Obsidian Market Update 3/10/2023
A B C D E F . . . T?
In the financial world, there’s a constantly changing alphabet soup of abbreviations. To name just a few: APR and APY, AMT, CAGR, CD, EIN, EPS, FDIC, IPO, IRA, P/E, REIT, ROI, TSA and YTM. (Translations are at the end of this newsletter.)
Joining the list 30 years ago was ETF or exchange-traded fund. The first U.S.-based ETF, the Standard & Poor’s Depositary Receipt (SPY), has become the world’s largest with over $370 billion in AUM (assets under management), and a daily volume of over $32 billion. By the end of 2023, investors had poured $6.5 trillion (on a net basis) into the EFT sector. As of September 30, 2022, there were 3,030 EFTs listed in the U.S. holding $5.928 trillion in assets in U.S. Markets. In January of 2023, the nation’s mutual funds combined assets totaled $23.13 trillion.
ETF and Mutual Fund Overview
EFTs share some of the same characteristics as mutual funds:
- Both buy investments with money pooled from many investors
- Both provide portfolio diversification
- Both can hold different investment vehicles such as stocks, bonds and commodities
But the two differ in asset mix, purchase and sale frequency, management style, price setting and purchase format.
- EFTs track an index (such as the S&P 500, commodities, bonds, or currency markets) through direct investment (or using derivatives) while mutual funds generally consist of a portfolio of stocks, bond and/or other investment vehicles in a mix designed to match specific goals, consumer risk tolerance, and time horizons.
- EFTs are sold and bought throughout the trading day while mutual funds limit purchases and sales to once per day
- EFTs are managed passively, while mutual fund managers decide when and what to buy
- EFT prices fluctuate during the trading day, while mutual fund prices are set after the end of each trading day.
- Investors can choose the dollar amount to invest in a mutual fund (although most have a required minimum investment) while EFTs are bought and sold only in full shares.
EFT or Mutual Fund: Which is Best?
As with every investment vehicle, “the best” is the one that best meet your goals. For example, if greater transparency, high liquidity, and fewer capital gains are important to you, then EFTs are worth considering. If a more actively managed approach within a particular investment makes sense, then a mutual fund may be the better choice.
It’s our job to stay on top of the ever-evolving world of financial projects. Yours is to help us understand your ever-changing goals so we can help you meet them. Together, we can customize a portfolio to achieve your current and retirement goals.
How We Help
Home Sweet (New) Home
The housing market is changing quickly for a variety of reasons including, increasing interest rates (6.97% for a 30-year fixed, 6.504% for a 20-year fixed 5.886% for a 30-year fixed FHA and 6.172% for a 30-year fixed VA as of March 6, 2023), limited supply and tight inventory due to lower rates of new home construction. Navigating this market is complicated, so it’s not surprising that many clients have contacted us recently with housing-related financial questions. Most common among them is: When I sell my current house, does it make sense to pay down the mortgage on the new one?
Of course, there is no one-size-fits-all answer. For example, a couple who already has a comfortable amount of liquid (non-retirement) investments could potentially save around six percent by paying down a new mortgage. A couple whose funds are held in various retirement accounts might make the opposite choice. There are many variables that must be taken into consideration for each family. The Lifestyle Protector Program accounts for many of these scenarios.
We’re always happy to share our thoughts on your unique situation. Give us a call and we’ll help you find the right financial solution for you and your family.
LIFESTYLE
Intermittent Fasting
Better memory, improved blood pressure and resting heart rates, muscle mass retention during fat loss and obesity prevention. Too good to be true?
Not according to Mark Mattson, a neuroscientist at Johns Hopkins who, for the past 25 years, has studied intermittent fasting. Basically, with your doctor’s approval, you pick a pattern of fasting and eating that limit eating to one six- to eight-hour period each day. You might fast for 16 hours and eat during eight every day of the week or only on two days per week. By prolonging the period when the body finishes burning sugars and starts burning fat, you can “protect organs against chronic diseases like type 2 diabetes, heart disease, age-related neurodegenerative disorders, even inflammatory bowel disease and many cancers,” says Mattson.
During fasting periods, you can drink water and no-calorie beverages, including coffee and tea. When you eat, choose wisely, as high-calorie junk foods aren’t great for you no matter your diet.
Is fasting for you? Of course, Obsidian is not an expert on this topic so that’s a discussion best had with your doctor.
Acronym translations from opening paragraph:
Annual percentage rate, Annual percentage yield, Alternative minimum tax, Compound annual growth rate, Certificate of deposit, Employer Identification Number, Earnings per share, Federal Deposit Insurance Corporation, Initial public offering, Individual retirement account, Price-to earnings ratio, Real estate investment trust, Return on Investment, Tax-sheltered annuity, and Yield to maturity.
Advisory Services offered through Obsidian Personal Planning Solutions, LLC. Securities are offered through Triad Advisors, member