
I spent the first 25 years of my life in India & the last 22 years in the US. I earned & invested almost all of my money in the US. There were times when I was tempted to invest in international stocks (India, China etc) or real estate (India). But my intuition kept telling me to stick with the US.


NOTE: This article is about investing, economics etc. This is not political commentary.
After much thought, I think I’m able to put this intuition into words. I call it the L2P2 framework: Life. Liberty. Pursuit of Happiness. Purpose.


1. **Life**: Right to life is the most fundamental human right & it is the foundation for humanity’s growth & prosperity. True measure of this is at the margins: if a journalist or a political dissident or an artist is killed, it pushes at least one generation away from those professions. When this happens, less capable & less motivated people take these jobs, thus reducing the economic impact. 


2. **Liberty**: Freedom of thought & expression ushers growth through new ideas. If even one person ends up in prison for ridiculing a nation’s leadership or policy, as happens regularly in most developing nations, an entire generation learns to curtail their thoughts, clip their ambitions & do less adventurous things. This leads to less risk taking, which leads to slower economic growth in the long term. 


3. **Pursuit of Happiness**: It’s one thing to have the liberty, but it’s another to have the support to pursue a goal that leads to individual happiness. The nations & cultures that are more supportive of weird & wild ideas tend to enjoy higher growth over the long term. This support is in the form of laws, education, family support (or at least nonchalance), peer pressure (lack of) etc. 


4. **Purpose**: A nation’s collective purpose is like a magnetic field that subtly guides the actions of its citizens. For instance, Afghanistan’s purpose to be an Islamist country aligns the population to do things that diminish 1, 2 & 3. America’s purpose as defender of freedom aims to reinforce 1 & 2. When this sense of purpose is strong, people voluntarily choose to do the right thing. Some European countries have less clear purpose in the 21st century so their economies are suffering as a result (Dear UK, what exactly do you now stand for!) 


**Life & Liberty** are fear dynamics and are best **measured at the margin**. Why? Because if one journalist is killed or one CEO is jailed unlawfully, the fear will drastically lower the animal spirits & risk taking ability. This will have major impact on economic productivity over the long term.


**Purpose & Pursuit of Happiness**, on the other hand, are motivation dynamics and are **best measured as averages** because motivation/purpose & happiness are personal. While external forces do have some impact, the driven individuals will find a way to keep their animal spirits alive & they will take the risks. 


**How can we measure each of these?**


After a lot of research, I found that the Human Rights Index (HRI) captures the first two (Life & Liberty) really well in one concise metric. In this graph, the darker the color for a country, the higher it scores on these two measures.

![](https://d391fpr6ao9qle.cloudfront.net/images/blog/2024-01-10-how-i-choose-which-countries-to-invest-in/2.webp)

3 & 4 are much harder to measure, at least scientifically. Since I know US & India really well, I know where they stand on these. For instance, happiness is valued higher in the US while honor, culture & family values are held much more dearly in India. I looked far & wide but I’m yet to find a good, uniform measure for this that would work across different countries. I’m open to ideas here.


**So how do I use all this information?** 


I index L2P2 as:

40%: Life 

40%: Liberty 

10%: Pursuit of Happiness 

10%: Purpose


I believe that the right to Life & Liberty constitute around 80% of what makes a nation successful. Why? As I explained above, Life & Liberty are fear dynamics so they have the biggest impact on risk taking & entrepreneurial activity.


Based on this, **I would not invest my money in any nation that scores less than 0.8 out of 1 on the Human Rights Index** because I’m not sure how my investments could grow long term in a country that doesn’t empower its citizens to be their best.


Best demonstration of this correlation is in the GDP data where you can see that countries with higher HRI typically have higher GDP per capita (oil producing countries are exceptions to this).

![](https://d391fpr6ao9qle.cloudfront.net/images/blog/2024-01-10-how-i-choose-which-countries-to-invest-in/3.webp)

Also, people all over the world vote with their feet. Net migration from countries with low Human Rights Index to those with high HRI continues in the 21st century:

![](https://d391fpr6ao9qle.cloudfront.net/images/blog/2024-01-10-how-i-choose-which-countries-to-invest-in/4.webp)


Of the countries that are rated about the same on the human rights index (say above 0.9), I invest in those that have a stronger purpose & are more tolerable to the crazy ones, the misfits, the rebels, the troublemakers, the round pegs in square holes……!


Over the last twenty years I applied this framework implicitly & invested almost exclusively in the US. I think that’s because the US scores pretty darn high in all these areas. (Australia, Scandinavian+Western Europe & Canada also score high in at least three out of four areas, especially Life & Liberty, but their scale is much smaller so I stayed away from them.)


I hope this was helpful. I would love to hear your thoughts on the L2P2 framework.


How I Choose Which Countries to Invest In?


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Welcome to "Real Estate IQ: Wisdom for Smart Moves." In this episode, we delve into the insider secrets tailored exclusively for Silicon Valley home buyers, sellers, and investors. Our goal is to arm you with the necessary tools to conquer the unique real estate landscape of this region.

Today, we are excited to have Gagan Sandhu, co-founder and CEO of Xillion, join us. Gagan's mission is to empower individuals with financial tools and knowledge, enabling them to make informed decisions and achieve financial freedom in the complex real estate market.

Navigating the real estate market is a challenging task. Over three-quarters of potential investors feel overwhelmed by its financial complexities, which include confusing mortgage options and complex tax benefits. Furthermore, 60% attempt to navigate these waters without expert guidance, often leading to suboptimal decisions. The recent notable changes in U.S. tax laws, especially concerning estate and capital gains taxes, add another layer of complexity.

Please note, the content provided here is for informational purposes only. We recommend consulting a licensed professional for specific legal or tax advice tailored to your situation.

Gagan, welcome to the show, and thank you for joining us. Could you give us a brief introduction to Xillion's inception into real estate and how it all began?

When we started conceptualizing Xillion, we aimed to offer our customers a holistic view of their finances and a comprehensive approach to solving their financial problems. We recognized that real estate is a crucial component of the average American's financial portfolio. After achieving certain life milestones, like graduating college, accumulating savings, or starting a family, the next natural step for many is home ownership. This is often the largest financial decision in their lives to that point. Therefore, we wanted to provide tools and guidance to help people make this decision more holistically, rather than relying solely on advice from friends and family, or information from the radio and other media. That's how our journey began.

Could you also share your personal passion behind running the organization?

As an engineer by trade, my journey to the U.S. about 22 years ago for my masters began with humble beginnings. Known as the 'poor Indian grad student,' I started at the bottom of the economic totem pole. Earning minimum wage and managing finances meticulously was crucial to avoid financial mishaps. This personal experience fueled my desire to create a platform like Xillion, to help others navigate their financial journeys more effectively.

In our conversation with Gagan Sandhu, co-founder and CEO of Xillion, he shared his journey and the pivotal role that financial diligence played in it. Post-graduation, Gagan landed a job, got married, and soon welcomed his first child. With growing family expenses, he remained diligent in tracking his finances. As his career progressed, the need to buy a house became evident, especially after the birth of his second child and the realization that their family required more space.

In 2006-2007, when the real estate market was similar to its current state, Gagan found the math of buying a home daunting. He tackled this challenge by creating a detailed spreadsheet. This spreadsheet included information about interest rates, home prices in various neighborhoods, down payment options, and different loan types. It became a crucial tool for him and his wife, helping them analyze the costs and benefits of potential homes compared to their current rent.

This spreadsheet evolved over time, guiding them in purchasing their first home. A few years later, Gagan and a friend, a realtor and fellow college alum, decided to invest in a property together. The spreadsheet proved invaluable once again, helping them analyze various properties and make informed decisions. This led to their first investment property.

Gagan began to share his spreadsheet with friends, assisting them in making decisions about buying homes or investment properties. As tax laws and real estate dynamics changed, he updated his spreadsheet to reflect these changes. He viewed real estate investing as an engineering problem, seeking the most efficient solution, which the spreadsheet provided.

When Gagan started Xillion two years ago, he incorporated the logic of his spreadsheet into an algorithm. Now, thousands of people use this tool daily.

Gagan emphasized the importance of mentors in real estate investing. His first investment property was made possible through collaboration with a friend who was a real estate broker and investor. He believes everyone has a unique superpower; for realtors, it’s their deep understanding of the market. While Gagan's expertise lies in data and AI, he recognizes that real estate is not his forte, unlike for professionals who live and breathe the industry.

Xillion’s philosophy is to connect customers with mentors who have the expertise and experience in real estate. Rather than attempting to navigate the market alone, Xillion advocates leveraging the knowledge of these "giants" in the field. This approach, Gagan believes, is a "match made in heaven," ensuring clients are guided effectively, whether they're purchasing a home, an investment property, or exploring commercial real estate.

Xillion tackles specific challenges for clients in real estate, primarily addressing two main types:

Simplifying Financial Complexity: Finance in real estate can be overwhelming, with numerous factors to consider, such as comparing different banks, closing costs, and interest rates. Xillion reduces this anxiety by providing tools that clarify the financial aspects. The platform aims to make buying a property – particularly a home – an emotionally driven decision rather than a mathematically daunting one. It simplifies the process by allowing clients to input numbers for different properties, comparing options, and presenting clear financial implications of each choice. This approach demystifies the financial complexity, making it manageable for the average customer.

Exploring Beyond Conventional Wisdom: Xillion helps clients explore options they might not have considered. For instance, they provide analyses comparing the potential growth of investing in real estate versus putting the same money into the S&P 500. This comprehensive approach ensures clients make informed decisions without the need to seek information elsewhere.

Pairing Clients with Experienced Mentors: The platform also focuses on reducing effort and anxiety by connecting clients with mentors. These mentors have extensive experience and can guide clients through the process, from finding the right neighborhood to considering various factors like schools or specific house features. Xillion believes in leveraging the expertise of these mentors, or "giants" in the field, to streamline the decision-making process.

Additionally, Xillion addresses a common dilemma homeowners face: deciding whether to sell their current home before buying a new one. To alleviate this, TrademMyHome.com, powered by Your Home Sold Guaranteed Realty, offers an upfront guaranteed cash offer on the current home. This service is particularly beneficial for those planning to move within the next 3 to 6 months.

Regarding empowering real estate investors, Xillion helps clients understand that real estate investment can be either a good or bad decision, depending on their circumstances. One case involved high-earning clients with a low debt-to-income ratio. Xillion's platform provided insights on optimizing this ratio for maximum financial returns, highlighting the benefits of leveraging bank loans for real estate investments. This comprehensive approach led these clients to consider purchasing another property for rental purposes.

Finally, Xillion distinguishes itself from other real estate platforms by offering personalized, data-driven insights and mentorship, helping clients see beyond the obvious and unlock value in their real estate ventures.

Gagan, shared insights about the uniqueness of their platform and how it addresses the challenges in real estate:

Personalization and Detail-Oriented Approach: Xillion stands out for its detail-oriented approach, different from most platforms that offer generalized calculators and analyses. They delve into finer details like maintenance costs, PMI, and debt-to-income ratios. The platform personalizes the experience by considering the user's income, marginal tax rate, and other specific financial factors to provide a tailored analysis of whether it makes more financial sense to buy a house, invest in stocks, or even rent.

