knowing the risks, what’s an OTC stock have going for it? For many people, the appeal may simply be the sense of accessibility. When you see stocks like Alphabet Inc. (owner of Google)  trading above $2,000 per share (as of October, 2021), it can feel daunting to start investing. But you don’t have to start with a large sum to get in the investing game with OTC stocks. An alternative to investing in an OTC stock is to invest in fractional shares, where you buy pieces of shares—even high-value stocks traded on an exchange. With a Stash account, you can start investing in fractional shares (as well as exchange-traded funds) with any amount of money. Because having access to investing shouldn’t mean you have to take on more risk than you’re comfortable with.

The post What’s an OTC Stock? Low Prices, Risky Business appeared first on Stash Learn.

Financial literacy at a young age may correlate with higher net worth in your 20s and beyond, according to a study by the research organization Brookings Institute.

Understanding the stock market is a key element of financial literacy. Yet, it can be intimidating. The key may be to break down complex topics into simpler ideas that your children can understand. Slowly introduce the concepts as your child grows up. You will be giving them a powerful tool for building long-term wealth and setting them up for adulthood.

How to introduce the idea of saving

You can start exposing your child to foundational concepts by introducing them to the principle of saving. Make the process hands-on and visual by having your child save in jars so they can watch their savings accumulate over time.

Teach your kids to save with purpose by dividing their savings into four jars labeled wants, needs, causes and goals. Ask them to name which of these categories are most important to them and have them save extra in the jars that matter most.

You might also take your child with you when it’s time to make a purchase. Demonstrate how money is exchanged for goods and services, and show them how to compare the cost of one thing to another. Explain that a little bit of money can turn into a lot of money over time when they save.

How to explain stock basics

When your children are old enough, you may be able to introduce the idea of owning stocks. They’re probably already familiar with publicly traded companies that make the products they may already use, such as Mattel, Kellogg’s, Nintendo, Disney or Apple. 

You can teach your kids that when people buy stock, they actually buy a small portion of companies like these, and when they perform well, the stock becomes more valuable. When companies do poorly, stock value declines. And when you sell a stock whose value has increased, you make a profit. And when a company underperforms, the stock’s value can fall. Selling the stock at that point would mean they lose money.

There are a number of games available that can help kids learn how the stock market works. The Securities Industry and Financial Markets Association (SIFMA) offers The Stock Market Game free to elementary school aged kids. The game gives them the chance to manage an imaginary $100,000 portfolio online.

Middle school and high school aged kids may explore similar themes with the free game How the Market Works and the Personal Finance Lab’s Stock Market Game, which costs $15.

As your child begins to learn more complicated math, they may be ready to wrap their heads around more abstract ideas related to investing. For example, if they’ve started learning about fractions, you can explain the concept of compounding—the return earned on your principle, plus your past returns. Demonstrate this concept by having them multiply $10 by 1.25. Then have them multiply the product by 1.25 again and again, watching the number grow by greater and greater leaps each time. Tie this into the way that investments can grow inside an investment account, and explain how the earlier you start investing, the longer you are able to take advantage of this benefit.

Explaining why people—and kids—may choose to invest

As you’re teaching your kids how the stock market works, try talking to them about why people invest in the first place. Explain that investing can be a powerful way to create wealth over the long term that helps people save for goals, such as going to college, buying a house or retiring from work.

Over the long term, average stock market returns can be much higher than the interest your money earns in a savings account, so it can be a way for people to build wealth fast enough to achieve these big goals.

Explain that another reason people invest is to overcome inflation. Over time, the prices of goods and services tend to go up, and the value of money tends to decrease. Use a practical example: Almost 90 years ago, a nickel could get you a 12-ounce bottle of Pepsi. Ask your kids to think of something they could buy for a nickel today. If your child simply kept their money in a jar at home, over time it would be worth less and less. However, if they invest that money, the potential gains they could make could help their savings increase in value over time, instead of decrease.

