Your Financial News Roundup
March 29, 2023
1. Economy: The NLRB has voided non-disparagement clauses; while poverty levels remain stagnant in the U.S.
2. Tech: Crypto founder and scammer, Do Kwon, was arrested for securities fraud; while digital disruption comes for “legacy” industries worth $75T.
3. World: A UN report found global happiness levels were high for another year; while Israeli PM Netanyahu pauses a reform bill that sparked nationwide protests and strikes.
Personal Finance Concept [Part 1/4]: A Primer on Target Date Funds
🎤 Free Speech For All: In a win for workers, the National Labor Relations Board ruled that non-disparagement clauses (NDCs) are illegal. Employers can no longer include blanket NDCs in their severance packages, which prevents laid-off workers from criticizing the company or discussing their exit packages. These agreements typically catch workers when they are most vulnerable, effectively forcing them to stay silent. The NLRB says its decision will get applied retroactively, including NDCs signed before its ruling. (VICE)
Our Take: Some industries have used NDCs to prevent ex-employees from speaking out about unsafe, predatory, or illegal working conditions. Still, the ruling does not allow former employees to openly share a company’s trade secrets.
🌩️ Poverty, By America: In his new book, “Poverty, by America,” Pulitzer Prize winner, Matthew Desmond, delivers shocking statistics that bring the nation’s rampant inequality to the forefront. Over the last 50 years, there has been no real progress on addressing poverty, with 10.5% of the population considered poor in 2019 vs. 12.6% in 1970. Meanwhile, the racial wealth gap is as large as it was in the 1960’s while 1 in 18 Americans, or ~18M people, live in extreme poverty. According to Desmond, many Americans and corporations benefit from keep people impoverished. (CNBC)
Our Take: For a long time, poor people have been blamed for their circumstances. But, Desmond’s new book hints that there are structural forces at play that subject the poor to labor, housing, and financial exploitation.
👀 A Pariah’s Downfall: Former CEO of crypto firm Terraform Labs, maker of the TerraUSD stablecoin and its sister token LUNA, Do Kwon, was arrested in Montenegro while attempting to flee to Dubai. Following the Terra/LUNA collapse in May 2022, ~$40B was wiped out from the crypto market. Both U.S. and South Korean prosecutors have filed criminal charges against Do Kwon for securities fraud and conspiracy. They will have to work out his extradition details so he can face justice in multiple jurisdictions. (TechCrunch)
Our Take: In 2022, many crypto firms were found to misuse customer funds and commit fraud. Regulators have been slow to prosecute (e.g. Alex Mashinsky/Celsius Network) and even slower at creating guardrails for crypto – stalling its development.
🏭 New Tech, Old Industry: 75% of the world’s $100T GDP is made up of “old-school” industries like manufacturing. VC firm, Eclipse Ventures, has invested ~$4B to digitally transform these industries. VulcanForms, an Eclipse portfolio company, uses 3D printing and metals to create parts for jet engines, medical implants, or consumer devices. This frees up resources for R&D, sales, and marketing. Vulcan co-founder and MIT Professor John Hart, says these disruptions will make supply chains more agile and less global and decarbonize manufacturing. (Financial Times)
Our Take: As 3D printing tech matures, it’ll become more interwoven with manufacturing processes, allowing factories to produce larger varieties of products. For the U.S., it’ll mean industry comes back in an environmentally friendly fashion while supply chains and production localize to where the customers are.
😊 Joy Persists: Published by the United Nations, the 2023 World Happiness Report revealed a surprising trend — global happiness levels have stayed steady. Pulling data from 150 countries, the report analyzes data such as a sense of social support and positive feelings toward others. Researchers noted that both positive feelings and those of social support were reported twice as much as their negative counterparts. Interestingly, benevolent actions toward others stayed high in 2022. (Good News Network)
Our Take: The forced isolation of the pandemic reminded people of the value of community and finding gratitude in their positive circumstances. Though not receiving as much media attention, it seems this positive effect of the pandemic lingers.