Investment Growth Projection: Xillion offers a unique window into the long-term growth of clients' investments. They utilize comprehensive data to project how clients' assets, including real estate, stocks, and retirement savings, will evolve over time. This insight helps clients understand and plan their financial future more effectively.

Equity Management Tools: The platform is developing tools to advise clients on managing their home equity. For instance, they might suggest leveraging accumulated equity to invest in the market or purchase additional investment properties, providing a strategic approach to wealth management.

Staying Informed and Adaptable: To remain current with real estate trends, Xillion uses tools like the Xillion Terminal, which analyzes economic indicators and their impact on real estate. They adapt to changes in tax legislation, interest rates, and other economic factors, ensuring their clients have the most up-to-date information for decision-making.

Gagan's advice for those venturing into real estate is to "invest in what you know." He advocates for investing in local neighborhoods or towns, as familiarity with the area provides valuable insights. For investments outside one's familiar territory, he recommends partnering with a mentor knowledgeable about that specific market.

Gagan extends an invitation to listeners interested in Xillion's services and mentorship to visit their website, Xillionapp.com, for more information.

As we conclude this episode of the podcast, we thank our sponsor, trademmyhome.com, for their commitment to clients and for making this discussion possible. For those considering buying or selling a home, visit trademmyhome.com. Remember to subscribe, leave a review, and share this episode with a friend. Stay ahead in the real estate game with Real Estate IQ. Thank you for listening.

Check out the this podcast on:

1. [Youtube](https://youtu.be/8zzhU3Bf8to)
2. [Apple Podcasts](https://apple.co/3QNpIZe)
3. [Spotify](https://sptfy.com/PdTr)

Check out the article on Trademyhome:

[https://trademyhome.com/reiq-financial-independence/](https://trademyhome.com/reiq-financial-independence/)

[https://www.einpresswire.com/article/666819638/financial-independence-making-smarter-real-estate-choices-in-silicon-valley](https://www.einpresswire.com/article/666819638/financial-independence-making-smarter-real-estate-choices-in-silicon-valley)


Making smarter real estate choice in silicon valley


# Economic Insights - October 2023

Xillion brings you Economic Insights for October 2023 to navigate the ever-evolving economy. This analysis sheds light on key economic indicators impacting various sectors. It's your window into the financial pulse of today's world.

![2023-11-01-Stock-Market.webp](https://d391fpr6ao9qle.cloudfront.net/images/blog/2023-10-31-monthly-economic-insights-oct-2023/2023-11-01-Stock-Market.webp)

In October, broad market indices dipped. Dow Jones decreased by 1.4%, the S&P 500 by 2.2%, the NASDAQ Composite by 2.8%, and the Russel 2000 saw the most decline at 6.9%.

---

![2023-11-01-Sectoral-Performance.webp](https://d391fpr6ao9qle.cloudfront.net/images/blog/2023-10-31-monthly-economic-insights-oct-2023/2023-11-01-Sectoral-Performance.webp)

Most sectoral indices dropped. Energy fell the most at -6.1%, followed by Consumer Discretionary at -4.5%. Only Utilities saw a gain, rising by 1.2%.

---

![2023-11-01-Commodity-Prices.webp](https://d391fpr6ao9qle.cloudfront.net/images/blog/2023-10-31-monthly-economic-insights-oct-2023/2023-11-01-Commodity-Prices.webp)

In October, Natural Gas soared with a 22.1% increase, making it the top performer. Gold also shined bright, rising by 7.4%, and Silver went up by 2.7%. However, Crude Oil slipped by 10.8%, and Copper dipped by 2.3%.

---

![2023-11-01-Inflation.webp](https://d391fpr6ao9qle.cloudfront.net/images/blog/2023-10-31-monthly-economic-insights-oct-2023/2023-11-01-Inflation.webp)

Inflation remained steady at 3.7% in September 2023, defying market expectations of a slight decrease to 3.6%, whereas the Core CPI, which excludes volatile items such as food and energy, fell to 4.1% in September 2023, the lowest since September 2021.

---

![2023-11-01-Personal-Finances.webp](https://d391fpr6ao9qle.cloudfront.net/images/blog/2023-10-31-monthly-economic-insights-oct-2023/2023-11-01-Personal-Finances.webp)

Household Saving Rate in the United States decreased to 3.40% in September from 4% in August of 2023 whereas Real Disposable Personal Income grew 3% over the last year.

---

![2023-11-01-Housing-Market.webp](https://d391fpr6ao9qle.cloudfront.net/images/blog/2023-10-31-monthly-economic-insights-oct-2023/2023-11-01-Housing-Market.webp)

In October, the average rate for a 30-year fixed mortgage surged to 7.8%, marking its highest level since November 2000. Additionally, the S&P Case Shiller Home Price Index, which tracks US housing prices, reached an all-time high of 309.4.

---

![2023-11-01-Treasury-Yield.webp](https://d391fpr6ao9qle.cloudfront.net/images/blog/2023-10-31-monthly-economic-insights-oct-2023/2023-11-01-Treasury-Yield.webp)

In October, the 10-year treasury yield rose to 4.9%, the highest since July 2007.

---

![2023-11-01-Consumer-Sentiment.webp](https://d391fpr6ao9qle.cloudfront.net/images/blog/2023-10-31-monthly-economic-insights-oct-2023/2023-11-01-Consumer-Sentiment.webp)

In September, the consumer sentiment index, based on a survey by the University of Michigan, fell to 67.9 from 69.5 in August. Meanwhile, Industrial Production rose by 0.08% in September 2023 compared to the same month the previous year.

---

As we gear up for the final months of the year, it's clear that both opportunities and hurdles lie ahead. How do all the economic changes impact your investments and your financial future? Login to Xillion to find out!


Monthly Market and Economy Roundup - 31 Oct 2023

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Today, let's talk about a common feature in 401k plans: Target Date Funds. These are fine if you don't want to touch your 401k for decades, but you can do better with just a bit of attention.

What to Do?

**Sell Target Date Funds:** They often have high expense ratios, from 0.4% to 0.9%.

**Buy Specific Funds:** Choose the more cost-efficient options I mentioned in the previous episode.

**For Large-Cap**

VO or SPY or QQQ or VUG

**For Mid-Cap**

SCHM or VO

**For Small-Cap**

VB or SCHA

These selected funds have lower expense ratios, often around 0.01% to 0.3%, which means more of your money goes toward your future, not fees. Want specific recommendations tailored for you? Use [Xillion](https://xillionapp.com/) to get personalized advice right at your fingertips.

Why you should not invest in target date funds

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Want to make smarter financial choices? Consider the long-term cost of your daily habits, like grabbing a cup of coffee or eating out. Here's a real-life example.

My wife enjoys her Starbucks coffee, which costs about $5 a cup. Making coffee at home? Just about $1. Over 30 years, that daily Starbucks habit would amount to half a million dollars! Yes, you read that right. And this isn't just a random number; you can check it using [opportunity cost calculators](https://xillionapp.com/calculators/opportunity-cost-calculator/) like the one on Xillion.

But it's not just about coffee. What about eating avocado toast out every day, which might cost $12 to $15, versus making it at home for about $2? That habit would cost you close to $2 million over 30 years.

The takeaway? Enjoy your coffee and your avocado toast, but be aware of the long-term financial impact of these daily choices. It's all about making informed decisions.

So the next time you find yourself in line at Starbucks or a trendy café, remember: habits have a price. Tools like [Xillion](https://xillionapp.com/calculators/opportunity-cost-calculator/) can help you better understand these costs, enabling you to make more informed choices.

Cheers to smart spending and a more secure financial future!

The real cost of Starbucks coffee

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Great funds that offer great returns at low fees.

**Small-Cap Funds**

Vanguard (VB)

Schwab (SCHA)

**Mid-Cap Funds**

Vanguard (VO)

Schwab (SCHM)

**Large-Cap Funds**

Vanguard S&P 500 (VOO)

State Street S&P 500 (SPY)

Fidelity 500 Fund (FXAIX) (Fidelity customers only)

**Feeling adventurous?**

**Nasdaq Top 100 (QQQ):** High growth but also high risk.

**Vanguard Growth (VUG):** Focuses on the fast-growing segment of the S&P 500 and has grown about 12% over the last 15 years.

Remember, you can choose how to allocate your investments. A balanced approach would be 30% small-cap, 30% mid-cap, and 40% large-cap. Alternatively, go 50% large-cap and 50% mid-cap like I did for strong returns.

To get more specific advice, check out tools like [Xillion](https://xillionapp.com/) to see which funds align best with your financial goals. Start investing wisely today for a brighter tomorrow!

Best funds to maximize 401k returns

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Today we're discussing the most impactful step you can take: maximizing your yearly contributions.

**The Power of Max Contribution**

For 2023, the contribution limit is $22,500. If you hit this cap, especially with an employer match, the magic of compounding means you could have a million dollars in your 401k by 2040!

**The Benefits**

**Tax Savings:** The money you contribute isn't taxed now, though it will be when you withdraw it in the future. Think of this as a tax gift from the government.

**Compounding:** Investing in cost-effective index funds (like S&P 500, mid-cap, and small-cap funds) can set you up for financial freedom.

Investing the maximum amount has both immediate and long-term benefits. So, aim to contribute as much as you can! For more on how much difference maximizing contributions can make, check out resources on [Xillion](https://xillionapp.com/).

Why you should maximize 401k contributions

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Let's dive into why and how to roll over old 401k accounts from previous employers.

**Why Should You Roll Over?**

**Better Growth:** Old accounts may be in sub-optimal funds, not growing as they should.

**Simplified Management:** One consolidated account makes it easier for you to make better financial decisions.

**Steps to Roll Over**

**Contact Old Employer:** Find out who your old 401k provider is if you don't know.

**Initiate the Rollover:** Call your old 401k provider and ask them to sell all assets in your account and send you a check.

**Where to Roll Over?**

**Current 401k:** Merging it with your existing 401k is often the best choice.

**Open a New IRA:** An Individual Retirement Account offers flexibility to choose cheaper, long-term investments.

Consolidating your old accounts can speed up your journey to financial freedom. So, take action today!

Need step-by-step guidance? [Check out resources on Xillion](https://xillionapp.com/learn/how-to-rollover-old-401k-to-existing-401k/) for more information on 401k rollovers.

Why should you rollover your old 401(k) plans?


The 401(k) is the best way to set yourself up for a comfortable retirement for two big reasons.

1. **Tax Benefits:** Contributions are tax-deferred, meaning you only pay taxes when you withdraw during retirement.
2. **Employer Match:** This is literally free money that boosts your retirement savings. No excuses; take full advantage of it!

Yet, one of the common mistakes that keeps most people from building solid retirement savings is being invested in the wrong funds. Let's dive in and make sure you're getting the most out of your Fidelity 401(k).

## **Default Options: A Roadblock to Your Goals**

The default settings in your 401(k) are often set to conservative, high-fee, low-performing options like Target Date Funds, which keeps you away from saving a meaningful amount of money for your retirement.

To put it simply, Target Date funds have returned an average of just 6% over the last 20 years. In contrast, SPY, an index fund that tracks the S&P 500, has delivered a 10% return over the same period. That's not just better; it's significantly better.

