April 25, 2023

View online | Sign up

TOGETHER WITH

Good day. The median age of a first-time U.S. homebuyer back in 1974 was 29. Can you guess what the median age of a first-time homebuyer is today? a. 37, b. 42, c. 47. Follow the wave 🌊 below for the answer.

Here are the topics for today:

Stock Pickers Flopped During An Unexpected Rally
2023's Most Pressing Finance Questions Answered
Blockchain, Explained

INVESTING

Stock Pickers Flopped During Unexpected Rally

At almost all times, it's a tough time to be a stock picker, but sometimes this arduous task becomes even harder. Active fund managers are consistently berated with expectations and comparisons to their more laid-back counterparts on the passive side — it's a tough crowd.

Q1 has proven to be much of the same, and an unexpected, haughty market bounce to start the year has made matters even more difficult.

Performance review

Guessed wrong: Only about 33% of actively managed large-cap mutual funds beat their benchmarks in Q1 of the year, and this was their worst quarterly outing dating back to Q4 of 2020.
Worse than usual: Actively managed funds have always been like a streaky shooter on a good team — hot when they're feeling it, cold when they're not. Last year these funds found a rhythm in a bear market and notched a 57% beat rate, their best since 2007.
Over-correcting again: What exactly happened that caused such a bad outing in Q1? Fund managers were too pessimistic. After a rough 2022 which saw that nihilistic perspective pay off, those same bearish positions came back to bite them in Q1 as the markets unexpectedly rallied.
Don't rely solely on active: But this is the nature of the game. Active funds are risk-takers — good when they're hot, risky when they're not. Consider investing in a diverse range of funds with differing investment styles (inclusive of passive or index mutual funds), asset classes, and geographic regions that align with your investment goals.

Take this related lesson and earn 🟡 Dibs:

Active vs. Passive Investing

Investing Basics

1 mins

MONEY TIPS

2023's Most Pressing Finance Questions Answered

At any given time, life is constantly full of questions with seemingly no right answer. The evasiveness of such questions doesn't stop us from trying though, and it's that valiant effort that keeps us learning.

Finance is no exception. In fact, it may have more hard-to-answer questions than any other subject. The past few years have brought us an extraordinarily long list of new ones to answer, and we're giving it our best shot yet again.

Here's our list

Is my money safe? In all likelihood, yes. While we have seen some cracks in the banking world creep up from unkempt corners, most depositors will likely remain unscathed. However, recent events like the failures of SVB, Signature, and others serve as a reminder to give some time and thought to the safety of your money, if it's insured, where it's kept, and more.
Are stocks still cheap? After last year's robust rout that saw the S&P 500 put forth its 7th worst year ever, it's fair to ask if stocks are cheap now. The thing is though, that depends on how you look at it. While valuations are down overall, certain stocks are higher than others, and it largely depends on the industry we're looking at. So, the answer is that yes, you'll be able to find a better deal on some stocks now, whereas others are still running hot.
How do I handle freelancing? More U.S. citizens are freelancing than ever, with more than 36% doing some kind of contract work last year. As a result, many are facing challenges like bookkeeping, client and time management, and self-employment taxes for the first time. How to deal with it all? In short, learn all you can and embrace the uncertainty. More specifically, get organized, stay ahead, plan for taxes, and document everything.
Is that recession ever coming? Maybe. Economists have been anticipating a recession for over a year now, and despite our double quarters of negative GDP last year, it seems like it's yet to formally arrive. At this point, 58% of economists surveyed said there's at least a 50% chance of a downturn within the next 12 months, and even the Fed is now expecting a recession this year.
Is it a terrible time to buy a home? Home prices have skyrocketed over the last 3 years, up almost 43% in that time. Over the last 6-8 months though, that growth has slowed, and drastically so in some markets. Interest rates and high prices have stamped out a lot of buyers and therefore stifled the fire. So, is it still a bad time to buy? Homes are still really expensive, but that doesn't mean it's a bad time to buy. If you're looking for a place to call home for the next 30+ years and can find a place you can afford, it's unlikely to matter what price you buy it at right now.
Is crypto still a cool investment? From the second half of 2020 through late 2021, crypto was all the rage. It had finally arrived, or so we thought. Since then, it's been a series of unfortunate events for the industry. But, crypto has quietly rebounded quite nicely so far in 2023 — so is it still worth investing in? Maybe. Crypto is a market enigma for now — a sector that has a lot of potential in the long-term future, but with an equal amount of kinks to work out. If you're considering investing, most experts recommend allocating less than 5% of your portfolio to crypto, and for now, that remains a good rule of thumb.
How big should my emergency fund be? When you're dealing with the prospects of historic inflation, a potential recession, and even the occasional bank failure for the first time in over a decade — the natural response is to start stuffing money under the mattress. All this uncertainty begs the emergency fund question, how much is enough? Most would suggest 3-6 months of personal expenses, but in uncertain times like these, we'd hint at nudging that up a bit. Depending on where you are now, aim to ratchet things up to 5-7 months first, then build from there.

