2 Eye-Opening Money Statistics, Hedge Funds Explained, and More

Read Time: 4-minutes

Happy Saturday,

Here is this week’s edition of 6-Point Saturday — financial insights to help you make smarter money decisions.

Table of Contents*

• Point #1 — Everything Can Pay Off

• Point #2 — Stressed Financially? You’re Not Alone

• Point #3 — Dual Income, No Kids…Do we really need …

• Point #4 — What’s a Hedge Fund?

• Point #5 — Quotes of the Week

• Point #6 — My Question of the Week

*Clickable in the online version. 

Point #1 — Everything Can Pay Off

What a mindset.

Cameron had to experience many moments of doubt, frustration, and uncertainty.

But probably his most valuable asset:

His unwillingness to let anything go to waste.

He seems to have looked for valuable lessons and skills in every stop in his career. An incredible habit to build.

If we’re not exactly at a place in our career or in our finances that we’d hoped or expected, we can either let it discourage us—or choose to make it exactly what we need.

Point #2 — Stressed Financially? You’re Not Alone

And if you're feeling anxious or stressed about your finances, it can easily feel like you're the only one.

Especially in the age of social media. Where everyone only posts their highlights. Friends or family can seem like they’re taking vacation after vacation…

But 2 studies this year reveal a more accurate picture of what lies beneath the hood:

From a Northwestern Mutual study in conjunction with The Harris Poll:

And a June survey from leading retirement plan provider ($1.8T assets under administration) Empower:

Whether it’s literally four hours or simply a lot of mental bandwidth, the takeaway is clear: many people are quietly experiencing financial stress.

Key lesson:

You’re not the only one stressing. Know that many others are quietly fighting the same battle.

Point #3 — Dual Income, No Kids…Do we really need a full Emergency Fund?

We don’t have many specific numbers here, but we can glean some positives:

• Little debt with a home and investment property

• They are contributing to their 401(k)s and investment accounts

• They’re aware of the traditional 3-to-6-month emergency fund guidance and it’s smart to ask whether going below this makes sense

My opinion is they’re sort of “splitting hairs” here:

For a dual-income family, the general recommendation is a 3-month emergency fund.

What’s 1 more month of fixed expenses, really?

It’s so easy in personal finance to get swept up in minor details when bigger picture-thinking is usually what moves the needle most. In this case:

• Are they contributing enough to their 401(k)s to get the match?

• Are they properly insured?

• Does it really make sense to get more exposure to real estate investments (which typically underperform the stock market)?

It almost always makes sense to add a margin of safety to every personal finance decision. Because the future is unknowable and sufficient cash on hand provides stability.

Point #4 — What’s a Hedge Fund?

If you’ve come across the term “Hedge Fund,” you’ve probably gathered that it’s a sophisticated, somewhat exclusive investing arrangement…

But what is it, exactly?

A hedge fund is a private investment fund, actively managed (not simply an investment designed to earn the returns of an index), with complex investing strategies.

A hedge fund doesn’t have to be registered with the SEC and make typical disclosures. As such, you need to be an accredited investor to participate ($200k income or $300k with spouse/spousal equivalent OR $1 million in net worth with or without spouse, excluding primary residence).

Because of the complex, riskier strategies (often involving borrowing money & derivatives), hedge fund managers want to be compensated accordingly. Typically, they earn 2% of assets under management and 20% of the hedge fund’s profits.

So should you strive to invest in a hedge fund?

Certainly, hedge funds can provide value. But the complexities and high management fees should be red flags. Simple, low-cost investing strategies like index funds can more easily achieve your goals.

In fact, Warren Buffett famously made a $1-million bet that index funds would beat a collection of hedge fund managers over 10 years ($)—and won.

The lesson?

You don’t necessarily need sophisticated strategies to build wealth and achieve financial freedom.

Point #5 — Quotes of the Week

Continuing the “determined to make everything work for you” theme, which of these is your favorite?

Point #6 — My Question of the Week

Reply to let me know! I read every response.

Thanks for reading — I hope you found a helpful idea or two.

I’ll see you next Saturday with more.

Have a great weekend,

Benjamin Daniel, CFP®

Founder, Money Wisdom

P.S. Want to take control of your money (and stop stressing)? Here are 2 ways I can help:

1. Financial Health Check: Get your biggest money questions answered, understand where you stand financially, and get a personalized action plan from a CFP® professional. Book a free Intro Call here (or purchase today) to see if you’re a good fit.

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Disclaimer:

This material is not investment or tax advice. No responsibility for loss occasioned to any person or corporate body acting or refraining to act as a result of reading this material can be accepted by the publisher.

👉 Is there another topic(s) you would like me to cover? If so, reply to this email & let me know—I read & respond to ALL emails.