Opening a custodial account for your kids

To give your child a more in-depth experience of buying and selling stocks, consider opening a custodial brokerage account for them.¹ With a custodial account, you can make monetary gifts and retain control of investments and withdrawals until your child reaches adulthood at age 18 or 21, depending on the state in which you live.  When you subscribe to Stash+ ($9/month), you can open two custodial accounts with a minimum deposit of only $1.00.² 

Unlike other savings accounts for children, such as 529 plans for college education, custodial accounts offer flexibility in how they are used once your child is an adult. They could use the money to fund education, but also to buy a new car, travel the world, or open a business.

You can use the custodial account as an educational opportunity to help your child learn to make investment decisions. Help them identify individual stocks of companies they’re interested in—owning a piece of the company behind their favorite toys or movies may help fuel an enthusiasm for investing. Consider picking out some index funds or low-cost ETFs on their behalf, explaining the benefits of diversification. Think about balancing helping them follow their own interests and developing a healthy long-term investment strategy that has the potential to gain value.

Developing an understanding of the stock market can demystify investing and can put a powerful wealth-building tool in your children’s hands. Introducing age-appropriate concepts to your children prepares them to be responsible investors and gives them a leg up on their peers. Best of all,  it can be easy to make the learning process fun and engaging when you help them invest in the stocks of companies they love.

The post How You Can Start Explaining the Stock Market to Your Kids appeared first on Stash Learn.

There are typically two parties in an M&A deal: The acquirer, or the company purchasing another company, and the target company, or the company being purchased and acquired. 

Generally speaking, if both companies involved in an M&A transaction are public, the target company’s stock will no longer be traded, and shareholders will get either cash, stock, or a combination of both in the acquirer’s company.

Basics of M&A deals

Every M&A deal varies in their terms, but the two main types are all cash and all stock deals. 

• In all cash deals, shareholders of the acquiree receive a set amount of cash per each share owned. 
• In all stock deals, shareholders of the acquiree get their shares converted to new shares of the acquirer. A great example of this is the T-Mobile and Sprint merger in early 2020 that converted all Sprint (S) shares to shares of T-Mobile (TMUS). (You can learn more about this merger here.)

There are also other variations of M&A deals, like cash & stock deals that are a mix of both of the above, and other, more complex deals where new spin-off companies are created with their own associated shares. 

About cost basis

A great example of a merger that involved a spin-off is the Raytheon (RTN) and United Technologies (UTX) merger in early 2020, which resulted in new stock for the merged company (RTX), as well as spinoff company stocks for the parts of United Technologies’ business lines that did not merge with Raytheon, like Carrier Corp (CARR) and Otis Worldwide (OTIS). (You can learn more about this merger here.)

In all M&As, your initial investment, known as the cost basis for your shares of the target company will be spread out to the new stock(s) received. In other words, your shares will convert but the value of your initial investment will stay the same, so you will not experience any additional gain or loss on the investment. It’s important to note that the average price you see on the newly converted shares may be much higher or lower than the current price of those shares on the market. This is because you are receiving these new shares at the same amount it cost you to purchase your original shares before the M&A event, not at their current stock price.

Some examples

For example*, let’s say you have an initial investment of $100 in company A for 10 shares total. This is your cost basis, or the initial cost to you to own those shares.

Company A then gets acquired by company B. The terms of the deal say each share of A converts to two shares of B. Your 10 shares of A will be removed from the platform, and you will instead see 20 shares of B in your portfolio.

The initial investment of those new 20 shares of company B will still be $100, the cost basis or initial investment of your position in company A. The app will show those shares having an average price of $5, as the $100 cost basis divided by the 20 shares of B you now own is $100/20 = $5 per share.

This can get confusing if shares of company B are currently trading at $4 and you see your average price is $5. This is because you receive the shares at the same initial investment or cost basis that you originally invested in A with, and not the current price of company B stock.

Here’s another example. It’s the same as before, except this time the terms of the deal say each share of A gets $1 in cash and 2 shares of B. In this case, the cash is first taken out from your initial investment/cost basis in A (which was $100 across 10 shares). The 10 shares you own grant you $1 each a part of the deal, for a total of $10. This $10 you receive is reduced from your $100 initial investment/cost basis in A.

The remaining $90 is then spread across your new shares in Company B. Your 10 shares of A convert to 20 shares of B, and the average price per share of B becomes $90/20= $4.50.

