Money Management

It’s really not a favorable market for buyers. 

A lot of people have struggled to buy a home over the past few years. We can thank factors like record-high prices and limited inventory for that. But at this point, home price gains have been slowing. And mortgage rates, though still high, are lower than they were in late 2022.

As such, you may be inclined to go out and purchase a home, especially if you’ve been saving diligently for one. But if you ask investing and real estate guru Graham Stephan, he’ll tell you that buying a home today is a pretty bad idea.

Why it’s a “terrible” time to buy a home

In a recent tweet, Graham Stephan point-blank said, “Now is a terrible time to buy a house.” And he cited a few different reasons:

Mortgage rates are highFed rate hikes are unpredictableNational housing prices might drop further

Let’s dive into each of these, because they’re important factors to understand.

Mortgage rates

Today’s mortgage rates, though lower than they were late last year, are almost twice as high as they were a year ago. Now, if home prices were more affordable, then it would be easier to make the case that signing a mortgage loan with a higher interest rate attached to it isn’t the worst thing. But home prices aren’t affordable. Gains have slowed down, which means sellers aren’t raking in the same large profits they were a year ago. But they’re still profiting nonetheless.

Federal Reserve rate hikes

Now let’s talk about Federal Reserve rate hikes. The Fed isn’t done trying to slow the pace of inflation. As such, it’s likely to keep raising interest rates this year.

The Fed does not set mortgage rates. But when the Fed raises its federal funds rate, which is what banks charge each other for short-term borrowing, the cost of consumer borrowing tends to rise, too.

Interestingly enough, sometimes mortgage rates can rise and fall independently of what the Fed is doing. Last year, for example, mortgage rates began to climb before the central bank got aggressive with its rate hikes. But still, the Fed’s actions could make other types of borrowing more expensive. And the fear is that expensive borrowing will lead to pullback in consumer spending, which could ultimately spur a recession.

So all told, there’s a lot of economic uncertainty to grapple with right now. And taking on a major expense like a home loan may not be the best move in light of that.

Home prices might drop

Finally, let’s talk about home prices. They’re high today, but many experts are convinced they’ll continue to trend downward.

When you’re buying a home as a place to live, rather than as an investment, then you don’t have to worry so much about what your home might be worth in a year or two from now. But you also don’t want to end up underwater on your mortgage, so it may not be a good idea to buy a home at a time when prices are up but likely to drop significantly.

Should you wait on a home purchase?

If you’ve been saving for a home for years and are struggling to find a quality, affordable rental, then you may want to move forward with a home purchase regardless of the issues Stephan brings to light. But otherwise, waiting to buy a home could work to your benefit.

There’s a good chance that home prices and mortgage rates will be lower a year from now than they are today. So sitting tight and being patient could be the better move, financially speaking.

Our picks for the best credit cards

Our experts vetted the most popular offers to land on the select picks that are worthy of a spot in your wallet. These best-in-class cards pack in rich perks, such as big sign-up bonuses, long 0% intro APR offers, and robust rewards. Get started today with our recommended credit cards.

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.

 Read More 

Some employers are offering up to $75,000 to new hires. 

Americans are partying like it’s 1969 following the release of a jobs report indicating the lowest unemployment rate in 50 years. But the labor report isn’t good news for everyone, especially employers in certain industries facing worker shortages. To attract new talent, some companies have resorted to offering substantial signing bonuses. Read on to learn more about which industries are offering the most, and how to boost your odds of landing a signing bonus.

A sizzling labor market

A report from the Bureau of Labor Statistics earlier this month indicated that the American job market was strong, despite ongoing recession concerns. A strong market gives extra leverage to employees who face rosier prospects in the job market.

The reported unemployment rate of 4.3% hasn’t been seen since the Nixon administration and signals that workers have the upper hand in negotiating power. When employees feel they are being treated or compensated unfairly, they may consider entering a labor market where their prospects of finding better conditions are good. This is likely why companies are raising wages at the fastest rate in over twenty years.

Of course, worker shortages can be the result of many factors, not exclusively unfair treatment of employees. In many industries, job creation has recently outpaced new workers entering the workforce, especially among companies bouncing back from the COVID-19 pandemic. However, in an economy where there are two job openings for every one unemployed worker, it can be incredibly challenging for employers to fill vacancies right now.

Who’s offering bonuses?

From transportation to education, a variety of industries are in the midst of a hiring crisis. Some have sought to stand out to job seekers in a variety of ways, including by offering signing bonuses of tens of thousands of dollars, which could be an unexpected boon for the personal finances of many Americans.