## **Your Next Steps**

If your Fidelity 401(k) is crawling in Target Date Funds, here's your action plan:

1. Log into your Fidelity account.
2. Move your money out of Target Date Funds.
3. Invest it in low-cost, high-performing Index Funds (FXAIX, FSPTX, VOO, QQQ etc)

## **Meet the 401(k) Optimizer**

If all this sounds complex, don't worry. We've built a simple tool—the **[401k Optimizer](https://xillionapp.com/)**—that will do this for you. It scans your Fidelity 401(k), flags the high fee and underperforming funds, and then recommends low-cost, high-performing funds based on your risk appetite.

![401k Optimizer](https://d391fpr6ao9qle.cloudfront.net/images/blog/2023-10-25-401k-Optimizer.webp)

This is your life, your retirement, and your future comfort. Optimize your Fidelity 401k today and your future self will thank you.


Maximizing Fidelity 401(k) returns: a practical guide

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In this article, we will talk about the first pillar for reaching financial independence: earning. Earning is the most important factor in achieving financial independence. How so? If you earn more, you can save more, which means you can invest more, allowing you to reach your milestones sooner.

Earning is something you just can't work around. For example, if someone is earning $50,000, they can only invest, say, $5,000, versus someone else who's earning $80,000 and is able to invest $20,000 a year. The difference is too big to overcome. So, focus on earnings first and foremost, before you focus on spending and saving. Maximize your earnings.

One of the best ways to earn more is to upgrade your skills. I did exactly the same thing. I went to college three times: for my undergrad, grad school, and then MBA. I took loans every single time to go to school, and it paid off handsomely. My income has grown; in fact, I think with every education that I took, my income grew about three to four times over the next five to seven years. So, I urge you to maximize your earnings in the long run.

Why Earning More Should Be Your Top Priority

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The fourth, and I would argue one of the most important pillars for achieving financial independence, is investing. Investing done well and early in your life is the surest way to achieve financial independence. I have talked to hundreds of people in their 20s, 30s, 40s, and 50s about finances. One of the biggest regrets, especially among those in their late 30s to 50s, is not starting to invest early. The reasons vary: "I thought it wasn't important," "I wasn't earning enough," or "I don't know how the stock market works."

Please start investing as early as possible and invest as much as possible. If you're wondering how much, consider your 401(k) as a form of investing. Invest it in low-cost index funds. If you don't know how, we can show you step-by-step which funds to purchase and which ones to sell off. Beyond the 401(k), start investing. If your mortgage interest is around 3 to 5%, don't pay off the mortgage; invest that money in low-cost index funds like QQQ for NASDAQ 100 or SPY for S&P 500.

As an example, if you maximize your 401(k) contributions starting this year, 2023, by 2040, you'll have more than a million dollars in your account due to the power of compounding. Seven years later, that amount could double to two million dollars.

If you're already investing but have been misled by poor advice or trendy investment platforms, we have the tools to help you make smarter choices based on your risk tolerance and age. So, start investing today and continue doing so. If you need help, log into [Xillion](https://xillionapp.com/). We can assist you in making informed investment decisions.

Start Investing Early and Wisely for Long-Term Success

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Is real estate a good investment? Should you actually invest in it? Can you make a lot of money with it? Let's dig in.

Eight years ago, I bought a property in Northern Virginia, and I paid $50,000 as a down payment and some repairs before the renters moved in. I rented the property out for eight years. There was some negative cash flow some months, some positive, but that fifty thousand dollars became a profit of around $214,000 at the end of eight years when I sold the property earlier this year. Pretty good profit, right? Even more than that, but there's more.

There were a few more expenses. The cash flow was negative in certain months. Now, that added up to be more than $16,000 expense over eight years. Also, repairs before selling cost us $25,000, and there were some months when we just couldn't rent the property; it was vacant. That was another $20,000 loss. So now, my profit is $153,000 once I adjusted for all that, much less than $214,000.

But this is still a 15%-18% return over the last eight years, which is better than S&P 500, which gave about 12% over those eight years.

But there's more. My 50% business partner in this deal was my best friend from college, who is actually a very good realtor, and he knows the Northern Virginia Market inside out. He helped me in multiple ways. One, he was able to get us a loan of 90% to the value of the property back in 2014 when we bought it, which means we only paid a 10% down payment.

Also, when the property was bought and when it was sold, he only charged one% in commissions when he could have charged 2.5%. So that saved us money. This friend saved us $35,000. How? He did not charge us what is called a property manager fee, which is about 7% of rental income. That would have added up to $15,000 over eight years. He didn't charge us that. He charged us a lower commission; that saved us about $10,000. Also, he was able to fund some of the repairs from his own part because he had earned some money as a commission, so he actually felt obliged to do that. That saved us another $10,000. Now, if you add all that up, our net profit from that property was $118,000 on an initial investment of $50,000. That's still a decent 11.5%, still slightly higher or maybe even with S&P 500, but nothing out of the ballpark.

But here's one more thing that no other real estate investor will tell you: there is a value for the time that you invest in actually managing the property, finding the renters, finding refinancing, all of that. I call it the time value of money or the opportunity cost of investing in real estate. Now, because I have this friend who was also a 50% business partner in this deal, he spent all this time, but he said it costs about 30 to 40 hours a year to manage a property. Now, that 30 to 40 hours, if you multiply it by $100 an hour as your opportunity cost, if you multiply 40 hours by $100 an hour over eight years, that's $32,000 of extra investment you have put into the property. Now, once you adjust for that, the net profit for this property was only $86,000, which is about 7%. It's not great; it's less than S&P 500. Also, think about it this way: real estate is actually a fixed asset.

You can't sell it tomorrow and take the money, so your money sits in the asset for a long time. There is a cost to that. I put that cost as 2%. So, if you adjust for that, our returns on this entire deal were about 5% per year, which is not great. So, the key to successful real estate investing is to find a partner who will be with you and who will look after your benefit and investment returns as much as they are.

Otherwise, you are much better investing in low-cost index funds and also in S&P 500 because real estate investing actually yields four to 5% a year. If you still want to invest in real estate and you want to work with this realtor, who is also a friend of mine but he's a mentor on our platform Xillion, log in to Xillion today and create an account. You get to work with wonderful people like my friend, who can help you make money through real estate if you choose to do so.

If you want to go solo, use our [Real Estate Investment tool](https://xillionapp.com/real-estate-investment/) to find out if your investment makes sense or not.

Should you Invest in Real Estate?

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The final pillar in achieving financial independence is planning. Planning encompasses managing your accounts, preparing for "what-if" scenarios, building an emergency fund, and simplifying your financial life. Why is planning crucial? A good plan helps you adapt as circumstances or markets change. Here are some ground rules for creating a good plan:

**Digitize Your Financial Life:** Keep a digital record of important documents. Save them in a cloud-based drive so they're easily searchable.

**Simplify Your Accounts:** Consolidate your various accounts—checking, brokerage, 401(k)s—into as few as possible with as few institutions as possible. This not only simplifies management but also gives you leverage when negotiating with financial institutions.

**Do the Math:** Use financial tools to calculate your path to financial independence. These could help you figure out when you can afford a house, how much to save for retirement, or plan for other significant life events.

If all this sounds overwhelming, don't worry. Tools like the one we offer at [Xillion](https://my.xillionapp.com/) can make it easier, but even a simple spreadsheet can help you get started.

Planning Your Way to Financial Security

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Hello and welcome! In this series, we'll discuss the six pillars of personal finance that can guide you towards financial freedom. So, what are these pillars?

**Earnings:** The amount you earn is the biggest factor in how quickly you can achieve financial independence.

**Savings:** The percentage of your income that you're able to invest has the second biggest impact on your journey to financial independence.

**Spending:** While spending is important, it's less critical than savings and earnings. Spending has a floor; for example, if you spend $3,000 on everything, the maximum you can save is by reducing maybe 50% of that spending.

**Investing:** This is the fourth key area. By investing in assets you're comfortable with and good at, you can earn significant returns. For example, investing in real estate could yield 4 to 20% returns per year, the S&P 500 could yield around 10%, and tech companies could yield 12 to 15%.

**Borrowing:** How and how much you borrow can play an important role in your financial independence journey. For example, borrowing money to buy assets like real estate is generally beneficial.

**Planning:** This involves organizing your entire financial life. It's about knowing how much to put into which account, the types of accounts to have, and how much to save in different vehicles like a 401(k), Roth, or your own IRA.

A good plan will keep you on track for financial independence.

The 6 Pillars of Personal Finance You Need to Know

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The biggest Boomer myth is: all debt is bad, debt is evil. I'll tell you from my own experience, not all debt is bad. I categorize debt into three main categories.

**Bad debt:** anything that you have to pay 10% interest on is a bad debt. You should pay it off as soon as possible, and typically these are credit cards or super high personal loans, like, you know, 'buy now, pay later' kind of things.

**Anything that's 5 to 10% loan interest rate, that's not a bad debt**, especially if you use it for, say, studies, upgrading your skills, buying an asset that appreciates, and so forth. A car loan at 7% may be not so great, but a home loan at 6-7%, if it makes sense for you, absolutely no harm in that. Homes appreciate over time.

**Now, any loan that is below 5%**, that's a third category. That loan is actually not bad. I never rushed into paying off those loans early. I always paid those loans at the end of their maturation. Why? Because you can take the money that you're going to use to pay off that loan, invest that money in a cheap index fund, low-cost index fund like S&P 500, FX, or a VUG, something like that, and your money can grow 10% or more per year. Then why would you pay off a loan that is less than 5% a year? It makes absolutely no sense.

So, debt is not evil. 10% or more interest rate debt is bad; pay it off. 5 to 10%, use good judgment. I think you can still make a case that not to pay it off quickly. Under 5%, don't worry about paying it off early. Take your time, invest that extra money into investments that can grow over time, way faster than 5%. Hope this was helpful, and we have two tools that help you do that. [Log into Xillion](https://my.xillionapp.com/signup), create an account, and you will see how we help you categorize your debt into good, bad, and not-so-bad.

Not all Debt is Bad


To move post-tax funds from a 401(k) to a Roth 401(k), you would typically need to execute an in-plan Roth conversion within your employer-sponsored 401(k) plan, if your plan allows for such conversions. Here's how you would generally go about it:

1. **Check Plan Eligibility:** First, check with your employer's 401(k) plan to see if they allow for in-plan Roth conversions. Not all plans offer this option, so you will need to make sure it's available.
2. **Initiate the In-Plan Roth Conversion:** If your plan allows for it, contact your plan administrator or HR department to initiate the in-plan Roth conversion. They will provide you with the necessary paperwork or guidance on how to proceed.
3. **Determine Tax Implications:** When you perform an in-plan Roth conversion, the converted amount will be treated as taxable income in the year of the conversion. You will need to consider the tax consequences and may need to pay taxes on the amount converted.
4. **Specify the Funds to Convert:** You can generally specify which funds or contributions within your 401(k) you want to convert to Roth. This allows you to convert just the post-tax contributions, leaving pre-tax contributions untouched.
5. **Complete the Conversion:** Follow the instructions provided by your plan administrator to complete the conversion. The funds will be moved from the post-tax portion of your 401(k) into the Roth 401(k) account within the same plan.