This same principle is applied to all deals. The sum of all your new shares, or cash and shares, will equal your original initial investment or cost basis before the M&A occurred.

The post Find Out What Happens to Stock with Mergers and Acquisitions appeared first on Stash Learn.

With that in mind, companies may conduct something called a rights offering. That’s when a public company issues a contract to existing shareholders, giving them the right, but not the obligation, to purchase additional shares of the company at a predetermined price. Rights offerings are another way for a company to raise money, by selling more shares.

Rights are a type of derivative

That price is set in a contract, which is valid until a specific date in the future, at which point the right expires. 

The value of a right is determined by the current price of the stock with which it is associated. Because of this relationship, rights are referred to as a type of derivative investment product, meaning its value is derived or determined by the value of another stock. Other types of derivatives include warrants and options. 

Here’s an example:*

ABC company’s stock trades at $10 per share. 

ABC then conducts a rights offering, which gives existing shareholders the right to purchase one additional share at a predetermined price for every share they own at the time of the offering.  In this example, the terms of the right allow an investor to purchase each additional ABC stock at a discounted price of $9.90, while the current market price of ABC stock is $10. 

If you own 10 shares of ABC, you will have the right to purchase 10 additional shares at that predetermined price.The value of the right can be said to be worth $0.10 since that is the difference between the discounted price in the right and the current market price per share.

Depending on the current market price of the underlying stock, it may or may not be favorable to exercise the right when received. An investor may choose to exercise the option at a later date in order to take advantage of an increase in stock price. 

Additionally, this right can be sold in the market at any point prior to the end date specified in the right. In some cases, it can be in an investor’s best interest to let the right expire, like when the right specifies a predetermined purchase price that is higher than the current stock price. In this scenario, if the investor wants to purchase additional shares, they could just buy shares in the market at a lower cost.

Stash and derivatives

At this time, Stash does not support derivative investment products of any kind, including rights, warrants, and options. Therefore if you as an investor are entitled to a right of any kind, the security will be sold by Stash at market value at the time of receipt, and you will receive the proceeds of that sale in the form of cash once the transaction settles. 

The post What is a Rights Offering? appeared first on Stash Learn.

I usually write to you when the market makes big moves, and over the past few days, the market has been gyrating up and down. Here’s something I really want you to take to heart: Investing is all about time in the market, not timing the market.

Yesterday, for example, the Nasdaq was up around 2%, and today as I write this, it’s down even more than that. Zoom out and take a long-term view. Don’t get caught up in the short-term noise. Remember, you’re a long-term investor!

Market Psychology

Today I want to address something called market psychology.

Market psychology is all about the way investors feel at any one point in time. But it also includes the tendency for investors to act with their emotions, rather than stick to their long-term financial plans.

There’s a lot going on with the economy and with markets today. The U.S. is beginning to feel the impact of a trade war with China. An important indicator in the bond market, called the yield curve, is flashing red lights. And there’s a lot of uncertainty in global markets too.

As a long-term investor, however, it’s important to tune out the noise of the day, and buy small amounts of stocks, bonds, and funds on a regular basis, through the market ups and downs. Turn on Auto-Stash to help you do that.

Volatility is normal

It’s understandable for someone to be nervous when the market moves sharply down.  It can be uncomfortable, especially if this is your first time investing during one of these periods. Hey, I was a beginner investor once, too.

I remember investing through my first bear market in the early 2000s right after the Dot-com bust. It wasn’t fun seeing my account balance decline; however, I always had a long-term perspective. In 2008, I lived through another big market correction. But again, I thought long-term and maintained my focus.

Why thinking long-term is key

It’s important to think about why a long-term investor shouldn’t get emotional over these types of market gyrations.

Over time, the stock market will go up and down. Look at this chart compiled by New York University’s Stern School of Business, which shows market performance since 1928.  You’ll see some really good years, and some nasty years as well. The coolest thing to see is the compounding value of stocks, throughout the good and bad years.

Here’s what it all means. Over the last 90 years, annual returns for the S&P 500 have been positive three quarters of the time. Nearly half the time (11 out of 24 down years) any losses were recovered within two years.  It has never taken more than 7 years to fully recover.

