The Weekly Wealth of Knowledge is your download of this week's most important topics related to financial planning, the markets, and our community. September is back to school month at MONECO Advisors, where we discuss everything from financing school supplies to saving for college.
In this issue:
- Inflation (2 min read)
- Back to School: Managing Student Loan Debt (1 min read)
- 6 Tips for Eating on a Budget (3 min read)
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This week we have an introduction from our Senior Relationship Manager, Jose Vivero!
Most recently, you may have read that Federal Reserve Chair Jerome Powell announced a change in how the Fed views inflation. In the past, the Fed said it would consider adjusting short-term rates when inflation approached 2 percent. But in light of 2020’s many challenges, the Fed’s new policy may allow inflation to run above 2 percent for a period of time before any shift in monetary policy is considered.1
For many, bonds are a critical component of their overall investment strategy. So any change in Fed policy regarding inflation may influence a portfolio. That's why It’s so important to understand that the market value of a bond will fluctuate with changes in interest rates. In other words, when interest rates rise, the value of existing bonds will typically fall.2
There’s no doubt this will be a subtle change for many. But for bond investors, the policy shift may indicate that the Fed has given itself more flexibility in the future.
But, what does that mean for the outlook for the bond market as a whole? It’s unclear. However, lower levels of unemployment in recent years have not led to higher inflation. This new phenomenon runs counter to the Phillips curve, a concept which states that inflation and unemployment have a stable and inverse relationship. With this data in mind and the changes announced by Chairman Powell, it could be argued that the Fed believes the relationship between unemployment and inflation has changed.3
Keep in mind that If an investor sells a bond before maturity, it may be worth more or less than the initial purchase price. By holding a bond to maturity, an investor will receive the interest payments due plus your original principal, barring default by the issuer. Investments seeking to achieve higher yields also involve a higher degree of risk.
Back to School: Managing Student Loan Debt
If college were a party, then student loans are the hangover. Unfortunately, the “hair of the dog” won't cure this headache, but here are 5 ideas for managing your student loan debt. Click here to learn more.
6 Tips for Eating on a Budget
Keeping a budget for food tells us the truth about our spending habits. It might seem restraining at first, but it gives us the freedom to save for bigger picture items.
Budgets help us say no while also saying yes - we can limit the things we don't need and appreciate the things we have truly earned. Click here for 6 tips for eating on a budget!
1. Schwab.com, August 27, 2020
2. Asset allocation is an approach to help manage investment risk. Asset allocation does not guarantee against investment loss.
3. Investopedia.com, May 19, 2019
The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG Suite, LLC, is not affiliated with the named representative, broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information and should not be considered a solicitation for the purchase or sale of any security.