It's essential to consult with your plan administrator and possibly a tax advisor to understand the specific rules and tax implications associated with in-plan Roth conversions in your 401(k) plan. The tax treatment can vary depending on your individual situation and the rules of your plan, so it's crucial to make informed decisions.

How to Move a post-tax 401(k) to a Roth 401(k)



Converting a post-tax 401(k) to a Roth IRA is a process that may involve several steps and forms. It's important to note that there are two types of after-tax contributions in a 401(k): traditional after-tax contributions and Roth 401(k) contributions. The process to convert these contributions to a Roth IRA may differ slightly. Here are the general steps for both scenarios:

**1. Determine the Type of After-Tax Contributions:** Traditional After-Tax Contributions: If your after-tax contributions in your 401(k) are considered "traditional" after-tax contributions (i.e., not Roth 401(k) contributions), you will need to follow these steps:

**2. Request a Distribution:** Contact your 401(k) plan administrator or the financial institution managing your 401(k and request a distribution of the after-tax contributions. You may need to fill out a distribution request form.

**3. Complete IRS Form 1099-R:** The 401(k) plan administrator will send you IRS Form 1099-R to report the distribution. This form will indicate that the distribution is from after-tax contributions. There should be a box labeled "8" that is checked to indicate a "Code B" distribution (taxable amount not determined). This is because the tax treatment will depend on your subsequent actions.

**4. Roll Over the After-Tax Contributions:** Open a Roth IRA account if you don't already have one. b. Contribute the after-tax distribution amount into your Roth IRA within 60 days. Be sure to deposit the entire distribution, including the earnings on the after-tax contributions, into the Roth IRA to avoid any taxation.

**5. File Your Taxes:** Report the conversion on your income tax return. You may need to file Form 8606 to document the conversion.

**6. Pay Taxes (if applicable):** If there were any earnings on the after-tax contributions while they were in your 401(k), those earnings may be subject to income tax. You'll need to include the taxable portion in your income for the year in which you made the conversion.

If your after-tax contributions in your 401(k) are Roth 401(k) contributions, the process is simpler:

**1. Request a Distribution:** Contact your 401(k) plan administrator and request a distribution of the Roth 401(k) contributions. You may need to fill out a distribution request form.

**2. Roll Over the Roth 401(k) Contributions:** a. Open a Roth IRA account if you don't already have one. b. Contribute the Roth 401(k) distribution amount directly into your Roth IRA. This rollover does not have tax implications, as Roth 401(k) contributions are already post-tax.

**3. File Your Taxes:** Report the Roth 401(k) to Roth IRA rollover on your income tax return for documentation purposes.

Please consult with a tax professional or financial advisor when performing such conversions, as there may be individual circumstances or nuances to consider. Additionally, tax laws can change, so it's essential to ensure you're following the most current regulations.

How to Convert a post-tax 401(k) to a Roth IRA

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We've talked about four different pillars so far: earnings, savings, spending, and investing. Another crucial aspect is borrowing. Borrowing can include car loans, home loans, credit card loans—you name it. It's essential to understand that borrowing is a tool for wealth creation and financial freedom.

Let me give you a quick example. Suppose you're part of a dual-income household and can save a good amount of money. In that case, you can consider taking on more debt to invest in real estate, provided your debt-to-income ratio allows it. This ratio is calculated by taking all your debt payments, like mortgage, car payments, minimum credit card payments, and a few other bills, and dividing that by your total household income.

Banks generally allow a debt-to-income ratio up to 43 to 45%. I personally believe that as long as you're below that threshold, you should continue to invest in property. Real estate is a good investment when bought with leverage, i.e., debt. I've done it myself; we have our primary home and had two other properties, though we sold one earlier this year.

As a rule of thumb, any debt with an interest rate under 5% is generally safe to take on. For interest rates between 5 to 10%, ensure the debt serves a good purpose, like education or purchasing appreciating assets. Anything above 10% is generally not advisable, as the high-interest payments can become burdensome.

So, look at your debt-to-income ratio. If it's below 40%, you have room to invest in more property.

How Smart Borrowing Can Accelerate Your Journey

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Welcome to the second discussion. The second most important pillar in building long-term financial wealth and achieving financial independence is savings. Robust savings will put you on a path to financial freedom faster than you can imagine. If you are an American, I urge you to set your minimum savings rate so that you can at least save $22,500.

Why that number? That's the maximum amount you can put into your pre-tax 401(k) as mandated by the government for the year 2023. If you're not able to do that, go back to the previous discussion, watch that, and increase your earnings so you can save at least $22,500. If you are earning decently, I would encourage you to treat saving as your first expense. Before you do anything else—before you pay your mortgage, your credit cards, anything else—put savings aside. That's why a pre-tax 401(k) is critical; the money is taken directly from your paycheck and deposited.

If your employer offers an ESPP, which stands for Employee Share Purchase Plan, you can actually contribute 15% of your pre-tax income into the ESPP plan. Even though ESPP is post-tax, it forces you to save. This is a very good way to increase your savings because that money never hits your checking or savings account; you can't spend it because it doesn't even come to you. It's automatically saved, and that's the best way to save money that is already stashed away.

If you can do more, consider a Roth 401(k) or a Roth IRA on your own, contributing $6,500 per person. If you still have more, invest in your own brokerage account. I challenge you to save 40 to 50% of your income. If you're making more than $250,000, aim to save about 60% of your income. I've done it; at my peak earning years, I was saving about 75 to 80% of our income.

Good luck increasing your savings and improving your chances of reaching financial independence soon.

The Power of Robust Savings

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Pre-tax 401k or Post-tax 401k? Here's my general rule of thumb: If you are a high-income earner, maximize your pre-tax 401K first. If your employer allows it, once you have maximized your pre-tax 401K, you can put more money into a post-tax 401k. Not every employer allows that, but a lot of them do.

If your employer allows that and you can save a little bit more—this year's limit is 22,500—if you can save more than that, you can put that money in a post-tax 401K. Then, at the end of the year, you fill out a form and convert that post-tax 401K into a Roth backdoor Roth. That's a simple mechanism the government still allows. There was a proposal to ban it, but it's still an option.

So, you can put away a lot—I think a total of up to $66,000—in your 401k this way. Make sure you first maximize your pre-tax 401K, get all the tax benefits, and then put as much money as you can into a post-tax 401k, and then switch that post-tax into a Roth 401k so you won't have to pay taxes on the gains and on that amount in the future.

With a Xillion account, you can manage your 401k pre-tax and post-tax really well. We also will walk you through which funds to buy and all that. Go to [xillionapp.com](http://xillionapp.com/) and create an account.

Which is better, Pre-tax 401k or Post-tax 401k?

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The third most important pillar in reaching financial independence is spending, specifically reducing and controlling your spending. No amount of money is enough if you're going to spend it all away. In yesterday's discussion, I talked about good saving habits. The best saving habits actually involve saving money before it reaches your checking or savings account.

The best spending control habits that have worked for me, and for many of my friends, focus on the biggest saving opportunities. One of the largest opportunities for reducing spending for me was buying used cars. We never bought a new car until I turned 38. Until then, every car we bought was used. A car payment of $500 versus $200 is substantial; that extra $300 a month goes into your investing or brokerage account and can add up to a significant number.

The second opportunity could be refinancing. If you have a mortgage, consider refinancing to a cheaper interest rate, as rates will likely decline in the next two to three years. My wife and I go through our credit card statements, as we typically make all our purchases through a single credit card, to look at broad spending trends. We flag any item over $100 and scrutinize it.

I'm not one to be penny-wise and pound-foolish. We focus on the big items and reducing those does most of the work for us. Whatever technique works for you, reduce your spending. Reduced spending means increased savings, which in turn means increased investing. Increased investing leads you closer to achieving financial independence.

Control Spending to Boost Savings and Investments

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One very easy way to save money with auto insurance—and even home insurance, earthquake insurance, flood insurance etc—is to keep a high deductible. What do I mean by that?

So, let's take auto insurance. Overall, I'm a pretty decent driver. I don't have much history of traffic violations, accidents, or anything like that. I knowingly keep my deductible pretty high, a thousand dollars minimum, typically even higher if the policy offers. Why? If you think about it, if you get into an accident, then you being at fault; there's a 50% probability. If you are not at fault, the other party who's at fault will likely pay all your expenses, so there is no deductible.

If you are at fault, you will still pay, but the deductible will be higher. But the chances are, if you especially know yourself and you are a good driver and you live in a good area, the chances of you paying that deductible are very low.

For instance, so far, over 20 years of living in the US, I've had to pay a deductible out of pocket, maybe twice in 20 years. But that 500 extra every time has saved me approximately six to seven thousand dollars in insurance premiums over that time. That money, invested in stocks, gives much better results.

So, I urge you to look at your auto insurance policy, look at the deductible, look at your earthquake, insurance, flood insurance, look at the deductible, and based on the probability of everything, evaluate and opt for a slightly higher deductible, which is likely to give you a better price that you pay every month, every year.

Hope this was helpful, and if you have any questions, feel free to reach out via social media, and happy to answer your questions.

Is High Deductible Insurance a Good Choice?


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Here's my story of how I went from absolutely hating debt and considering debt as evil, to using debt as a tool towards financial independence. Growing up in a farming family, debt was considered evil because the interest rates were 30 or even 36% per year. So, if you went into debt, that typically meant you would lose your land.

After high school, I got admission into a great college, but my family didn't have the money. So, we had no other choice but to go to a bank and get a loan. The loan was priced at 16% per year, a very high-interest rate, but it afforded me the opportunity to go to an engineering college, get an engineering degree, and get a well-paying job right after college. I paid off my loan in two years.

Once I paid off that loan, I decided to come to the U.S. for graduate school and I took another loan, even bigger, but this time it was at about 12% interest. Not bad. I paid that off after I got a job in the U.S. A few years later, I had the itch again to go back to school for an MBA. I took another loan, even though by this time, I had enough assets to pay for this education from my own pocket. But I decided to take the loan at about 6% interest rate.

And not just for education, I also took a loan to buy a house and I only paid a 3.5% down payment. 96.5% was financed through a bank loan. In 2018, we bundled all our loans, including my really large business school student loan, into one home loan and refinanced it for 30 years at a really low-interest rate of 2.75%.

I have always used debt to invest into myself, growing my skills, or to invest into buying assets like real estate, like my home. I'm not afraid of debt anymore. I use debt as a tool to build wealth. I hope you can too. If you need help, follow me as I share more details and also new information that will help you have a good relationship with debt and use debt for financial independence.


How I used Debt to Reach Financial Independence

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So, you have decided to make a lot of money in the stock market by day trading. Let me share a story. This is the story about Jim Simons, who has made the most money in the stock market by day trading. 

How did he do it? He did three things.

**One**, he himself is a genius. He won the Nobel Prize for mathematics, which is called the Fields Medal, and he hired other friends of his who were genius mathematicians to come and work with him. This way, they could write programs that would analyze the data for the stock market and stock trades.

