Money Management

Small business failures are not a good thing. Read on to see why. 

Small businesses don’t have the same vast financial resources as large businesses do, and they often struggle to get their hands on the capital they need to stay open. As such, failure rates among small businesses are pretty high.

The U.S. Small Business Administration says that roughly 20% of new small businesses fail within a year. And only about 50% of small businesses survive for five years or longer.

But small business closures don’t just impact the people who own those companies. They also impact communities on a whole. Here’s what happens when a large number of small businesses in your area fail.

1. It can become difficult to find a job locally

Local jobs are particularly important to teenagers without the ability to drive a car and parents who don’t want a lengthy commute because they have kids at home and want to minimize their childcare costs. But when too many businesses shutter within a given town, local jobs become harder to find. That could force a lot of people out of the workforce if they have commute-related constraints.

2. Property values can decline

Small businesses lend value to neighborhoods. When too many businesses close down, neighborhoods can become less desirable to live in. The result? Lower property values.

Now you may not have any near-term plans to sell your home, and as such, you may not be particularly worried about what your home is worth. But remember, as a homeowner, you have the opportunity to borrow against the home equity you’ve built in your property. And the less your home is worth, the less equity you’re apt to have access to.

3. Local services can decrease

Local businesses tend to generate tax revenue. When too many close, and your town isn’t collecting as much revenue as it once was, it can lead to a decrease in public services. Parks can become neglected, and other programs might disappear. These factors, too, can lead to a decline in property values, but they can also impact your quality of life as a local resident.

It pays to support small businesses in your neighborhood

Small businesses commonly rely on the support of locals to stay alive. So if you want to avoid the repercussions above, you should do your part to support the small businesses in your town.

Instead of buying your coffee from Starbucks, consider stopping into the local cafe down the block and purchasing one of their lattes instead — even if it costs $0.50 more. And rather than buy all of your books on Amazon, give your business to your local bookseller, even if it means spending $10.99 on a novel Amazon has for $9.99.

In many cases, you will, indeed, pay more money for the product or service you’re purchasing if you get it at a local business. But spending a few extra dollars here and there might spell the difference between your home being worth $30,000 more — or less — over time.

And if you can’t afford to spend extra at small businesses because money is truly tight, at least try to support those businesses by writing positive reviews if you’ve had a good experience and encouraging friends and neighbors to check them out. Although small businesses need financial support to thrive, if you can’t provide that right now, word-of-mouth advertising is a helpful close second.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Maurie Backman has positions in Amazon.com. The Motley Fool has positions in and recommends Amazon.com and Starbucks. The Motley Fool has a disclosure policy.

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The SEC is fining JPMorgan for deleting essential communications. Find out what that means for JPMorgan brokerage customers. 

What happened

The SEC has fined JPMorgan Chase & Co. $4 million for allegedly deleting 47 million electronic records, including emails and instant messages between employees and customers.

On Thursday, the SEC said JPMorgan accidentally deleted the records in the first quarter of 2018 as it was troubleshooting glitches. Deleted records date from January 2018 to April 2018. The commission has ordered JPMorgan to pay a fine.

According to the SEC order, “JPMorgan willfully violated Section 17(a) of the Exchange Act and Rule 17a-4(b)(4).” The order claims JPMorgan must legally retain business communication records for at least three years, and further, failed to do so.

JPMorgan has neither confirmed nor denied the allegations.

So what

This isn’t the first time JPMorgan has failed to retain essential business communications.

In 2021, the SEC fined JPMorgan subsidiary “J.P. Morgan Securities” $125 million for failing to hold onto communications records — employees, including executives responsible for keeping the firm compliant, communicated on business matters “off the record” via WhatsApp.

Because of this incident, the SEC ordered further investigations into financial firms. It found 16 firms guilty of poor record keeping, including Bank of America and Goldman Sachs. Collectively, the firms were fined over $1 billion for breaking the law.

This time, the SEC claims that JPMorgan’s inability to provide records will impact ongoing investigations into the company. The specifics are unknown, but regardless, it’s a bad look for the company, one of the United States’ biggest banking institutions.

Now what

JPMorgan customers have reason to dislike this news. Spontaneously vanished records are the opposite of transparent. At a high level, customers want to trust banks. Banks and brokers are responsible for keeping safe people’s wealth, much of which rests in the stock market.

Importantly, it seems this incident has compromised no personal information.

Banks are required to keep communications for a few reasons. They help regulators determine whether a bank employee is guilty of fraud, insider trading, or market manipulation. With records, regulators have an easier time uncovering evidence of guilt.

For context: In 2013, regulations were more lax regarding transparency. Some of the worlds’ biggest banks spent years manipulating foreign exchange markets to the detriment of clients. Modern investors don’t want a repeat of that scandal; hence, the recordkeeping.

Current JPMorgan customers probably won’t be directly impacted by the loss of old records. But this incident raises concerns about whether similar issues could arise, throwing the integrity of the banking system into question.

Customers who are worried about JPMorgan losing its records again can do one of two things: Create copies of essential banking records, or check out alternatives to JPMorgan, the best of which offer comparable brokerage services.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. Cole Tretheway has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends JPMorgan Chase. The Motley Fool has a disclosure policy.

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It seems counterintuitive, but it’s possible to have too much cash in the bank. Read on for one finance guru’s advice on where else to put your cash. 

A good savings account is arguably the absolute best place to keep cash you need quick access to, such as your emergency fund. But after you’ve reached a reasonable emergency fund, it’s probably a good idea to start looking at better places to put your extra cash.

“Having too much cash in your bank account can actually erode your own wealth due to the fact of the inflation that we’re experiencing,” explains YouTube personal finance guru Humphrey Yang. He made a recent video on better places to keep your cash than leaving it in the bank.

According to Yang, these five alternatives should generally maintain their value, with most doing especially well in the long term. Let’s take a deeper look.

1. Real estate

Investing in real estate is pretty much a standard recommendation of any how-to-get-rich influencer — and for good reason. Historically, real estate has proven to be a good long-term investment. After all, land is finite, and we all need somewhere to live.

This doesn’t mean that investing in real estate is without its risks, however. Housing markets are notoriously fickle, and while property values may go up in the long term, short-term values can plummet with little warning. That risk holds true for residential property — think 2008 bubble burst — as well as commercial real estate (look at all the folks pushing people back to the office for the sake of commercial real estate values).

And don’t forget about interest rates. High rates overall mean higher mortgage rates, which could impact the profitability of your investment.

2. Commodities

There are a lot of things that fall under the “commodities” umbrella, from gold to livestock to energy, and you can invest in any or all of them. According to Yang, those investments are particularly worthwhile during times of inflation.

In support, he paraphrases a paper from 2021, saying, “All commodities, such as gold, silver, even livestock, have positive returns during inflationary periods, and also benefit from rising inflation.”

Having said that, Yang is quick to put a caveat on the commodities, pointing out that what’s good for riding out inflation may not be great in the longer term.

“Gold and silver might be good to own during a tough economic time, especially because they can outperform cash in that short period of time,” he says. “However, the longer you look out, the more that stocks and real estate look a lot more appealing, because they’re just going to perform a lot better in the long run.”

3. Stocks

There’s two main ways you can invest in stocks. You can pick your own stocks and try to beat the market. This is very difficult to do and requires a ton of time and research. (There’s a reason it can be a full-time job.)

Or, you can do what Yang recommends, and simply invest in an ETF or index fund. These allow you to invest a little bit into a lot of companies, offering built-in diversification. For example, Yang specifically mentions investing in an S&P 500 index fund, which would mean you’re buying a small percentage of all of the top 500 companies in the U.S.

Index funds can be a good long-term investment strategy, but I agree with Yang’s warnings about short-term risk. In times of recession, for instance, your portfolio can have a significant drop if the S&P isn’t doing well. He emphasizes that investing in stocks has the most potential for appreciation if you have a time horizon of 20 years or more.

4. Collectibles

Next on Yang’s list is, I think, a somewhat controversial suggestion: collectibles. Some of the collectibles he mentions include:

CoinsStampsRare magazinesSports memorabiliaPokemon cards

As with a few other things on this list, Yang’s argument for collectibles is that anything truly finite, such as one-of-a-kind collectibles, tends to maintain its value.

While I can sort of agree with this idea — with caveats — I’m glad he goes on to clarify that the appreciation of collectibles relies on a ton of variables and is no way guaranteed. He’s also careful to add that collectibles are highly illiquid.

5. Businesses

Perhaps the most interesting asset Yang lists is owning a business, or a piece of a business.

According to Yang, “Businesses are great uses of cash since they produce revenue and cash flow, allowing you to take some money off the table from time to time, as well as the asset itself actually grows some value over time as well.”

In my opinion, investing in businesses is a lot like investing in collectibles; how profitable the investment is depends on too many variables to predict. The industry, the specific business, the location, the economy — all of these things, and more, will impact how much appreciation and profit you see from investing in a business.

But, you know, banks are cool, too

After spending the video talking about the many ways you can avoid keeping your money in a bank, Yang brings it back around to, well, banks.

“If you don’t feel comfortable investing in any of the five assets I listed today,” he says, “if you do have a bunch of cash sitting around, make sure you’re getting at least 4% APY — or even 4.2% — APY by putting it in a high-yield savings account.”

Not only is this closing advice a nice way for him to work in an affiliate bank mention — no shade from us on that one! — but it also happens to be true. You can find savings accounts and CDs with remarkable rates that are quickly becoming a competitive place to put your money.

And this is especially true when you consider the much higher risk of most types of investment. (Yes, despite the bank troubles early this year, banks are perfectly safe for most savings so long as they are covered by the FDIC.)

So, long video short: If you want to put your money somewhere that isn’t the bank, you can invest in a variety of popular assets — but don’t discount the bank entirely, because rates are pretty good right now.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

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