Take this related lesson and earn 🟡 Dibs:

Save for a Rainy Day

Budgeting & Saving

7 mins

FEATURING DIVVY

Are you spending way more time and energy on expense reporting for your company?

If that sounds remotely like you, Divvy, BILL's spend and expense management solution can save you. It's one of the easiest and most efficient ways to manage your company's expenses.

With Divvy you can:

close your books 3 days faster
reduce time spent expense reporting by 75%
save almost 300 hours a year vs using traditional expense control software (we aren't kidding)
get access to credit to keep your business growing

And this month only — new customers (aka you) get a $100 Amazon gift card just for hopping on a demo. Learn more today.

CRYPTOCURRENCY

Blockchain, Explained

Do any of us actually understand the blockchain that's so often referenced in discussions about cryptocurrency? If you're like a lot of investors, you may have googled this buzzword on multiple occasions to try and get a grasp on the subject, only to leave feeling a bit defeated by the seeming complexity of it.

We're going to survey this topic in a very simplistic manner that's understandable and useful to the average investor, and there will undoubtedly be some intricacies omitted from the jargon along the way. So blockchain experts, close your eyes and hold your fire.

What is a blockchain?

A blockchain is a database that allows companies and everyday people alike to store and securely transfer information and currency instantly. Each block has a storage capacity for the amount of data it can contain, and once that limit is satisfied, another block is added chronologically to the chain.

A blockchain differs from a classical database in that information is presented and stored in blocks and not tables. In the case of Bitcoin, for example, the blockchain is a database used for storing and recording every Bitcoin transaction ever made on it.

Blockchains and decentraliziation

Bitcoin is considered "decentralized" because its blockchain is administered through thousands of nodes across the world (though the degree to which is debated). Each node or computer contains the entire record of the chain's transaction history, and because every transaction is cross-referenced against every other node's records, any attempt to alter the record is rendered worthless. Simply put, decentralization gets rid of the middleman, making transactions hard to manipulate.

At present, blockchains are mostly used for cryptocurrencies as a means of transfer of value between parties, and there are many use cases across industries from healthcare, financial services, and retail to governments and even tourism. For example, a healthcare company might offer a product that aims to provide decentralized blockchain patient records, or in the case of OpenBazaar (a non-profit), they're working to build a decentralized market where goods and services can be traded without middlemen and securely, instantly and globally.

Blockchain and Bitcoin

Here are a few more concepts to get familiar with for now...

Summary of the chain: A blockchain relies on a distributed network of storing data that retains a high level of integrity, often decentralized. A decentralized blockchain works to make sure that information that's stored and recorded within its database is basically irreversible.
The creation of new Bitcoin. In the case of Bitcoin, since there can only ever be 21 million total Bitcoins, the only way to release new Bitcoins into circulation is through a process called "mining" that requires solving a really complicated mathematical computation. And mining is necessary to maintain the ledger of transactions upon which Bitcoin is based.
The process. When a block is verified by solving this computational puzzle, new Bitcoins are created and the miner is subsequently rewarded with Bitcoin. The reward currently sits at 6.25 Bitcoin, and that amount gets cut in half every 4 years or so (every 210,000 blocks) meaning that this process will continue until about 2140 when the 21 million cap is reached.

Take this related lesson and earn 🟡 Dibs:

Bitcoin Deep Dive (Part 1)

Crypto & NFTs

6 mins

🌊 BY THE WAY

🏡 Answer: 47. According to data published by Deutsche Bank, the median age of homebuyers in the United States is now 47. Compare that to the median age of American homebuyers in 1981 which was 31. TBD (homecity)
✈️ Air travel is about to get that much worse (Axios)
🚗 ICYMI. Pause before buying that car (Finny)
🛋️ IKEA stores coming soon to 8 new U.S. locations (CNN)
✨ Finny lesson of the day. April is financial literacy month, so for every edition of The Gist this month, we'll go back to the basics and share a fundamental lesson for you to review:

Buy vs Lease a Car?

Cars

6 mins

How did you like today's newsletter? (Please vote only once.)

🔥 Great, enjoyed it - 😐 Okay, but you can do better - 👎 Not interesting

Finny is a financial wellness platform. The Gist is Finny's twice-a-week (Tues & Thurs) newsletter covering personal finance, market trends and investing insights. Finny does not offer investment and stock advice.

Please support our corporate sponsor⁠ — Divvy — as they make rewards on our platform possible! If your company is interested in sponsoring The Gist, please reach out to us. If you have any feedback about this edition or anything else, please email us.