Wondering what you need to know about a bear market, a mutual fund, or a recession? David tackles these sometimes confusing topics and shares the essentials you should know.
You might be hearing different terms in the news like a bear market or a recession. Today we’ll talk through several financial terms and see how they apply in your life.
To start, what do you need to know about bear and bull markets? These describe the intermediate or long-term trend in the stock market. Once the market is down 20 percent from the peak, that’s the start of a bear market. A new bull market starts once you’re up 20 percent from the downturn. Where are we right now? We don’t know if we’ve seen the bottom yet, but we are in a bear market. Why should you care?
Diversification is a key method for reducing stock market risk in your portfolio. David shares an example of what this could look like. Instead of individually picking out stocks, you might decide to invest in a mutual fund or in an ETF with a broad exposure to a few different funds.
A recession is a significant prolonged downturn in economic activity. When two consecutive quarters of GDP is negative, it’s considered a recession. The National Bureau of Economic Research declares a recession way after it has ended. Even if we are in one now, the NBER won’t say so for another several months.
Index funds can either be a mutual fund or ETF. With one purchase, you can buy or sell a particular index. ETFs and mutual funds can be either passively or actively managed. Target date funds help you put your investments on autopilot. You need to figure out which one you are invested in and what the asset allocation is. Does it match what you want to accomplish in your portfolio?
Finally, what’s the difference between a 401(k), a Roth IRA, and an IRA? Anything with a Roth means you are paying your taxes now and the future growth is tax-free. A 401(k) and an IRA gives you a tax deduction today, but the growth will be taxed as ordinary income. When you pay your taxes can be super important depending on what tax rate you’ll be in retirement compared to the tax rate you’ll pay now.
Listen to the entire episode or skip ahead to hear more about a particular term using the timestamps below.
If you ever want your question spotlighted on the show or to ask David something about your retirement, email him at [email protected]
0:46 - The Chiefs are getting up and running again!
1:20 - Let’s talk about some financial jargon.
2:05 - What should you know about bear and bull markets?
6:07 - Why is diversification important?
12:10 - A lot of people are talking about a recession.
15:13 - What’s the difference between mutual funds, ETFs, and target date funds?
20:17 - 401(k) vs. Roth IRA vs. IRA? .
"What you need to figure out is: what is it I’m investing in? What’s its asset allocation?"
– David Dickens
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OUR LOCATION
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Building 27, Suite 190
Overland Park, KS 66210
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