‘Go When You’re Good and Ready’

When it comes to investing innovations, let caution be your watchword. [Morningstar](?utm_source=eloqua&utm_medium=email&utm_campaign=newsletter_improvingfinances&utm_content=36164&elqTrackId=a226285c64734c098da8313b5126bf66&elq=2ac9eafa7657438e8e75fcece9584224&elqaid=36164&elqat=1&elqCampaignId=16874) [Improving Your Finances] Improving Your Finances with [Christine Benz]( [Christine Benz] One time when I was still driving on my learner’s permit in early high school, a carful of boys pulled up behind our family car, which I happened to be piloting with my mom in the passenger’s seat. I was making a left turn on a green light, but I couldn’t quite see whether it was safe to turn. I paused, craning leftward in my seat. The boys honked, much to my horror, suggesting that I get a move on. Observing what was happening, my mom said, “Oh no. Pay no attention to them. If you can’t see what’s coming, you don’t go. You go when you’re good and ready.” You go when you’re good and ready. I can’t tell you how many times I’ve summoned that advice since that day, for matters big and small, work-related and personal. I’ve thought of it often in investing, too. As the chorus singing an investment type’s merits grows louder, often on the basis of hot recent performance, I listen to myself and no one else. I reserve the right to maintain a “[too hard pile]( for investments that are complicated, opaque, or difficult to maintain. In the case of cryptocurrency, I was put off by the fact that it doesn’t generate cash flows—unlike stocks and bonds. That makes it impossible to say whether it’s cheap or dear at any given time. If the sole premise of buying an investment is that I might be able to sell it to someone else at a higher price at a later date, I’m out. More important, I was deterred by the dearth of long-term data on crypto’s behavior. Would crypto confer inflation protection or portfolio diversification, as some crypto enthusiasts were touting? Heck if I know. The oldest cryptocurrency, bitcoin, was created in late 2008, and crypto has only enjoyed widespread adoption in the past few years. [Amy Arnott explored the portfolio diversification benefit of crypto in our recent research paper on asset class correlations](. She concluded that while crypto’s correlation with stocks has been pretty low historically, [it has tended to increase in inopportune times]( far this year, for example. In a similar vein, I appreciated Ben Johnson’s critical take on [so-called “liquid alternative” investments]( which purport to deliver performance that’s uncorrelated with plain-vanilla stock and bond assets. While some of these funds have indeed performed well as stocks and bonds have swooned in 2022, the group’s long-term track record hasn’t compelled thus far, and investors have shown a tendency buy them high and sell low. We’ll continue to monitor these and other investing innovations on an ongoing basis; [John Rekenthaler’s recent exploration of the trend toward “direct indexing”]( is well worth your time. We’ll call out innovations that we think are helpful, such as [exchange-traded funds]( and [target-date funds]( for example. But when it comes to entrusting new products and services with your hard-earned money, I’d urge you to listen to my mom. “Go when you’re good and ready.” And sometimes, that means not going at all. With warm regards, Christine [When's the Right Time to Take RMDs?]( Where you go for required minimum distributions will usually have a bigger impact than when you go. [Read More]( Share: [facebook]( [twitter]( [linkedin]( ADVERTISEMENT [media]( [media] [Brian Feroldi: Why Does the Stock Market Go Up?]( The author and stock analyst discusses explaining investment principles to newbies, whether beginning investors should hold individual stocks, and his enthusiasm for spreading financial wellness. [Listen Now]( [Is It Time to Recession-Proof Your Investment Portfolio?]( Here's what investors who are worried about a recession should consider today. [Watch]( [How Much Will Your RMDs Be?]( New tables for RMD calculations will result in slightly lower withdrawals for most accountholders. [Read More]( Listen Now Get the latest investing insights and market updates with [Morningstar’s podcasts]( available on your iPhone, iPad, Android, PC, or smart speaker. Stay connected: [twitter]( [facebook]( [linkedin]( [instagram]( [YouTube]( [Apple News]( [View online]( | [See all newsletters]( | [Share your feedback]( [Unsubscribe]( from this newsletter. Or update your [email preferences](. © 2022 Morningstar, Inc. All Rights Reserved. 22 W. Washington St. Chicago, IL 60602