**Two**, they scoured the entire world for data about companies, about stocks, about commodities, and about futures.

**Three**, they put their programs and their data on powerful computers and trained them to beat the stock market. They started doing this back in the 70s, and by the mid-1980s, they had built such a machine that they were able to make billions of dollars of profit every year. Between 1982 and 2018, they made 100 billion dollars in profits.

If you think you can beat people like Jim Simons and his team at Renaissance Technologies, you should day trade. Otherwise, you should invest either in stock funds, index funds like the S&P 500, or you should invest in companies that you believe in and know really well, and hold on to those companies for a long, long time.

How Jim Simons made $100 Billion by Day Trading

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A lot of people ask me, "What is one thing they can do to increase their wealth?" And if you're in the US and you have a high-paying job, the best thing you can do to increase your wealth is to actually maximize your 401k.

Why? Two main reasons:

**First**, any amount of money you put in your 401k is actually tax-free. You don't pay any taxes now; you will pay when you withdraw, but that's a separate thing. Right now, you save taxes, and taxes saved now are better than taxes paid now because your money compounds & grows without paying taxes.

**The second reason** is that when you put money away in a 401k, you actually can't spend it. If you take it out and spend it, there is a penalty, so think of it as a forced saving habit. And once you get into this habit, you put this money away, you get a tax benefit, and then you can't use it, so this money keeps growing over time, for a long time.

If you max out starting today, in about 17 years, you will have more than a million dollars in your account. That's how magical this particular type of wealth creation is.

So, go ahead, maximize your 401k contributions today, and you will thank your future self.

Benefits of Maximizing your 401k

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A lot of people ask me, 'Is this a good time to invest? How much should I invest in this thing? How much should I invest in that thing?' And what I feel a lot of people are asking is, 'How can I time the market?' And I'm here to tell you that you can almost never time the market perfectly. That's why I tell everyone: don't try to time the market. Actually, increase the amount of time your money will spend in the market. What I mean by that is there is never a bad time to invest.

The S&P 500 Index has grown 10% or more over the last 50-plus years. When you look at it over a 30-year period, even if you invest today and you think the market is a little bit frothy, you will still come out ahead in 30 years' time because it grows 10 or 12% over a 30-year period.

Also, if you are going to try to time the market, you have to be right multiple times: one, when you buy something, and two, when you sell something.

Let's say you think that stock XYZ today is really cheap and you should invest in it. Well, one, you have to be right that it's really cheap and it's low right now. And let's say in a month, you think it's gonna pop, it's gonna go up. Then you have to be right again in a month so you can sell it for a profit. If you're not right on either end, you are likely not to make money. But let's say you think XYZ is actually a good company and you think it will grow over a 10-year, 20-year time period.

You buy XYZ stock today and you don't worry about timing it because you're going to hold that stock for a long time. And after 10 or 20 years, it would have grown so much that you can sell it any day of, you know, in the market, and you will still make a profit. So, invest for the long term. Please don't trade. Buy great companies and hold them.

Can you Time the Market?


Achieving financial success might seem like a complicated journey, but in reality, it can be broken down into three essential steps. By following these guidelines, you're setting yourself on a path toward a more secure and prosperous financial future. Let's dive in!



### 1. **Save, Save, Save!** 

 **Save at Least 20% of Your Income:**  If you're just starting your financial journey, aim to put away at least 20% of your income. But don't stop there! If you're earning a decent salary, why not challenge yourself to save 30-40%? Here's how:

- **Contribute to Retirement Accounts:** Start with your 401(k) and Roth accounts. They offer tax advantages that can boost your long-term savings.

- **Invest in a Post-Tax Brokerage Account:** Once you've maxed out your retirement contributions, consider a brokerage account for additional savings.
    Once you've maxed out your retirement contributions, consider a brokerage account for additional savings.


The more you save, the more financial freedom you'll have down the line.




### 2. **Invest in What You Know :** 
When it comes to investing, sticking to what you understand is important. Invest in companies and asset classes that you're familiar with. Research, study, and get to know the areas where you put your money. Investing isn't about quick wins; it's about informed decisions that pay off over time.



### 3. **Pay Off High-Cost Loans :**
High-interest loans can be a drain on your financial growth. If you're dealing with loans at 10% interest or more, focus on paying them off as quickly as possible. Think of it this way: by paying off a loan with 10% interest, you're essentially earning a 10% return on that money. It's a guaranteed way to boost your financial health.



Financial success doesn't happen overnight, but these three fundamental steps can set you on the right path. By saving aggressively, investing wisely in areas you understand, and paying off high-cost loans, you're laying the groundwork for a solid financial future.

3 Basic Steps to Achieve Financial Success



August 2023 has been a roller coaster for the U.S. economy. This report provides a concise examination of these indicators, giving you a clear picture of the current landscape.
In a nutshell, the US economy remains pretty strong, albeit it’s slowing down a little bit. Inflation continues to cool off while job growth remains steady.

As we gear up for the final months of the year, it's clear that both opportunities and hurdles lie ahead. How do all the economic changes impact your investments and your financial future? [Login to Xillion](https://my.xillionapp.com/) to find out!

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![Broad_Market_Indices@2x(1).png](https://d391fpr6ao9qle.cloudfront.net/images/blog/2023-08-31-StockMarket.png)

In August, broad market indices showed declines: S&P 500 (-1.8%), Dow Jones (-2.4%), Russell 2000 (-5.2%), and Nasdaq 100 (-1.6%).

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![Sectoral_Performance@2x (1).png](https://d391fpr6ao9qle.cloudfront.net/images/blog/2023-08-31-Sectors.png)

**Sectoral Performance:** Energy and Materials saw gains at 1.3% and 3.6%, respectively. All other sectors registered declines, with Utilities experiencing the largest drop at -6.7%.

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![Copy of Broad_Market_Indices@2x.png](https://d391fpr6ao9qle.cloudfront.net/images/blog/2023-08-31-Commodities.png)

Crude Oil and Natural Gas prices rose by 3.0% and 4.6%, respectively. Silver also saw a marginal increase of 0.6%. Gold remained unchanged, while Copper prices declined by 3.5%

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![Real_GDP_10Years@2x (1).png](https://d391fpr6ao9qle.cloudfront.net/images/blog/2023-08-31-GDP.png)

In Q2 2023, the real GDP grew at a 2.1% annual rate, slightly higher than the 2.0% increase seen in Q1. This growth was driven by consumer spending, private investments in non-residential fixed assets like machinery, equipment etc., and increased government spending by both state and federal governments. The growth, however, was tempered by lower exports, residential fixed investments, and private inventory investments. 

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![Inflation@2x (2).png](https://d391fpr6ao9qle.cloudfront.net/images/blog/2023-08-31-Inflation.png)

**Inflation:** The overall CPI rose by 3.2% year-on-year in July, a minor increase from the 3.0% observed in the previous 12 months. Excluding food and energy, the CPI increased by 4.7% over the past year. Energy costs went down by 12.5% in the year ending July, while food prices increased by 4.9% over the same period.

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![Copy of Inflation@2x.png](https://d391fpr6ao9qle.cloudfront.net/images/blog/2023-08-31-Mortgage.png)

The 30-year mortgage rate reached a peak of 7.23% in the week ending August 23rd, the highest in over two decades. However, it slightly decreased to 7.18% by the week ending August 30th.

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![Copy of Copy of Inflation@2x.png](https://d391fpr6ao9qle.cloudfront.net/images/blog/2023-08-31-Job.png)

US job openings dropped to 8.8 million in July, the lowest since March 2021, yet remained high compared to pre-pandemic levels. The quit rate for US workers decreased to 2.3%, marking the lowest since January 2021.

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![Copy of Copy of Inflation@2x (3).png](https://d391fpr6ao9qle.cloudfront.net/images/blog/2023-08-31-Imports.png)

Imports saw an 8.2% decline year-on-year, while exports fell by 3.4% in Q2 2023

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![Copy of Copy of Copy of Inflation@2x.png](https://d391fpr6ao9qle.cloudfront.net/images/blog/2023-08-31-Unemployement.png)

US unemployment rate rose to 3.8% in August, the highest since February 2022. Notably, the 3.4% in April was the lowest since 1969.

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![Copy of Inflation@2x (1).png](https://d391fpr6ao9qle.cloudfront.net/images/blog/2023-08-31-Home_Price.png)

The average price of homes sold in Q2 2023 was $495,100, down from $552,600 in Q4 2022, while the median price dropped to $416,100 from a Q4 2022 high of $479,500.

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Monthly Market and Economy Roundup - 31 August 2023



If you pay attention to the financial news, you’ve undoubtedly heard about 7% mortgage rates. The memes would have you believe the lucky few who purchased homes with 3% mortgage rates are living like kings, while the rest of us missed our golden opportunity and will be renting forever. After all, the price of housing is [supposed to go down](https://edition.cnn.com/2023/07/08/business/mortgage-rates-home-prices/index.html) when mortgage rates go up, but the U.S. housing market is still red-hot even after the rate hikes.

The truth is more complicated. While mortgage rates make a significant impact on how much you pay for a home, it might not necessarily be as large as you expect. For example, if you pay a 20% down payment on a $440,000 with 7% interest rate, you [would pay](https://www.wsj.com/personal-finance/what-7-mortgage-rates-mean-for-home-buyers-c5e88c1b?mod=personal-finance_lead_pos2) a monthly payment of $2,300. WIth a 6% interest rate, your payment would be $2,100. 

Both of those figures might sound too high, but it’s important to compare that monthly figure with the cost of renting. Also factor in other cost sources, such as local income tax, maintenance, and upkeep. Expected appreciation or depreciation should also go into your home-buying decision. One big difference between renting and owning? A mortgage locks in your monthly payment price, while renting fluctuates every time you renew. 

Many people don’t take the time to make that calculation, which is by far the most important one you can make in your home-buying journey. That’s exactly why we created the **[Xillion Mortgage Calculator](https://xillionapp.com/product/home-buying-guide/)** — it takes everything into account, and lets you know whether you should rent or buy a new home.

According to our research, the majority of renters do not take the time to compare the expected cost of renting versus buying a home. Oftentimes, these buyers simply rely on gloomy news headlines to decide they’ll never be able to afford a home — which often isn’t true. 

It’s easy to also get stuck in a pattern of wishful thinking. Instead of thinking about whether you should have purchased a house five years ago, focus on the decision today. Of course it would have been better to purchase with lower interest rates. But there is no point in dwelling in the past. And in fact, you can still reap considerable upside by making the right decision today. 

So don’t delay more. Go to Xillion and use our [Xillion Mortgage Calculator](https://xillionapp.com/product/home-buying-guide/) to make the optimal housing decision. You will reach your financial goals sooner, with the peace of mind of knowing you made the right call.


Beyond Interest Rates: Exploring Tax Benefits, Rent Costs, Appreciation, and More in Your Housing Decision


There are over 5,000 companies listed in the U.S., and if you're like most people just starting with investing, you might be scratching your head, thinking, "Where exactly should I invest?" It's a big question, and with so many options, it can feel a little overwhelming.