A prudent investor who bought regularly throughout this period (and didn’t panic or make rash decisions) would have seen a full recovery from all the down markets.

Important disclosure and takeaway: This is what happened in the past. It is by no means a guarantee of what will happen in the future. The key thing to understand from history is how bad years and good years follow each other pretty consistently over time. It’s the nature of the market.

How to think like a long-term investor

The majority of Stashers are new to investing. It’s our job to keep educating you on this long-term journey, and we take this very seriously. There are 3 million of you now with Stash accounts, and many of you all joined at different times.

Here’s the big tip: It doesn’t matter when you started. We aren’t market timers so the goal is not to buy something all at once, but rather to buy small amounts at different prices over a long period of time.

As an investor, you own real shares of public companies, bonds and other asset classes. These assets—or shares—are tangible and real and their prices move up and down. Your invest account isn’t a bank account, but instead represents money that you are putting away for the long term. Think of it like owning a home. Its value will go up and down over time.

Turn on Auto-Stash

Turn on or update your Auto-Stash. It’s the easiest way to add small amounts of money on a regular basis.  This way, you’ll avoid the emotional aspect of investing and won’t get fooled into trying to time the market.

Auto-Stash is an incredibly powerful tool, and an essential part of the Stash Way.

Work hard, earn your money, and then make it work hard for you. By taking a long-term view and consistently investing small amounts, you can allow your money to work for you.

Remember the Stash Way

Investing can be confusing, especially when markets become volatile.

That’s why we’ve boiled down our investing philosophy into three basic principles that we hope can guide you as you make your first investing decisions. We call our approach the Stash Way. Here are its three pillars:

• Invest for the long-term
• Invest regularly
• Diversify

When in doubt, follow the Stash Way, which you can learn more about here.

Stash on

We look forward to many great years ahead, as we help you meet your financial goals.

Thanks—and keep on Stashing!

-Brandon

Ps. We love to hear from you and value your feedback. Please write to my co-founder and me at: feedback@stash.com

The post How to Think Like a Long-Term Investor appeared first on Stash Learn.

So what is a direct listing?

A direct listing—sometimes called a direct offering—is a way for a company to sell its shares to the public without involving any middle men, or intermediaries.

It’s different from an initial public offering (IPO), where the company relies on an investment bank to take it public. Such a bank is called an “underwriter,” because it assumes much of the risk associated with the IPO.

With a direct listing, company executives, early investors, and employees who own equity, or shares, are given the option to convert them into a public stock and then sell it to the public through a stock exchange such as the New York Stock Exchange or the Nasdaq. (These stakeholders are not obligated to sell their shares, however.)

Wait, what’s an IPO again?

An IPO is the first time a company sells its shares to the public through an exchange.

When a company wants to open new stores, build or acquire a factory, or expand in some other way, it may need additional resources to pay for it. Company executives may use an IPO to raise additional capital to invest in and grow their business.

Often a company does not yet have enough internally generated funds to finance such projects. Going public is one way to raise a relatively large sum of money in a relatively short period of time.

Companies typically use investment banks to underwrite the shares that will be sold to the public. That means the company relies on the bank to set the opening price of the shares before they start trading. This can cost a lot of money—we’re talking potentially millions of dollars.

Direct listing vs. IPO

Here are some other ways a direct listing differs from an IPO.

• With a direct listing, the stock exchange sets the starting trading price. It’s called an “initial reference price,” and it’s based on new investor demand for the shares. In contrast, the underwriters set what’s known as an “opening price” in a traditional IPO, through a process called a roadshow.
• There isn’t a lock-up period in a direct listing. A lock-up period is typically a period of time—usually about six months—where company insiders aren’t allowed to sell their stock. When a lockup expires, that can make the stock of the newly public company more volatile. With a direct listing, a company insider may sell their shares right away.
• By doing a direct listing, the company also isn’t “diluting” its shares, or potentially making them less valuable by creating more of them. Often in the traditional IPO process, the investment bank handling the IPO will create more shares to sell to the public.
• In contrast to a direct listing, the investment bank underwriting an IPO often creates an over-allotment of shares to sell to the public if demand for the stock becomes too great. That can smooth out price volatility. Such a practice doesn’t exist in direct listing.

