Risk Off & Risk On

NERD ALERT: This edition of TGIF 2 Minutes will get a big “wonky” but still worth the read. A good number of people reading are familiar with the terms, “risk off” and “risk on,” terms that are used frequently in financial media and by financial industry traders and risk managers.

Even for a business owner or anyone familiar with risk, the term “risk on” or “risk off” may make sense. But for those still wanting clarification on how these terms relate to personal savings and investments – specifically the stock and bond markets – here are a few details.

First, the reason it made sense to highlight this topic is that just this week the US Fed said,“[The US] economy has made progress toward its goals, teeing up bond taper.” *

Think of “risk ON” as increasing risk and being comfortable with taking on more risk; whereas “risk OFF” would be decreasing risk due to factors that make risk uncomfortable.

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Personal Board of Directors

As has been said, “No man [or woman] is an island.” The deeper meaning of the famous poem by this title may be somewhat philosophical: that we are all part of a bigger unit such as the world, a country, a family, or something. The less deep but equally serious meaning is more like,

  • why go it alone?
  • try reaching out to others from time to time to seek advice and larger perspective.

Regular readers of TGIF 2 Minutes may be thinking that Debbs has lost her mind here but the related idea of having a “Personal Board of Directors” has been worthy of featuring for some time. Coincidentally Brett Danko, my business partner and the principal and founder of Main Street Financial Solutions LLC, recently presented a similar topic including having and regularly consulting with a Personal Board of Directors which inspired this edition.

The Personal Board of Directors can be consulted regarding decisions of all sorts – personal, financial, and professional.

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A Good Time to Borrow Money?

Life without some kind of debt is nearly impossible. Still, there are “good” kinds of debt and “bad” kinds of debt, and timing of taking on debt matters too.

As the US economy emerges from the extended pandemic a number of factors affecting debt and borrowing are at play:

  • Jobs – job openings, job creation and job RE-creation
  • Ability of small businesses to pay workers amidst longer-term uncertainty
  • The presence of Inflation for all kinds of popular products and services – meaning consumers are being forced to pay more, often unexpectedly
  • Changing demographics and geographies around home ownership…
  • …Creating increases in home prices
  • Super low interest rates
  • Plain old desire to spend after year-long restrictions on nearly everything!
As the US economy emerges from the extended pandemic a number of factors affecting debt and borrowing are at play.

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A Quick 2Q Wrap-Up

Just like that it is July 2021! That means both the 2nd Quarter and 1st Half of the year have come to a close. Here are a couple of quick notes about the quarter including a few things that changed and did not change on the year.

Stock and bond markets along with portfolio performance continued to be strong. It seems there is less caution in the air with an economy continuing to come out of the pandemic. Although the expression “the most unloved bull market” is still on peoples’ minds. Reason being that worries abound as the US Fed and Treasury continue to pump record amounts of money into the US economy. And there are plans for the stimulus to continue. This state of affairs risks inflation among other economic maladies.

Stock and bond markets along with portfolio performance continued to be strong in 2Q.

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Family Fireworks

This year’s Fourth of July, celebrated with a long weekend, is lining up to be much more celebratory than one year ago. Thank goodness for that! The 3-day weekend will allow families and friends to spend time together – just like “old times”. Considering the year-long pandemic there may be families who have not been together in one place for over a year, two years or longer. This opens up the opportunity for celebration as well as “family fireworks” that can be just as explosive as the fireworks that will be lit all weekend long at beaches and towns throughout America.

In a prior TGIF 2 Minutes, I referred to “10 Topics Likely NOT Discussed at the Thanksgiving Table”. These included a couple of money and family related topics often not discussed due to their emotional nature. Here, a closer look at two conversations that can prevent much pain and expense at a later time:

“Family fireworks” that can be just as explosive as the fireworks that will be lit all weekend long at beaches and towns throughout America.

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