But hang on a minute. What if the answer isn't in a fancy financial report or a hot tip from a stock market guru? Here's a thought: Have you ever considered that what you do every day could be your secret weapon in the stock market? Seriously! Let's say you've been working in the SaaS industry for a couple of years. Well, congratulations! You probably know more about that space than most folks out there.

I know, I know, it might sound too simple, but hear me out. Warren Buffett, the big kahuna of investing, has this idea called the "circle of competence." Basically, he says that if you stick to what you know, you've got a good shot at success in the stock market.

So, that SaaS knowledge you've got? That's your circle of competence. It's like having insider info without the illegal part. You understand the industry, the trends, the ups and downs. You can spot a good deal or a bad one from a mile away.

Here's what you could do with that know-how:

- **Find the Hidden Gems**: Those companies that are doing great stuff but aren't on everyone's radar yet. You can spot 'em.
- **Avoid the Duds**: You'll recognize red flags that others might miss, saving you from a bad investment.
- **Enjoy the Ride**: Investing in something you know and care about can be genuinely enjoyable, like turning your hobby into a money-maker.

And here's the kicker: This doesn't just apply to your job. Are you a car enthusiast? A health nut? A tech geek? Whatever you know and love can be your investing superpower.

So take a minute to think about what you're good at. What do you know, like the back of your hand? That's where you might want to start looking for investment opportunities.

Remember, investing doesn't have to be about charts, graphs, and boring numbers. It can be about taking what you love and know and turning it into something even more valuable. Cool, right?

Which Stocks to Invest in?


When it comes to saving for your child's education, the 529 Savings Plan often comes up as a go-to option. Widely known for its tax benefits, including deductions from state taxes or tax-free withdrawals, it's no wonder why it is a popular choice. Despite its popularity, here's a detailed look at why the 529 Plan might not be the best option and how a Post Tax Brokerage account is better.

### 1. **Limited Investment Options**

The 529 Plans often come with a constrained set of investment options. Unlike a brokerage account, where you have the freedom to choose from a broad array of stocks, bonds, or mutual funds, 529 Plans restrict your ability to tailor your investment strategy to meet specific goals or risk tolerance. This limitation may hinder your ability to achieve decent returns. 

### 2. **No Flexibility with the Use of Funds**

The funds in a 529 Plan are strictly earmarked for qualified educational expenses. This lack of flexibility can be problematic if your child decides not to attend college or use the money to fund his or her business. In such cases, withdrawing the money for non-educational expenses results in taxes and penalties. Conversely, Post Tax Brokerage accounts have no such restrictions, clearly making them a more flexible option.

### 3. **High-Cost Funds, Hence Lower Returns**

Another drawback of 529 Plans is that they often include high-cost funds. The expenses related to managing these funds can significantly eat into your returns, especially over the long term. Even though they offer tax benefits, these may not offset the loss in returns due to higher costs. Post Tax Brokerage accounts generally come with lower fees, leading to better overall returns without the need for specific tax advantages.

![A typical 529 Savings Plan fund has an expense ratio ranging from 1% to 0.5%, which is over 10 times higher than that of a typical S&P 500 Index Fund.](https://d391fpr6ao9qle.cloudfront.net/images/blog/nh-2039-actively-managed-blend.webp)

```A typical 529 Savings Plan fund has an expense ratio ranging from 1% to 0.5%, which is over 10 times higher than that of a typical S&P 500 Index Fund.```

### 4. **Time Investment**

Time Investment in 529 Plans can be substantial due to their complexity and variation between states. Managing rollovers, tax deductions, and potential penalties requires navigating complicated rules which differ from state to state. You either invest significant time in understanding these complexities or hire a financial advisor, often at a 1% charge. Both options can add to the overall burden and cost of the investment, making 529 Plans a less appealing option for most.


### 5. **The Opportunity Cost of Money Locked for a Long Time**

Money invested in a 529 Plan is locked until it is used for qualified education expenses. While this helps ensure that the funds are used for their intended goal, it also means that the money is not available for appealing investment opportunities or emergencies. This opportunity cost may lead some to consider alternatives that allow for greater flexibility and the potential for higher returns in other areas.

![Comparison](https://d391fpr6ao9qle.cloudfront.net/images/blog/comparison-529-plans-brokerage.webp)

***Even after paying a 15% capital gains tax of $14,606, you'll be left with $136,767, which is $22,394 more than what you would otherwise have with a 529 Savings plan.***

Additionally, don't be misled by the term 'Index' in the names of some 529 Plans, such as 'NH Portfolio 2030 (Fidelity Index).' Though it might appear that you're investing in an index fund, the reality is different. In fact, 'NH Portfolio 2030 (Fidelity Index)' is a blend, comprising a U.S. Total Market Index fund, a Non-U.S. Index Fund, and 52% allocated towards debt. This composition has led to its performance being only half that of the Fidelity 500 Index Fund. These are not just theoretical concerns but actual facts that underline the importance of carefully examining the specifics of any fund labeled as an 'index' within a 529 Plan to ensure it meets your investment objectives.


![529 Index option only returned an annual average return of 6.61% over 10 year period while the Fidelity 500 Index Fund returned 12.65%, more than double the 529 Plan.](https://d391fpr6ao9qle.cloudfront.net/images/blog/fidelity-index-index-option.webp)
```529 Index option only returned an annual average return of 6.61% over 10 year period while the Fidelity 500 Index Fund returned 12.65%, more than double the 529 Plan.```


It's worth noting that some 529 managers do offer an S&P 500 or a U.S. Total Stock Market Index Fund. If you are living in a state that offers such an option, it could be a great choice. However, keep in mind that the money invested in a 529 Plan is locked away and can't be used for other investment opportunities in the future. Moreover, it doesn't save you from the time investment that goes into researching and managing your 529 Plan. So, take the time to work out your finances and see what makes the most sense for your individual situation.”

**Conclusion**

Post Tax Brokerage accounts are not just an alternative but a more adaptable and profitable option for saving for your child's education. The decision is clear: for those seeking investment freedom, flexibility in fund usage, and potential for better returns, Post Tax Brokerage accounts are the better choice. This is not just a possibility; it's a financially sound decision that aligns with the needs of modern families planning for their children's future.


Why Don't We Recommend 529 Plans for Saving for Kids’ Education?


Did you know that Ford makes [nearly as much](https://www.detroitnews.com/story/business/autos/ford/2020/02/03/fords-lending-arm-generating-profit-ever/41133523/) profit from auto loans as it does from manufacturing cars? The auto loan industry in the U.S. [generates](https://www.ibisworld.com/industry-statistics/market-size/auto-leasing-loans-sales-financing-united-states/#:~:text=The%20market%20size%2C%20measured%20by,was%20%24160.5bn%20in%202022) around $161 billion annually, which makes it larger by revenue than U.S. industries including newspapers, day care, movies, and home-building, according to IBISWorld estimates. These statistics show just how big (many would say “out of control”) the American auto-loan industry has become. 

It wasn’t always this way. In the 1950s, [around a third](https://www.nytimes.com/2007/07/28/business/yourmoney/28money.html) of car buyers in the U.S. paid with cash. But as debt became cheaper and more widely available, automakers figured out they could generate a significant profit by financing car purchases. 

In more recent years, Americans have started taking out longer and more expensive auto loans. Most auto loan terms tend to be between 24 and 60 months, but increasingly people are opting for 72-month and 84-month loans. Making matters worse, monthly payments are also [getting more expensive](https://www.wsj.com/livecoverage/stock-market-news-today-04-03-2023/card/more-car-payments-top-1-000-a-month-NhS62TR3lMgr5gtefZah). In 2019, only around 4% of auto loans had monthly payments over $1,000 per month. Now closer to 17% of auto loan payments are over that threshold. 

![Car Sales Payment](https://d391fpr6ao9qle.cloudfront.net/images/blog/car-sales-payment.webp)
[Source](https://www.wsj.com/livecoverage/stock-market-news-today-04-03-2023/card/more-car-payments-top-1-000-a-month-NhS62TR3lMgr5gtefZah)

Millions of Americans are stressing out over their monthly auto loan payment. In some cases, this is entirely by choice — some people just want to drive the latest Ford F-150 or Tesla Model X, both of which can often cost over $100,000. New cars sold [on average](https://www.wsj.com/articles/auto-dealers-finally-have-cars-to-sell-again-6ecff886) for $46,000 last year, which was well [over half](https://www.census.gov/library/publications/2022/demo/p60-276.html) of the real median household income. Used cars used to be an attractive option for many people, but in recent years their average cost has also gone up too.

As it turns out, automotive loans are one of the biggest financial decisions that many of us make. If you make a bad decision, it can set back your path to financial freedom by years. Why? Because if you’re young, all the extra money spent on a car could be going into markets, generating wealth over time.

That’s why it’s so important to avoid easy mistakes. It’s also why Xillion created an auto loan calculator that lets you put in inputs such as loan payment, term, and interest — we’ll show you exactly how your decision will impact your path to financial freedom. 

![Auto Loan Calculator](https://d391fpr6ao9qle.cloudfront.net/images/blog/xillion-auto-loan-calculator.webp)

If you’re in the market for a car, we recommend checking out the calculator (for free) at www.xillionapp.com/calculators/auto-loan-calculator. In the meantime, here are four of the biggest (and easiest to avoid) mistakes people make in purchasing a car and how to avoid them:

- **Brand matters, but not the way you think** It’s a mistake to think the brand of your car doesn’t matter — but it’s not because you need a flashy car brand. Rather, buy from an automaker that’s known for its reliability, safety, and durability. For most people in the U.S., Toyota, Subaru, and Honda are [great choices](https://cartelligent.com/how-long-do-people-keep-different-car-brands/). Of course, it’s always worth investigating the particular model and manufacturer before making a decision. But if you think you need a fancy car to validate yourself, remember — if a Prius is [good enough](https://www.cnbc.com/2018/08/21/9-billionaires-who-still-drive-cheap-hondas-toyotas-and-chevrolets.html) for Sergey Brin (and a Honda Accord for Jeff Bezos), then it’s probably good enough for you. 

- **If you are financing, shop around for loan options** Many buyers make the mistake of simply accepting the financing offered by the dealership without exploring other options. Take the time to explore other lending institutions, such as banks, credit unions, and online lenders. Dealerships can be pushy, but remember, you’re the one who has to live with the monthly payment. Even a seemingly small difference in interest rates can result in significant variations in your monthly payments and overall loan costs.

- **Term duration matters as much as monthly payment** A lower monthly payment can be deceiving — and, unfortunately, auto-loan companies know that. Use the Xillion calculator to figure out which option is really best in the long-term. And if you find savings that way, use our portfolio optimizer to invest the difference in markets for a long-term gain. 

- **Don’t forget to look for EV subsidies** Federal and state governments offer subsidies designed to encourage drivers to purchase EVs instead of gas vehicles. In some cases, the subsidies can run close to $10,000. It’s a huge benefit for Americans, and if you live in an area with convenient access to charging stations (or if you can charge at home) then it’s 100% worth looking into. 
 
Making a car-buying decision can be scary. And it’s certainly a decision that should not be taken lightly. Here at Xillion, we want to help you make sure you avoid the easy mistakes so that you can get to financial freedom faster. Before you make a decision, don’t forget to check out our auto-loan calculator! 


