Good Financial Reads: Making Smart Investments (Part Two)

Do you hold highly appreciated stock that you want to sell, but don’t want to pay the subsequent capital gains tax?

If so, there is a new investment option to consider. Investing in a Qualified Opportunity Fund (QOF) allows you to defer federal tax on your capital gains while freeing up the money you initially used to buy the stock (i.e., your cost basis) for other purposes.

When I let my engineering colleagues know that I was going to pursue financial planning full-time, we had some of the most fascinating conversations.

For instance, there was the colleague who pulled me aside and, in a conspiratorial sotto voce, asked me, "So...what do you think about Tesla?"

I hope everyone had a turkey filled and relaxing Thanksgiving, I know I’m planning on working leftover turkey into my meals for weeks to come.  I write a fair amount about how to reduce stress in investing and focus on making smart investment decisions, but I wanted to talk about this concept in a down market.  If you’ve been paying attention to the market recently (and if you haven’t, seriously congratulations, I’ll get to that in a bit) you’ll have seen that a lot of the numbers are red more often than not.  My advice about staying the course is all well and good when the markets are up and you’re making money, but things get a little more murky when the market actually begins to dip. So, let’s take a look at logical steps to take when a downturn hits and then ways to calm the illogical thoughts/actions that can pop up.   

My father-in-law recently found a buried treasure.  Deep in the back of a filing cabinet, he discovered a forgotten envelope containing several US savings bonds.  

Fun!  Unexpected money!  The bonds were made of real paper; they had a good feel – squared corners, colorful bold print.  They were just as sturdy and crisp as the day he bought them 30 years ago.  The printed, or “face value” was $500.  He had bought the bonds for $250 (that’s how series EE savings bonds work) to help his daughter pay for college, and because Boeing employees at that time were encouraged to by Savings bonds.  But, he forgot about them.  I am guessing that paying for college didn’t have the same financial pressure then as it does today. 

There's a reason why Jim Cramer and his big red buttons are so popular. He's flashy and funny and so...certain. You can't lose! He makes things simple, and that appeals to us. Buy "good tape", not "bad tape". Do this, get rich. Do that, go broke.

Meanwhile, ask me or my colleagues what we think of Tesla, or the FAANG(M?) stocks, and we'll shrug and talk about the relative efficiency of the market, and the importance of a well-diversified portfolio that matches your risk tolerance and risk capacity.