Healthcare appears to have been hit the hardest by the labor shortage, with doctors, nurses, medical technicians, dentists and even veterinarians in high demand. Education and childcare are also facing a labor crisis as schools and daycares nationwide struggle to find workers. And as a result of last year’s supply chain crisis, trucking companies are unable to find enough drivers.

The number of job listings advertising a signing bonus has tripled in the last three years, and in some industries as many as one in five job openings comes with a signing bonus. The amount of these signing bonuses can vary, but some employers are offering large sums. This includes Walgreens, which now offers a $75,000 signing bonus to new hires. Other employers are getting even more creative, holding job fairs and paying candidates to interview.

Boost your bonus chances

In a competitive market, remember that you are a hot commodity. So, don’t be afraid to negotiate a signing bonus when interviewing for your next job.

First, do your research on what a job seeker in your industry can expect for a signing bonus, and use that to benchmark your offer. Next, shop around for another offer — if you are interviewing with a company offering a high bonus, don’t be afraid to ask whether other companies will match it. Finally, don’t limit your negotiations to a dollar amount. Many employers have more flexibility to negotiate things like hybrid work schedules and vacation time than upfront compensation.

The job market is the hottest it’s been in half a century, giving workers more power in workplace negotiations. A number of industries are especially feeling the consequences of a worker shortage, and offering sizable signing bonuses as a result. A job market like today’s won’t last forever, and workers should take advantage of their negotiating power before it’s too late.

Alert: highest cash back card we’ve seen now has 0% intro APR until 2024

If you’re using the wrong credit or debit card, it could be costing you serious money. Our experts love this top pick, which features a 0% intro APR until 2024, an insane cash back rate of up to 5%, and all somehow for no annual fee.

In fact, this card is so good that our experts even use it personally. Click here to read our full review for free and apply in just 2 minutes.

Read our free review

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.

 Read More 

Would you go a similar route to spruce up your home? 

Improving your home could enhance your quality of life in many ways. If there’s a larger project on your radar, you may be eager to take the plunge.

Of course, before you dive into a home improvement project, you’ll need to crunch the numbers to see what it will cost you. And you’ll also need to make sure you have a way of paying for that project.

In a recent survey by Today’s Homeowner, a surprising 60.3% of respondents said they plan to pay for home improvement projects using money from their checking or savings accounts. Of course, a lot of people don’t have enough money in the bank to pull off a major renovation project. But if you do, you may be thinking of taking a withdrawal to cover your costs. That way, you won’t have to deal with the hassle of applying for a loan, and you won’t have to bear the cost of paying interest on one.

But even if you have the money sitting in your bank account to pay for a renovation, you may want to consider taking out a loan instead. Here’s why.

You don’t want to leave yourself short for emergencies

If you have $40,000 in savings and need $5,000 to cover a home improvement project, then it could pay to take that withdrawal. But if you’re looking at a $30,000 renovation, then raiding your savings may not be the best choice, even though doing so might seem to make sense.

One thing you don’t want to do is leave yourself short on funds for emergency expenses just to cover a home renovation. So let’s say you normally spend $6,000 a month on living costs. Ideally, you should have enough money saved in an emergency fund to cover at least three months of bills in case you lose your job. If you take a $30,000 withdrawal from $40,000 in savings, your balance will fall below that threshold, leaving you vulnerable in the event of a layoff.

Affordable ways to borrow for home renovations

If the idea of taking a large chunk of money out of your savings isn’t sitting well with you, there are other options you can explore. One is a personal loan, which lets you borrow money for any purpose. If you have a strong credit score, this could be a good choice, and you may find you’re able to lock in an affordable interest rate on a loan.

You could also tap the equity you have in your home with a home equity loan. This might be a better option than a personal loan if your credit score isn’t in the best of shape.

Now, there’s a third option to look at — a home equity line of credit, or HELOC. A HELOC isn’t a straight-up loan. Rather, you get access to a line of credit you can tap for many years.

You may be inclined to go this route if you’re not sure what your upcoming renovation will cost you, as it gives you flexibility (whereas if you borrow $30,000 for a project that ends up costing $33,000, you’ll be short). But HELOCs also come with variable interest rates, which means you run the risk of your payments getting more expensive over time.

If you’re sitting on money in the bank, you might assume you should just take a withdrawal to pay for home improvements. In some cases, that makes sense. But if you’re talking about removing a large chunk of your savings and leaving yourself with little money left over, then looking into different borrowing options may be the better choice.

These savings accounts are FDIC insured and could earn you 13x your bank

Many people are missing out on guaranteed returns as their money languishes in a big bank savings account earning next to no interest. Our picks of the best online savings accounts can earn you 13x the national average savings account rate. Click here to uncover the best-in-class picks that landed a spot on our shortlist of the best savings accounts for 2023.