Don’t let a car be the reason you can’t retire. Four of the biggest auto-loan mistakes and how to avoid them.




Ever since interest rate hikes began in 2022, economic pundits have wondered whether the U.S. would be able to achieve a “soft landing.” In other words, would raising interest rates inevitably crash the economy? Or would the Federal Reserve succeed in slowly deflating overpriced assets, steering the economy toward a healthier future?

Interest rates are now at the highest level in 22 years, and the Fed has hinted it will hike them even higher. So where do we stand now? Things look good — really good, actually. The U.S. stock market is hovering near all-time highs, with the S&P 500 having fully recovered from a 25% dip in the first nine months of 2020. The U.S. still has a historically low unemployment rate of around 3%. And interest rate hikes have largely had their desired impact: inflation is down to just 3% from a high of 9% in 2022.

Despite all the positive signs, it’s still too early to declare a successful soft landing. If the economy were a SpaceX Falcon 9, it would be hovering close to the launchpad with the rockets still firing away. There are simply too many unknowns to give the all-clear signal. To list a few:

- **China’s economy is teetering on the brink of a debt crisis.** You may have seen Evergrande in the news recently. It’s a Chinese real estate developer that ran into a huge debt problem (to the tune of $340 billion) since it kept building new real estate projects using leverage, anticipating China’s middle- and upper classes would always demand more. Of course, as soon as the Chinese economy hit a rough patch, the demand shrank, and Evergrande ended up defaulting on billions of dollars in debt. The government intervened and helped to stabilize the situation. Still, the Evergrande story speaks to China’s debt problem and the lingering impacts of COVID lockdowns. The youth unemployment rate sits at over 21%, contributing to social unease. Any financial crisis in China would undoubtedly spill over to global markets, given China’s status as “the world’s factory” and the second-largest economy behind the U.S.
- **Decoupling from China.** America & other Western economies continue to decouple from China. This is resulting in more in-shoring & near-shoring, as witnessed by Mexico’s climb to the top position as a US trading partner. China’s cheap labor + capital, coupled with lax environmental standards, kept inflation artificially low for much of the developed world over the last few decades. It remains to be seen how inflation will play out once this decoupling has run its course.
- **Important economic indicators are still flashing red.** The U.S. bond market yield curve remains inverted. This happens when short-term bonds have a higher yield than long-term bonds, meaning investors are worried about longer-term uncertainty (hence higher short-term rates), but are confident of longer-term stability (hence lower longer-term rates). Reading between the lines, investors are worried about near-term problems such as debt and inflation, but they maintain confidence in the long-term success of the American economy. The Conference Board's leading economic index, a comprehensive amalgamation of key economic indicators, has been signaling trouble for some time. This index is intended to signal a potential slowing of economic activity, prompting investor caution.


![Yield_Curve.png](https://d391fpr6ao9qle.cloudfront.net/images/blog/2023-08-11-the-soft-landing-is-within-sight-but-not-guaranteed/Yield_Curve.webp)



![Conference_Board.png](https://d391fpr6ao9qle.cloudfront.net/images/blog/2023-08-11-the-soft-landing-is-within-sight-but-not-guaranteed/Conference_Board.webp)



- **Consumer sentiment** has improved, but it might not last. In July, U.S. consumer sentiment rose to a nearly two-year high of 72.6 on the University of Michigan's index, up from June's 64.4 and surpassing expectations. This surge reflects easing inflation worries and a strong job market. One reason for caution? J.P. Morgan CEO Jamie Dimon recently warned that U.S. consumers may be using up their savings due to inflation, which he says could result in a 2024 recession.



![Consumer_Sentiment.png](https://d391fpr6ao9qle.cloudfront.net/images/blog/2023-08-11-the-soft-landing-is-within-sight-but-not-guaranteed/Consumer_Sentiment.webp)


- **There are geopolitical threats** that could destabilize markets, especially energy prices. The war in Ukraine continues to weigh on global markets, adding an unpredictable dimension to global energy markets. Despite earlier declines, gas prices have recently spiked by nearly 30 cents to reach a national average of $3.82. This increase has been driven by OPEC+ (a coalition of oil-producing countries, including Russia) implementing output cuts to boost crude prices. Saudi Arabia also recently decided to maintain its production cut in a bid to increase energy prices. We believe this is a medium-term risk to Western economies. As more renewable sources come online, coupled with the promise of newer technologies like nuclear fusion, dependency on coal, oil & natural gas will decline substantially.

**Our take:** Xillion maintained throughout 2022 that the U.S. market remained an attractive investment. We cautioned against giving into market panic by pulling out investments. That turned out to be great guidance. If you took your money out of the S&P 500 in June of 2022, you would miss a 20% increase in investments. The markets can tell optimistic or pessimistic stories depending on your perspective. But our product optimizes for long-term success, and that means trusting the long-term growth of American stocks.

The soft landing is within sight but not guaranteed




After spending 15 years working in the data & AI space, I have been both mesmerized by its potential and humbled by its limitations.

The latest generation of generative AI tools such as ChatGPT are no different. These tools wow you instantly, but they can’t be trusted 100%, especially in areas where deep expertise is needed. And especially when your reputation or someone’s life is on the line!

Let me walk through an example. I was recently chatting with a Xillion customer about 401k deductions & its tax benefits. I needed a quick calculation on their expected tax savings from making 401k contributions pre-tax instead of post-tax.

I asked ChatGPT expecting a quick answer. It started on a promising note, giving details of federal tax brackets and the marginal tax rates. It also did the first part of the calculation right. Everything looked promising at first glance.

![ChatGPT1.png](https://d391fpr6ao9qle.cloudfront.net/images/blog/2023-08-11-promises-fallacies-fantasies-of-ai/ChatGPT_Tax_Blunder_01.webp)


But when it gave the final answer, it was completely wrong. It wasn’t even close. The result was 5x the approximate answer that I had roughly calculated in my head. I shared my own number with the customer and resolved to come back to research the miscalculation.

A bit of digging revealed that ChatGPT hallucinated and made up an imaginary number to calculate the marginal tax (see pic 2). It took me around 5 minutes to find the exact place where ChatGPT went wrong. I don’t know why it made up the number, and I don’t think even the creators of this algorithm would be able to pinpoint exactly why this happened. That one hallucination changed the equation completely and rendered the entire effort useless.



![ChatGPT2.png](https://d391fpr6ao9qle.cloudfront.net/images/blog/2023-08-11-promises-fallacies-fantasies-of-ai/ChatGPT_Tax_Blunder_02.webp)


Here’s my overall take on generative AI tools like ChatGPT: they’re great at regurgitating & repeating the information that has been available in public domain (the Internet) in large quantities for a long time. But they can’t do any real thinking, despite all the claims. I have spent a big chunk of my adult life building data & AI products, and I have seen that the promise of new technology generally exceeds its utility — sometimes by a wide margin.

What does all this mean for you? If you are a knowledge worker and you solve unique problems, focus on the aspects of your job that are unique to your job, company, industry, etc. For the things that are widely available — say, common programming patterns, creating documentation, etc. — use AI tools because those algorithms have been trained on millions of design documents, software programs, reports and such.

I use ChatGPT to augment my research, instead of using a search engine, because it provides well-organized information that is easy for me to consume. But when I’m working on something that puts my reputation on the line, I do not rely on AI output. Perhaps this is why students are some of the biggest users of Generative AI tools? Barring accusations of plagiarism, students face limited consequences for generative AI providing inaccurate information.

These accuracy pitfalls and domain limitations are exactly why I don’t expect AI tools to replace any meaningful part of knowledge jobs for the foreseeable future. While OpenAI and the AI industry are hard at work on making these products more accurate, these limitations are simply inherent to the technology. After all, generative AI is a word predictor: it uses the words before it to predict which word is most likely to come next. That isn’t thinking. At least not in the way we humans do it.

I would love to hear your thoughts. What do you think of generative AI? How big of a limitation is the accuracy problem? How do you use AI in your work?


Promises, Fallacies & Fantasies of AI


# U.S Economic Insights

In July, the US economy displayed a strong performance with an uptick in GDP and a robust rally in the financial markets. Tech giants reported strong earnings, while crude oil, gold, and copper surged significantly. However, export activity and home prices hinted at potential challenges.

Here are the key highlights,

![Real_GDP_10Years@2x.png](https://d391fpr6ao9qle.cloudfront.net/images/blog/2023-07-31-economy-roundup-2023-07-31/1.webp)

**Real GDP:** The **_US economy grew by 2.4% in Q2 2023._** This was quicker than the 2.0% growth we saw in Q1. This surge can be attributed mainly to rising consumer expenditure and corporate investment. However, a decline in export activity partially counterbalanced these gains. Interestingly, imports, which negatively influence the GDP calculation, also fell this quarter.

---

![Broad_Market_Indices@2x.png](https://d391fpr6ao9qle.cloudfront.net/images/blog/2023-07-31-economy-roundup-2023-07-31/2.webp)

**Stock Market:** The **_Dow closed higher for 13 straight sessions in July, its longest series of positive closes since 1987_** Russel 2000, Nasdaq 100, Dow Jones, and S&P 500 closed with month with 6.06%, 3.81%, 3.35%, 3.11% gains, respectively.

---

![Sectoral_Performance@2x.png](https://d391fpr6ao9qle.cloudfront.net/images/blog/2023-07-31-economy-roundup-2023-07-31/3.webp)

**Sectoral Performance:** All the **_Sectoral Indices ended the month with gains,_** with Energy, Communications Services, and Financials taking the top spot.

---

**Big Tech Earnings**

**Microsoft** reported stronger-than-expected Q4 earnings, surpassing estimates on several key metrics, including revenue of $56.19B. However, annual sales growth moderated to 7% in 2023, and cloud growth decelerated, causing some to question the hype around AI.

**Alphabet** delivered robust Q2 results, outperforming expectations with a revenue of $74.60B and an EPS of $1.44. All units, including Google Cloud, which reported another profitable quarter, surpassed estimates.

**Meta's** Q2 earnings surpassed expectations, with a 12% rise in ad revenue, supported by improved monetization of Reels.

**Tesla's** Q2 earnings revealed impressive performance, marking the fifteenth consecutive quarter of profit, with earnings beating both profit per share and revenue expectations.

---

![Active_Fund_Manager_Equity_Exposure@2x.png](https://d391fpr6ao9qle.cloudfront.net/images/blog/2023-07-31-economy-roundup-2023-07-31/4.webp)

**Active Fund Manager Equity Exposure:** For the first time since November 2021, Active Fund Manager Equity Exposure surged beyond 100%, showing an **_exceptionally robust sentiment_**.

---

![Commodity Prices_July@2x.png](https://d391fpr6ao9qle.cloudfront.net/images/blog/2023-07-31-economy-roundup-2023-07-31/5.webp)

**Commodity Prices:** **Crude oil prices saw a remarkable rally of more than 14% in July.** During the same time, Gold and Copper surged over 4% each.

