InvestInvest

What the Rising Price of Crypto Means for Your Portfolio

Jean Chatzky  |  June 29, 2021

Just because asset prices are rising doesn't mean the economy is growing. Read more to find out how the price increase will affect your investment strategy.

Not subscribed to HerMoney’s weekly newsletters yet? This is what you’re missing! Here’s a look at what we published in our “This Week In Your Wallet” newsletter, Tuesday, June 29, 2021.  Subscribe Today!

This Week In Your Wallet: Building Long-Lasting Wealth

Happy (almost) Holiday Weekend! I don’t know about all of you, but for me…it feels like we kind of slid out of the spring and into this summer without much of a kickoff.  So, I’m really looking forward to the Fourth of July festivities. I’ll  be making barbecued chicken and ribs, a watermelon and feta salad, and maybe some grilled veggies. And yes, there will be pie, plenty of pie. Although this won’t be coming out of my kitchen…I am good at many things, but making pie crust isn’t one of them.

Meanwhile, on what Pooh would call a ‘blustery day” here on the Jersey shore (albeit one with 80 degree temps and plenty of sunshine), these are the wallet-impacting items that have captured my attention.

Do Rising Asset Prices = Long-Lasting Wealth?

Moody’s.com economist Mark Zandi asked that question — in addition to “are we as wealthy as we think we are? — in yesterday’s Philadelphia Inquirer. With prices of so many assets (stocks, homes, crypto) grabbing one headline after another, you can understand why. There are a slew of reasons, many of which we’ve discussed in this space before, that explain the runups in prices. The stimulus dollars that flowed during the pandemic were spent by those who needed them, but the many others who kept their jobs hung onto a lot of that money. It’s now being poured into the economy, boosting the bottom lines of businesses in just about every sector and sending profits up. Low interest rates have also given a helping hand to stocks because they’ve made bonds so comparatively unattractive. They’ve also (combined with low supply) sent home prices soaring.  

What about the more quizzical categories? Regarding meme stocks: A survey of 1,500 investors released last week from Betterment.com found that 91% received stimulus money and nearly half invested at least some of it. (By comparison, a 2020 Betterment survey found only 9% had invested part of their stimulus.) Half of the respondents also said they were not just investing, but day-trading — and expect to continue doing so post COVID.   

Then there’s crypto, which as the Wall Street Journal reports is starting to show up in the retirement portfolios of “everyday investors.”  It cites a survey of financial advisors conducted by the Financial Planning Association that shows 49% of advisors had clients asking about investing in crypto in 2021 compared with 17% in 2020, and 14% of those advisors recommending crypto in 2021 compared with just 1% in 2020. 

So, what’s Zandi’s answer? Are we as wealthy as we think we are? “Probably not,” he writes. “Frothy and speculative asset markets are vulnerable to significant price corrections if everything doesn’t stick to script. Of course, they rarely do. Not that this is necessarily a time to sell, but to be more cautious when buying.” Well said.

P.S.: On That Rising Tide…

It’s important to remember that it doesn’t lift all boats. As The Philadelphia Inquirer was writing about soaring assets, the Washington Post simultaneously reported on the grassroots “freege” movement in, yes, Philadelphia.  What’s a freege? It’s a community refrigerator, stocked for free, by volunteers, restaurants, farms and local merchants, that invites the hungry to take what they need and leave what they don’t.  Philly is not the only city that has them. As the Post reports, freege.org, says there are now about 200 in the US, up from 15 before the pandemic.  The need is there — and growing. Although the country saw a decline in hunger this spring, it is now on the rise once again. Some 20.3 million Americans haven’t had enough to eat in the past 7 days.   

Trust, But Verify

There were two interesting dispatches this week in the world of financial trust. The first, from a partnership of the Stanford Center on Longevity, the University of Minnesota and AARP, is the release of a free resource called the Thinking Ahead Roadmap.  It’s a resource for seniors to help them select someone they trust to help them manage their money in the future.  It goes through a series of helpful steps from “choosing a trusted financial advocate” to “organizing your financial information” to “planning for an eventual transfer of responsibility.”  I found it helpful so I wanted to pass it on, and I hope you’ll do the same.

As for the second? We may worry more about our older relatives and friends getting taken financially, but as The New York Times Ron Lieber reports, our perception is out of whack.  According to both the Better Business Bureau and the Federal Trade Commission, It’s the young who are more susceptible to scams. In part, it’s because so many of these things happen online — and that’s where these digital natives spend both their time and their money. But the array of fraudulent offers is breathtaking. There are employment scams, bogus check scams, student loan scams, even (heaven forbid) puppy scams. You may want to pass this along as well.

Have a great week, and a wonderful long weekend!

Jean

Editor’s note: We maintain a strict editorial policy and a judgment-free zone for our community, and we also strive to remain transparent in everything we do. Posts may contain references and links to products from our partners. Learn more about how we make money.

Next Article: