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Investor Education: 529 Plan
A 529 plan is a tax-advantaged savings plan designed to encourage saving for future education costs. 529 plans, named after the section of the Internal Revenue Code that created them, are sponsored by states, state agencies, or educational institutions and are authorized by Section 529 of the Internal Revenue Code.
Read our feature on 529 Plans here!
A Good Historian
“The only fence against the world is a thorough knowledge of it.” —John Locke
The Nasdaq ended its five-week winning streak, falling 2.4% this past week. The S&P 500 also finished lower, down by about 1.1%.
As we wrote last year, knowledge of one’s holdings can give one confidence:
Knowledge about your holdings gives you the confidence to hold or add to your investments when they are down—if you know they are good—or to sell and invest in better things that you also know well. You are hedged because you know the difference between price and value and won’t let a declining share price affect your ability to act intelligently.
Knowledge of market history can also give one confidence. Not the confidence to predict what will happen in the future—we’ve spent plenty of time in these virtual pages discussing the difficulty of forecasting. But confidence that you understand what can happen—and have your portfolio positioned for that range of possibilities.
Bob Rodriguez, former Managing Partner and CEO of First Pacific Advisors, touched on this topic over a decade ago when discussing the best advice he ever received:
“In the fall of 1974 I was in graduate school at USC taking a portfolio-management investment course. The financial markets were in difficulty, and I didn’t understand how securities were being sold at such depressed levels. I had only recently discovered Security Analysis by Graham and Dodd when we had a guest lecturer come in named Charlie Munger, who went on about this idea of value investing. After the class was over, I walked up to Charlie and asked him if there was one thing that I could do that would make me a better investment professional. His answer was, ‘Read history, read history, read history.’ And so I became a good historian, reading both economic and financial history as well as general history.
“What I learned is that people relate to the crises they have experienced. So when the crisis of 2008 came, it felt like an old friend to me because it had so many similarities to the banking crisis of 1907. Asking Charlie's advice and then reading history allowed me to put those things in context.”
One of the main topics getting headlines over the last year or two is inflation. The markets seem to think the Fed now has it under control. But some people are pointing to signs that it might be about to heat up once again:
Studying some history and looking back at the 1970s, we see that inflation was volatile. It came. It went. It came back. And then went away again. Etc.
One of the most important things to remember in business and investing is this: It’s not about prediction. It’s about positioning.
While the causes of inflation then and now aren’t the same and every cycle is different, it might be worth asking how your portfolio is positioned should inflation return. The market isn’t expecting it—but maybe you should, just in case.
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