Our Portfolio is up almost $15,000 in 1-day! Inflated Growth?

Watch out for inflated growth and a rolling recession. The first step is steeper than we realize.

The Neighborhood Finance Guy writes about financial literacy topics, investment strategies, market expansion, inflation, signs of inflated growth, and investment buying opportunities. The goal is to help you make effective decisions and set S.M.A.R.T+ER goals with your money. The information is free but the struggle is not sold separately.

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How to construct an investment portfolio that thrives during inflated growth. Sharing all the tips and market tricks to edge out wins.

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Yeah, our investments spiked up almost $14,000 in one day. However, the big twist is that our investments have been down by as much as $40,000 this year. So why the one-day change? The Fed decision!

Jerome Powell, Fed Chairman says “there is ‘misalignment’ in the labor market but not a wage-price spiral.“

The Federal Reserve lifted its policy interest rate for the first time since 2018. The Fed rate decision on February 16 increased interest rates by 0.25%-0.50% with a guarantee of another six sets of increases throughout the year to ease inflation. The goal is to fight with rapid bursts.

Think of it like slowing down a car that’s going too fast downhill. A full stop would be disastrous. Stocks will be up due to optimism so try not to fall for the inflated growth sleight of hand trick. Most portfolios are still down.

Be cautious with the wins since the rallies up and down are coming.

A well-diversified portfolio is still critical. The reversion to the means is in full effect. Your investment goals should align with your risk tolerance and risk capacity. In other words, you need to develop a flexible and resistant portfolio based on systemic strategies, economic and business cycles, as well as your own needs.

Graphic #1 – TNFG’s 2021 Invst. Strategy in M1 Finance

For example, I included my own 2021 strategy (see graphic #1)

This investment strategy addresses short-run growth while minimizing taxes, and even compound using a DRIP.

Setting a vision for our investments and staging your household budget,
Determining your asset allocation,
Creating and Styling your portfolio strategy and desired outcome,
Reassessing and re-balancing your portfolio weightings, and
Profit recapture over long-term holding where needed.

Graphic #2, I know scamming is up but I keep it 100%, check the 1-day change in Personal Capital

Financial Experts call this Coiling Gun Powder to Invest!

Let’s get the global homework out of the way.

China holding steady in an economic Recession due to double dips in pandemic productivity. Western Europe is struggling in the late stage of expansion and is headed to a recession by mid-2023. All of this leaves the United States trailing behind.

The Russian-Ukraine war pulled the entire world downwards. Oil prices are soaring due to sanctions. OPEC isn’t budging on increasing production. It will take at least 6 months for gas prices to stabilize back to sub $4 at your local station. Since both Russia and Ukraine are top wheat, soy, and corn exporters, prices for food also went up.

You might not like wheat bread, those things are in everything.

Sorry to say this, but it’s a whole mess. The only good news is that solutions that were applied 5 years ago as still valid today and tomorrow. Here is a guide on how to go from broke to wealthy even during this inflationary period. As a bonus, I highly recommend that you coil some money on the side for buying opportunities.

See video #1 on how you can create a wealth snowball

Always Opt for Investment Strategies over Inflated Growth

Want to win while everyone is losing?

You have to figure out an investment strategy that capitalizes on market movement (see graphic #3). One of the things you should avoid is holding unto too much cash.

For example, if you hold $30,000 in a US savings account at 0.01% annual growth with over 5% inflation, the new buying power after a year is $28,503.

Your money needs to go out the door fast to either tackle your debts or funnel them into investments.

Having some cash and float for emergencies is good but holding on too tightly to cash is not a great bet.

See video #2 on Building Wealth During Inflation.

Late Stage Investment Shake Ups

This late stage in the business cycle is characterized by moderate growth, credit tightening, earnings under pressure, policy contractions, and new inventory growth and sales growth trailing. And based on some financial experts’ estimates, we are witnessing the twilight of the US military complex.

In this phase, unemployment will drop while prices go up and wages stay down. If you are over-leveraged in the tech sector, it might be time to get with Consumer Staples, Health care, Energy, and Utilities.

While you will see snaps in the market, just remember to play the game and take the winnings off the table with S.M.A.R.T.E.R. re-balancing strategies.

If you don’t know what re-balancing is, check with your certified financial planner or certified public accountant. If they don’t know what you are talking about, leave them.

You will find that credentials don’t always translate to real-time expertise in building wealth. Some people merely work with the wealthy, while others are. And, try not to be fooled by inflated growth representations, massive drops in the DOW and S&P500 are still forthcoming.

Reallocate and keep the dry gunpowder handy for buying opportunities.

For my household, we are shifting toward Consumer Staples, Energy (for dividends), and health care. It’s just as easy to continue to invest in VOO or VTI ETFs and the like for the long run.

Bonus recommendation – The Last Period of Inflated Growth during the Late Stage

How to Recession Proof Your Personal Finances and Investments in Three Steps

Remember this, Recessions are unavoidable. Far from a full-on standing in lines for food ie 2020, Recessions are just lifestyle corrections to bubbles. They curb Irrational Exuberance, natural occurrences, or black swan events like pandemics.

We have been so fortunate to be a part of one of the largest expansions in history. However, this is likely coming to an end sooner than later (check out video #3).

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Disclosure: This post is brought to you by the Neighborhood Finance Guy. We highlight financial literacy information, resources, and more on your way to money management goals and personal wealth. Our goal is to help you make S.M.A.R.T decisions with our money. We do not give investment advice or encourage you to adopt a certain investment strategy. Your personal finance is up to you. If you take action based on one of our recommendations, we don’t earn a dime as of 5.2021. We operate independently.

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