As in a traditional IPO, companies pursuing a direct offering are still required to file paperwork about the listing with the Securities and Exchange Commission (SEC). You can find out more about any publicly listed stock on the SEC’s website EDGAR. Part of your due diligence as an investor should involve examining paperwork associated with a new filing.

Remember the Stash Way—invest for the long-term, invest regularly, and don’t put all of your eggs in one basket.

The post Direct Listing vs. IPO: What’s the Difference? appeared first on Stash Learn.

And as they do, now might be a good time to make sure you have your investing priorities in order. Why? Markets tend to move around a lot—they can go down as well as up. And the movement of markets in the short run is less important than achieving your long-term financial goals.

Read on and we’ll explain.

So what happened?

On Tuesday, April 23, the S&P 500 gained 25.71 points, closing at 2,933.68. Its previous record was 2,930.75, reached on September 20, 2018, according to the Associated Press.

Similarly, on the same day, the Nasdaq jumped 105.56 points to 8,120.82, beating its record high of 8,109.69 on August 29, 2018, according to AP.

The Dow Jones Industrial Average (DJIA), is also close to the record it achieved last year.

Why now?

Generally speaking, investors believe the economy is on strong footing, according to reports. Here are a few reasons why:

• Uneasiness about trade tensions between the U.S. and China, the world’s two largest economies, have reportedly moderated as the two sides work towards a resolution.
• Investors may be reacting to the March decision by the Federal Reserve to hold off on increasing interest rates. Higher interest rates can have a negative impact on business.
• Solid corporate earnings from companies including Coca Cola, Twitter, and Procter & Gamble may also be playing a role, according to sources.

Volatility is normal

Markets go up and they go down, it’s a natural part of investing called volatility. Volatility is essentially the tendency for stocks and markets to fluctuate. You can find out more about volatility here.

It’s important to realize that the last decade, where we’ve experienced fairly steady market gains each year, hasn’t been normal. We’ve been in the longest bull market since the one experienced in the decade after World War II.  At some point that is likely to come to an end.

Remember the Stash Way

It’s easy enough to feel great about investing when stocks and stock markets are climbing. But when you see your portfolio start to head south, there’s often a strong temptation to cut your losses and head for the hills.

When markets fall, the temptation might be to sell your holdings. We get it. Losing money is no fun. But by selling when markets drop, you could end up locking in your losses.

Instead, we recommend investing for the long haul. In fact, it’s part of our investment philosophy, called the Stash Way, which boils down investing into three core principles. These are investing regularly, investing for the long term, and diversification.

By investing regularly, sometimes you’ll be putting money into markets when they’re up, and sometimes you’ll be investing when they’re down. Over time, the highs and lows are likely to balance themselves out.

You can find more about the Stash Way here.

Don’t pay attention to the short-term market noise. Keep on Stashing.

The post Markets Are Reaching Records (Again). appeared first on Stash Learn.

At that point, the program’s costs will exceed its income from payroll taxes for the first time since 1982, and it will have to start tapping a reserve fund. Congress will have to act to make some changes to the way program is funded, or the reserve fund will be depleted in 16 years, and payments to retirees will start to get smaller, according to reports.

In related news, the Medicare trust fund is expected to be depleted by 2026, the same year that was predicted last year, barring action from Congress.

Although the two programs face financing challenges, they aren’t in danger of shutting down. Read on and we’ll explain what’s going on.

What are Social Security and Medicare?

Social Security is an 84-year-old federal program that provides monthly income during retirement. The program sends checks to 62 million people each month. It’s funded primarily through payroll taxes. It currently has a reserve fund of about $3 trillion.

Medicare is the government-run health insurance program that covers 60 million people, primarily retired, for care ranging from hospitalization to prescription drugs. It’s financed through a payroll tax and premiums paid by recipients.

Both programs are managed as trust funds, funded by income tax and other revenue.

Why are the trust funds running out of money?

Expenses for the programs are rising slightly, and tax revenues are lower than forecasts, according to reports.