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.

 Read More 

It can actually set the stage for big profits. 

In 2022, the S&P 500 lost 19.44%, representing its worst year since 2008. The S&P 500 index, which is comprised of the 500 largest publicly traded companies, is generally considered to be an indicator of the stock market’s performance on a whole. In fact, if you hear someone say something like “the stock market fell 2% today,” there’s a good chance that by “stock market,” they mean the S&P 500.

Given this, it’s fair to say that 2022 was a down year for the stock market. And it was a year that no doubt rattled investors — especially those who are still looking at on-screen losses in their brokerage accounts.

But if you invested money in 2022, you actually did a smart thing. And if 2023 ends up being a down year also, then it pays to keep pumping money into different investments, even though you may be inclined to do the opposite.

Why investing in a down market pays off

Your goal in buying stocks and other assets shouldn’t necessarily be to snag the lowest possible price. Rather, it should be to buy at a point where the value of those assets has the potential to go up.

If you’re tracking a stock and notice that its price has just reached a 52-week high, you may not want to buy it just yet. The reason? That stock may have peaked.

But let’s say there’s a given stock you’ve been eyeing whose price was $100 per share six months ago, and is now priced at $78 a share. If the reason for that drop has more to do with general market conditions and less to do with that company’s prospects, then buying that stock for $78 a share makes a lot of sense. That’s because there’s a good chance that stock will eventually be worth more than $78.

The same general concept applies to investing in a down market, whether you do so by loading up on individual stocks or going broad and putting your money into exchange-traded funds, or ETFs. If you buy when the market is down, there’s a good chance that your investments will be worth more money eventually. If you buy when the market is up, that might still happen — but it may not.

It’s all about patience

One thing you don’t want to do in a down market is buy stocks and hope their value will rise substantially within a year so that you can cash out, take the money, and run. Investing in the stock market is something you should plan on doing over a lengthy period of time. That’s because it can take time for a down market to recover, and often, being patient is the ticket to making money.

Of course, we don’t know if 2023 will end up being a down market or not. The year has started off on a somewhat volatile note, and thanks to the ever-persistent problem of inflation, it’s hard to know how stock values will fare. But if 2023 ends up being a year of lower stock values, don’t shy away from investing. Instead, put more money into stocks to set yourself up to profit big time in the long run.

Our best stock brokers

We pored over the data and user reviews to find the select rare picks that landed a spot on our list of the best stock brokers. Some of these best-in-class picks pack in valuable perks, including $0 stock and ETF commissions. Get started and review our best stock brokers.

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.

 Read More 

They all carry risk, but also, potential reward. 

Thanks to inflation, a lot of people are barely sitting on enough money to pay the bills these days. But if you have spare money you don’t need to put into your savings account for emergencies, then you may be eager to invest that cash and put it to work. Here are a few options to consider if you’re sitting on $5,000.

1. Buy individual stocks

When you buy individual stocks, you take on a couple of risks. First, you run the risk of the broad market tanking. You also run the risk that the specific companies you’ve chosen will experience challenges (financial or otherwise) that result in lower stock values.

But if you’re willing to spend the time researching different companies and digging into their finances, then putting $5,000 into specific stocks could be a good bet. Furthermore, if your brokerage account allows you to buy fractional shares of stocks, which many do, you can really assemble a nice, diverse mix of stocks with $5,000 to work with.

If the stocks you choose perform well, you might not only make money, but outpace the broad stock market. That’s something to be proud of.

2. Invest in ETFs

ETFs, or exchange-traded funds, are funds that trade publicly. The benefit of buying them is getting to scoop up a bunch of different stocks with a single investment. That could save you a lot of time — and stress — as far as research goes.

Another benefit of choosing ETFs for your portfolio? Not facing hefty fees that eat away at your returns.

In a recent Charles Schwab survey, almost 60% of ETF investors cited cost as the most important factor when choosing which funds to put money into. So if you don’t want to overpay, ETFs could be a good bet.

Now one drawback of ETFs is that you may not manage to beat the broad market if you stick to them. But if you’re okay with that, then they’re definitely a simpler way to invest. And you might take comfort in simple.

3. Put money into real estate

If you have $5,000 to invest with, you may be able to buy plenty of shares of stocks or ETFs. But you most likely can’t buy a rental property with $5,000.

That’s okay, though. You don’t need to own actual property to invest in real estate. Instead, you could buy shares of REITs, or real estate investment trusts.

REITs are companies that own and operate portfolios of properties. They make money by leasing out space within those properties, whether it’s warehousing space or space at a shopping mall.

The upside of putting money into REITs is that they’re required to pay out at least 90% of their taxable income as dividends. As a result, REITs tend to pay higher dividends than your average stock. And that could leave you with more money to reinvest during the year.