🇮🇱 Backing Down: Israel’s PM Benjamin Netanyahu is pausing an overhaul to the judiciary to stop what opposition leader, Yair Lapid, calls the “biggest crisis in the history of the country.” Israel’s very right-wing government sought to give Parliament the right to overturn Supreme Court decisions and take direct control over the judicial appointments, making it difficult to check a PM’s power. After a national strike, which involved the military, the bill was paused to let tensions simmer. Claiming he was a victim of a “witch hunt,” Netanyahu blamed his detractors — while facing existing charges of fraud, bribery, and breach of trust. (BBC)
Our Take: For weeks, hundreds of thousands of people have flocked to the streets of Tel Aviv to protest the proposed reforms and demand PM Netanyahu’s resignation. Given that the current government is the most right-wing in the country’s history, the reforms will likely erode the country’s democracy if passed.
Finance Concept of the Week
Investing with Funds [Part 1/4] — A Primer on Target Date Funds
Exploring Time-Tested Investment Strategies
If you want to simplify your long-term investing strategy and make it low-effort, then target date funds are for you!
A target date fund is a type of mutual fund that holds a diverse mix of stocks, bonds, ETFs, and other assets. The fund becomes less risky the closer you get to retirement (usually ~65 years old) by moving money to safer assets. You’ll benefit from the fund’s common sense approach, as it balances risk and reward based on where you are in your life and career. Retirement investing becomes low maintenance, with users checking in periodically.
- Ease of Diversification: Target date funds invest in a diverse mix of assets to minimize risk and reduce the downside of any single investment performing badly.
- Set It and Forget It: You won’t need to choose individual investments or rebalance your portfolio. The fund (and perhaps its professional managers) takes care of that — making them a great option for those who want to be more hands-off with their investments.
- Simplicity: Target date funds are easy to understand and use, making them a good option for those that are new to investing or want to keep things straightforward.
- Customizable: Funds are available for different retirement dates (e.g., 2050, 2055, 2060), giving you the freedom to choose the one that meets your personal needs and goals.
- Low Cost: Target date funds have lower fees compared to actively managed funds, so you’ll keep more of your returns over time!
- Lack of Control: You’ll have less control over the individual investments in your portfolio, which can be a negative if you prefer to research and pick your own assets. A lack of personal control is a common drawback of the one-size-fits-all approach of mutual funds and ETFs.
- Limited Flexibility: A target date fund may not offer a deep level of customization like other investments, which can be a disadvantage if you have complex financial targets.
How to Make the Most of It:
To make the most of a target date fund, you should consider the following tips:
- Understand the Fund’s Breakdown: You should understand how the fund allocates its assets to make sure it aligns with your financial goals. Read the fund’s prospectus and look at your brokerage’s info on the fund.
- Review Periodically: You should review the target date fund periodically to stay updated on any changes and make sure it’s aligned with your needs. Checking in once a quarter or every 6 months is common.
- Consider Extra Investments: Target date funds can be used in combo with other investments to create a more diverse portfolio or as part of a larger strategy.
Risk Level: Variable (Low to Medium). The risk of a target date fund varies based on how far the retirement date is in the future. A fund with a date that’s farther out takes more risk by holding more stocks. In comparison, a fund with a closer retirement date takes less risk by holding more bonds and cash.
Common Funding Sources:
- Retirement Accounts
- 401(k) or 403(b) plans
- Individual Retirement Accounts (IRA)
- Traditional IRA
- Roth IRA
- Taxable brokerage accounts
Note that target date funds include turnover of their holdings, which triggers taxes. This makes tax-deferred accounts such as a 401(k) or IRA great for these funds. If you want to use a regular brokerage account, review the fund’s documents or prospectus to get a better understanding of potential tax consequences.
Tip of the Week
💵 If you frequently make impulse purchases, consider waiting a week before you make the plunge to give yourself time to think about it. Alternatively, every time you make an impulse purchase, make an equal deposit into an investment account to hold yourself accountable.
Personal Finance Resources
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