The tax cut legislation approved at the end of 2017 will result in less revenue for government programs, and is expected to increase the annual deficit and the national debt.

Is Social Security going bankrupt?

No. The program isn’t ending, but it does face important funding challenges. If Congress does nothing, the program will still be able to make nearly 80% of its payments through 2090, according to AARP. In 1982, the last time Social Security faced a similar funding problem, Congress increased the full retirement age to 67 years old, from 65.

Congress is already debating plans that could increase payroll taxes to continue funding the program at current levels.

What can you do?

People can save for their own retirements via a variety of accounts, including workplace plans such as 401(k)s, self-directed individual retirement accounts, or IRAs and Roth IRAs.

It’s important to start saving for your own retirement now.

Americans have a hard time saving, in general. Multiple reports suggest that the average family only has $1,000 in savings. And average retirement savings for working families is about $95,000.

If you’re making about $40,000 a year now, you’d need to save about $1.18 million to have the same standard of living in retirement, according to AARP.

The average payout from Social Security is $16,464 annually, or about $1,372 per month, according to reports. For most people, that’s not nearly enough to fund a retirement. In fact, the average retired family, defined as a household headed by someone 65 years old and over, spends about $45,756 annually.

Meanwhile, the rising cost of healthcare is likely to take up half of Social Security income by 2030, according to a report from the Kaiser Family Foundation.

The post Why Social Security Isn’t Going Bankrupt appeared first on Stash Learn.

The Walt Disney Co. recently announced it will enter the on-demand video race with a new streaming video service it plans to launch in November, called Disney+.

For $6.99 a month—roughly half the price of a Netflix subscription—customers will be able to stream Disney’s trove of movies, television shows, and other content from its Disney, Pixar, Marvel and National Geographic studios. Disney also has plans to create original content exclusively for the service, including movies, documentaries and new TV series, starting in 2020.

With Disney+, Disney will compete in a multi-billion dollar streaming content market dominated by Netflix, which reportedly has 139 million subscribers and a market cap of $150 billion, and other providers including HBO and Amazon Prime.

Disney+ customers will initially have access to 7,500 TV episodes and more than 500 films, including well-known franchises including The Simpsons, The Lion King, Star Wars, and Marvel comics-inspired movies such as The Avengers, Black Panther, and Spiderman, according to the company.

Why is Disney launching a streaming service?

So-called direct-to-consumer video content is important to media companies because it gives them direct access to their customers, without an intervening television network acting as a middleman. U.S. consumers also spend more than $2 billion per month on streaming services, with more than half subscribing to at least one streaming service, according to CNBC.

Steep competition

The direct-to-consumer streaming content market is getting very crowded. Here’s a look at some of the other players shaping the market.

• HBO, now owned by AT&T, and Netflix both spend billions of dollars annually on original content, and they dominate the direct-to-consumer market with original programming like Game of Thrones, and Orange is the New Black.
• Amazon Prime video has produced 80 original TV shows, and has nearly 100 more in the pipeline, according to reports.
• Hulu currently has nearly 100 original TV shows either available now or in the works. Hulu’s other owners include Disney and Comcast. (AT&T was also an owner, but Hulu recently bought out its shares from AT&T in a deal that values the streaming service at $15 billion.)
• Apple recently launched Apple TV+, and is planning to spend $1 billion on original content, according to reports.
• Cable companies Viacom and Comcast have both launched streaming services. Even Walmart is getting in on the act with its recently acquired video platform Vudu. Facebook is also experimenting with its own on-demand video service, called Watch.

More about Disney and Disney+

In 2017, Disney announced plans to purchase parts of 21st Century Fox in a deal worth $71 billion. That deal closed in March 2019.

At the time the deal was announced, some experts saw it as an acknowledgment that Disney had to compete more effectively against the new crop of media companies that deliver entertainment directly to consumers homes.

Investing in the market

It’s important to remember that all investing involves risk, and that it’s possible for stocks, bonds, and other securities to lose their value due to changing market conditions.

Remember the Stash Way—invest for the long-term, invest regularly, and don’t put all of your eggs in one basket.

The post The House of Mouse vs. Netflix appeared first on Stash Learn.