If you’re sitting on $5,000, whether from a year-end bonus, an inheritance, or a tax refund, it’s a good idea to try to put it to good use. Investing that money in stocks, ETFs, or REITs could help you end 2023 with more money to your name. But remember — investing is something you should plan to do over time. So even if you don’t end up wealthier by the time 2023 draws to a close, there’s a good chance you’ll end up richer five, 10, or 20 years down the line.

Our best stock brokers

We pored over the data and user reviews to find the select rare picks that landed a spot on our list of the best stock brokers. Some of these best-in-class picks pack in valuable perks, including $0 stock and ETF commissions. Get started and review our best stock brokers.

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.Charles Schwab is an advertising partner of The Ascent, a Motley Fool company. Maurie Backman has no position in any of the stocks mentioned. The Motley Fool recommends Charles Schwab. The Motley Fool has a disclosure policy.

 Read More 

Short-term forecasts are for short-term investors. 

In 2023, everyone’s a prophet. Most middle-class American investors predict an economic downturn. The Fed continues to raise rates at historic speed to combat inflation (which may or may not still be happening). Recession predictions swing from wild to mild.

This year, Morgan Stanley thinks cautious investors will win the stock market game. Here’s why Lisa Shalett, the company’s Wealth Management Chief Investment Officer, says 2023 will be a “year to be patient” when it comes to investing.

Morgan Stanley thinks investors are “too optimistic”

Shalett thinks investors may be jumping the gun. The market is still down, but recent rallies point to inflated expectations. Take the S&P 500. The broader market anticipates year-end earnings of around $230. Morgan Stanley pegs the value at a much more modest $195. Why is that?

The financial firm’s logic is that companies have yet to be hit with the consequences of rising thriftiness among consumers. To put it plainly, people aren’t buying. Morgan Stanley anticipates companies will sell fewer goods and suffer lower profits as they’re pressured to drop prices.

Another one of Morgan Stanley’s Chief Investment Officers predicts the U.S. market will fall by 22% and slowly bounce back, ending the year on a flat note. The firm suggests consumers consider investing in U.S. stock alternatives, such as Treasury securities and emerging markets.

Two-year Treasury

Shalett suggests a two-year Treasury note as a stable alternative to volatile U.S. stocks. Right now, investors can make around 4% on their investments. Investors can purchase two-year Treasury securities through TreasuryDirect. Or, they can invest in exchange-traded funds (ETFs) through a great ETF broker.

Emerging markets

According to Shalett, emerging markets are ripe for investment. She cites factors like a weakening U.S. dollar and relatively cheap valuations as reasons to invest. She names China specifically as entering 2023 with strong growth prospects.

Short-term investors, take caution

Recessions have an outsized impact on traders, retirees, and short-term investors. Investors who anticipate withdrawing money within the next year or so may want to take Morgan Stanley’s advice and stick to Treasury notes or emerging markets. At the very least, a U.S. recession is likely.

Long-term investors, stay the course

Long-term investors should take price valuations by firms like Morgan Stanley with a grain of salt. Year-end valuations shouldn’t matter much to investors who hold their stocks for five years or more. Prices rise and fall, sometimes dramatically. That’s a given.

That said, bear markets bite. Investors worried about day-to-day stock swings can fortify their resolve by jotting down “why I invested in X” in an investment journal. They can also ensure their investments are diversified by holding at least 25 stocks.

Keep an investment journal

Sometimes, companies fail. In bear markets, red lines blur together. It’s tough to tell the difference between a company hurtling toward bankruptcy and one suffering the temporary effects of a broad market downturn like the one we had in 2022.

In times of doubt, refer to your investment journal: the place where you spell out the logic behind your investments. Reasoning can be as simple as “the Motley Fool recommended it” or as complicated as a twenty-column Excel sheet. The important thing is to record your thoughts.

An investment journal gives you something to measure when stocks are down. Refer back to it to make informed decisions during a stressful market.

Hold 25 or more stocks

Diversification is important for two reasons: 1.) hedging your bets and 2.) maintaining peace of mind. History suggests investors who diversify by holding at least 25 stocks for five years or more are more likely to see returns on their investments.

The best stock brokers offer savvy investors plenty of options to park their money. Record your investments in an investment journal before deciding whether to shift your investment strategy. Patience and informed decision making will see investors through a volatile 2023 market.

Our best stock brokers

We pored over the data and user reviews to find the select rare picks that landed a spot on our list of the best stock brokers. Some of these best-in-class picks pack in valuable perks, including $0 stock and ETF commissions. Get started and review our best stock brokers.

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.Cole Tretheway has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

 Read More