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It’s Time to Live a Stress-Free Financial Life

Your goal is to live a stress-free financial life. That is the whole point of having money.

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The Craziest Thing Since 1999

Be honest: Did you put your stimulus check into the stock market?

I hope not. Because something crazy is happening right now...

There’s a common misconception that retail investors drive the stock market. However, that is not the norm—99% of the time, retail investors are an afterthought.

The current stock market rally is one of the rare exceptions.

In case you missed it, the S&P 500 plummeted 32% at the start of the COVID-19 crisis. Now it’s exploded 43% higher since the March low.

A big reason for the whiplash is that retail investors are pouring their stimulus checks into the market. And they’re buying a lot of garbage, like airline stocks.

Image credit: HSBC

Retail investors are buying the JETS ETF, whose top four holdings—American, United, Southwest, and Delta—are stocks that legendary investor Warren Buffett recently sold. Not just buying… they’re behind a 1,600% surge in fund flows.

Look, the airline business is in the toilet. I don’t think air travel will reach pre-crisis levels for many, many years. In the meantime, the airlines have too many planes, too much capacity.

There is zero reason to buy airline stocks. But this is the kind of junk retail investors are buying.

The Biggest Stock Market Bubble in History

The last time retail investors played this big a role in the market was 1999, during the dot-com bubble. I remember sitting in an office full of government employees, and nobody was working. Everybody was trading stocks!

This was the biggest stock market bubble in history. Let me refresh your memory on what happened next...

The tech-heavy Nasdaq crashed 77%.

Today we’re in another bubble. And the craziest part is, it’s happening right after the stock market crashed over 30%.

Usually when the stock market crashes, people get demoralized and don't invest for years. But this time, people plowed into the market.

Part of the problem is sports gamblers. These guys don’t have any action right now. They can’t bet on baseball, or basketball, or hockey. There’s a massive amount of legal and illegal gambling in this country. And these guys are itching to bet on something. So, they’re betting on stocks.

I would not call these people investors. They’re gamblers!

Screwing Around with Stocks

The reality is, a lot of people are not responsible enough to own stocks. Just like a lot of people are not responsible enough to own a house.

Think back to the housing bubble, when the homeownership rate shot from around 63% to 70%. Part of the reason for the subsequent crash was that some of the folks in that extra 7% had no business owning a house. They couldn’t take care of it. They couldn’t make the payments.

Now we have a bunch of irresponsible people betting on stocks. They’re downloading a free trading app like Robinhood and screwing around. I do not know anyone who’s gotten rich this way, at least not on a permanent basis.

Smart Things to Do with Your Money

The conventional wisdom on Wall Street is that you should do the opposite of what retail investors are doing. And there’s something to that.

So, here is my recommendation: Do NOT put your stimulus check in the stock market.

Use the check to pay your rent, buy some groceries, or add it to your emergency fund. Remember, you need at least $10,000, or enough to cover 6 months of living expenses in your emergency fund, whichever figure is greater. Even then, more is better.

I have no problem with people hoarding gross amounts of money in their emergency fund.

There were a lot of sad stories after the dot-com crash... after the housing crash. You don’t want to be one of the people with a sad story after the next crash.

Jared Dillian
Jared Dillian

P.S. If you’re ready to separate yourself from the herd of irresponsible people screwing around with stocks... and actually learn how to invest the smart way, I can help you. I cover everything you need to know, including all the steps to take before you put a single penny in the market, in my free special report How Do I Start Investing? Download your complimentary copy now.
 

Let Jared Help! Depending on your comfort level, we suggest picking one of these four options to get started:

  1. How Do I Start Investing? FREE Course: The thought of learning how to invest can seem intimidating. But it doesn’t have to be.

    With the right approach, you can kickstart your investing journey with the certainty you’re getting exactly what you need. How Do I Start Investing? is the perfect guide for when you’re ready to dive in.

  1. Jared Dillian’s Strategic Portfolio: Get access to Jared’s stress-free portfolio with this monthly newsletter.

    Timely, actionable investment ideas on exchange-traded funds that can help you mitigate volatility and build a resilient and profitable core portfolio, protecting you in bad times while prospering in good times. Yearly subscriptions available.

  1. The Daily Dirtnap: Jared’s macro newsletter for investing professionals. This daily letter takes a top-down approach, looking at the various asset classes, including stocks, bonds, currencies, and commodities. Join over 4,000 readers who read his market insights every weekday.

  1. Street Freak: As the most active of Jared’s portfolio products, Street Freak is an aggressive stock-picking newsletter. It’s written for astute investors who crave creative, fresh macro analysis and forward-looking trade ideas so they can invest more opportunistically, without much hand-holding along the way.

    Adjusted for risk, of course. But this is not for the faint of heart. Jared and his readers are trying to make a lot of money here.

 

The House Determines Everything

Your financial health is less about discretionary consumption than you think. If you really want to move the needle, you need to control your fixed monthly costs.

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Max Out Your IRA with $17 a Day

You don’t have to give up $3 coffees to save for retirement. All it takes is $17 a day and a little attention to where your money goes—no austerity required.

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The Crazy Thing About Taxes

Personal finance is mostly about the big stuff, including taxes. Yet no one seems to know what their tax rate is, which is crazy! Don’t be one of these people.

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Don’t “Snowball”—This Is How You Pay Off Debt

There’s some bad advice out there about paying off debt. Jared shows you the best way to eliminate debt for good. This is how you get your financial freedom back.

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