---

![Inflation Rate_2Years @2x.png](https://d391fpr6ao9qle.cloudfront.net/images/blog/2023-07-31-economy-roundup-2023-07-31/6.webp)

**Inflation** in the US, as measured by the change in the Consumer Price Index (CPI), **_declined to 3%_** on a yearly basis in June from 4% in May, **_Core CPI inflation_**, which excludes volatile food and energy prices, **_dropped to 4.8% from 5.3%._**

---

![Federal_Funds_Effective_Rate_10Years@2x.png](https://d391fpr6ao9qle.cloudfront.net/images/blog/2023-07-31-economy-roundup-2023-07-31/7.webp)

**Federal Funds Rate:** The US Federal Reserve **_hiked its benchmark interest rates to 5.25-5.5%_**, the highest since 2001, to counteract persistently high inflation. Fed Chair Jerome Powell hinted at further increases, supporting goals of maximum employment and 2% long-term inflation.

---

![download (4).png](https://d391fpr6ao9qle.cloudfront.net/images/blog/2023-07-31-economy-roundup-2023-07-31/8.webp)

**Consumer Confidence Index**: Conference Board's US **_consumer confidence index surged to 109.7, the highest level since the beginning of last year_**, driven by increased optimism about the labor market and economic growth, surpassing all economist estimates.

---

![Initial_Claims_1Y@2x (2).png](https://d391fpr6ao9qle.cloudfront.net/images/blog/2023-07-31-economy-roundup-2023-07-31/9.webp)

**US weekly jobless claims** dropped to 221,000, a decrease of 7,000 from the previous week's level of 228,000.

---

![New_Residential_Construction_and_Hom_Sales_3Years@2x.png](https://d391fpr6ao9qle.cloudfront.net/images/blog/2023-07-31-economy-roundup-2023-07-31/10.webp)

**New Home Sales and New Residential Construction:** Sales of new single‐family houses in June 2023 were at a seasonally adjusted annual rate of 697,000. Privately‐owned housing units authorized by building permits in June were at a seasonally adjusted annual rate of 1,440,000. This is 3.7% below the revised May rate of 1,496,000 and 15.3% below the June 2022 rate of 1,701,000.”

---

![Median_Price_of_Home_Sold_in_the_US@2x.png](https://d391fpr6ao9qle.cloudfront.net/images/blog/2023-07-31-economy-roundup-2023-07-31/11.webp)

**Home Prices:** The **_median price of a home sold in the US stood at $416,100 in Q2_**, 2023, down over 13% from the all-time high of $479,500 in Q3, 2022.

---

Overall US economy displayed resilience and expansion, reflecting positive consumer sentiment and strong corporate earnings. Despite declining home prices and surging commodity prices, booming equity markets indicate promising prospects for future growth.

## How does all this impact my portfolio & finances?

Create an account with [Xillion](https://xillionapp.com), and we will help you navigate changing economic scenario.

Get this report delivered to your inbox every month for FREE by signing up for [Xillion](https://xillionapp.com) today.


Monthly Market and Economy Roundup - 31 July 2023


In July, the US economy demonstrated a strong performance with a notable uptick in GDP and a robust rally in the financial markets. Tech giants reported strong earnings, while crude oil, gold, and copper surged significantly. However, export activity and housing sales hinted at potential challenges.

The US economy grew by 2.4% in Q2 2023. This was quicker than the 2.0% growth we saw in Q1. This surge can be attributed mainly to rising consumer expenditure and corporate investment. However, a decline in export activity partially counterbalanced these gains. Interestingly, imports, which negatively influence the GDP calculation, also fell this quarter.

![Copy of Real_GDP_3Years@2x.png](https://d391fpr6ao9qle.cloudfront.net/images/blog/2023-07-31-economy-roundup-2023-07-31/1.webp)

The Dow closed higher for 13 straight sessions in July, its longest series of positive closes since 1987; Russel 2000, Nasdaq 100, Dow Jones, and S&P 500 closed with month with 6.06%, 3.81%, 3.35%, 3.11% gains, respectively.

![Broad_Market_Indices@2x.png](https://d391fpr6ao9qle.cloudfront.net/images/blog/2023-07-31-economy-roundup-2023-07-31/2.webp)

All the Sectoral Indices ended the month with gains, with Energy, Communications Services, and Financials taking the top spot.

![Sectoral_Performance@2x.png](https://d391fpr6ao9qle.cloudfront.net/images/blog/2023-07-31-economy-roundup-2023-07-31/3.webp)

Microsoft reported stronger-than-expected Q4 earnings, surpassing estimates on several key metrics, including revenue of $56.19B. However, annual sales growth moderated to 7% in 2023, and cloud growth decelerated, causing some to question the hype around AI.

Alphabet delivered robust Q2 results, outperforming expectations with a revenue of $74.60B and an EPS of $1.44. All units, including Google Cloud, which reported another profitable quarter, surpassed estimates. Despite concerns about AI impacting search advertising, no such signs were apparent.

Meta's Q2 earnings surpassed expectations, with a 12% rise in ad revenue, supported by improved monetization of Reels.

Tesla's Q2 earnings revealed impressive performance, marking the fifteenth consecutive quarter of profit, with earnings beating both profit per share and revenue expectations. Successful cost reduction strategies, production ramp-ups, and strong performance in energy and services helped the company maintain a healthy operating margin.

For the first time since November 2021, Active Fund Manager Equity Exposure surged beyond 100%, showing an exceptionally robust sentiment.

![Active_Fund_Manager_Equity_Exposure@2x.png](https://d391fpr6ao9qle.cloudfront.net/images/blog/2023-07-31-economy-roundup-2023-07-31/4.webp)

Crude oil prices experienced a remarkable rally of more than 14% in July. During the same time, Gold and Copper surged over 4% each.

![Commodity Prices_July@2x.png](https://d391fpr6ao9qle.cloudfront.net/images/blog/2023-07-31-economy-roundup-2023-07-31/5.webp)

Inflation in the US, as measured by the change in the Consumer Price Index (CPI), declined to 3% on a yearly basis in June from 4% in May, Core CPI inflation, which excludes volatile food and energy prices, dropped to 4.8% from 5.3%.

![Inflation Rate_2Years @2x.png](https://d391fpr6ao9qle.cloudfront.net/images/blog/2023-07-31-economy-roundup-2023-07-31/6.webp)

The US Federal Reserve hiked its benchmark interest rates to 5.25-5.5%, the highest since 2001, to counteract persistently high inflation. Fed Chair Jerome Powell hinted at further increases, supporting goals of maximum employment and 2% long-term inflation.

![Federal_Funds_Effective_Rate_10Years@2x.png](https://d391fpr6ao9qle.cloudfront.net/images/blog/2023-07-31-economy-roundup-2023-07-31/7.webp)

Conference Board's US consumer confidence index surged to 109.7, the highest level since the beginning of last year, driven by increased optimism about the labor market and economic growth, surpassing all economist estimates.

![download (4).png](https://d391fpr6ao9qle.cloudfront.net/images/blog/2023-07-31-economy-roundup-2023-07-31/8.webp)

US weekly jobless claims dropped to 221,000, a decrease of 7,000 from the previous week's level of 228,000.

![Initial_Claims_1Y@2x (1).png](https://d391fpr6ao9qle.cloudfront.net/images/blog/2023-07-31-economy-roundup-2023-07-31/9.webp)

Sales of new single‐family houses in June 2023 were at a seasonally adjusted annual rate of 697,000. Privately‐owned housing units authorized by building permits in June were at a seasonally adjusted annual rate of 1,440,000. This is 3.7% below the revised May rate of 1,496,000 and 15.3% below the June 2022 rate of 1,701,000.

![New_Residential_Construction_and_Hom_Sales_3Years@2x.png](https://d391fpr6ao9qle.cloudfront.net/images/blog/2023-07-31-economy-roundup-2023-07-31/10.webp)

The median price of a home sold in the US stood at $416,100 in Q2, 2023, down over 13% from the all-time high of $479,500 in Q3, 2022.

![Median_Price_of_Home_Sold_in_the_US@2x.png](https://d391fpr6ao9qle.cloudfront.net/images/blog/2023-07-31-economy-roundup-2023-07-31/11.webp)

July's economic activity displayed resilience and expansion, reflecting positive consumer sentiment and substantial corporate earnings. Despite declining home prices and concerns over AI's hype, the surging commodity prices, lower inflation rate, and booming equity markets indicate promising prospects for future growth.


Weekly Market and Economy Roundup - 31 July 2023


In today's consumer-centric society, the temptation to spend money on non-essentials is always lurking. The keys to financial security often lie in the little things—small, everyday decisions can have a big impact on your financial health. If you want to stretch your budget, here are three simple yet effective tricks to help you save money.

## **The One-Week Rule**

**Do you need that new gadget, or is it just a desire?**

Often, we make purchases on a whim, only to regret them later. This is where the one-week rule comes in handy. If you're considering a big purchase, don't rush. Wait for a week, giving yourself time to ponder whether you truly need the item. This waiting period can differ between a wise decision and an impulse buy.

Think of it this way—it's like a cooling-off period, a time to detach from the immediate desire and examine the purchase logically. More often than not, you'll find that the urge to buy diminishes over time. You might even realize you didn't need the item in the first place, saving you significant money.

## **The Hourly Pay Equivalency**

**Is that new pair of shoes worth five hours of your hard work?**

Another effective way to curb unnecessary spending is by equating the cost of an item with the equivalent of your hourly pay. Let's say you earn $20 an hour and are considering buying a $100 jacket. Is the jacket worth five hours of your work? Visualizing the cost in terms of time and effort often puts things in a new perspective and discourages frivolous spending.

This money management method can make you think twice before parting with your hard-earned cash. It allows you to measure the worth of an item in terms of your time, making it easier for you to evaluate whether a purchase is truly worthwhile.

## **The Savings-First Approach**

**Why touch what you don't see?**

One of the most effective ways to save money is to set aside a portion of your earnings as soon as you receive them. By doing this, you're treating savings as an important and non—negotiable expense.

Consider setting up a separate account for this portion of your earnings. Make it a point not to touch this money for regular expenses. This out-of-sight, out-of-mind approach can help you build a substantial savings fund.

It might be challenging initially, but as you make it a habit, you'll start feeling more financially secure knowing you have a safety net.

Saving money doesn't have to be a struggle. Implementing these simple tricks allows you to improve your financial health without drastically changing your lifestyle. Remember, it's the small, consistent efforts that often lead to significant results. So, why not start today? After all, the journey to financial security starts with a single step—or in this case, a single penny saved.


3 Simple and Easy Tips to Save More Money


Welcome to our June 2023 Economic Update. The past month has presented a dynamic landscape in the U.S. financial markets, filled with rallying indices, shifting inflation rates, and various other economic indicators making waves. Let's dive into the key highlights.

1️⃣ **Stock Market Rally:**

June saw a healthy surge in the stock markets. The S&P 500 & tech-dominated Nasdaq spiked 6.5%. Nasdaq 100 Index marked its second-best half-year performance in history with a 39% gain, fully recouping losses from Federal Reserve rate hikes.

![Stock_Market_Performance](https://d391fpr6ao9qle.cloudfront.net/images/blog/2023-06-30-june-monthly-insights/Stock_Market_Performance@2x.png
)

2️⃣ **Inflation Rate:**

The US inflation rate declined to 4.0% in May 2023, marking the lowest point since March 2021. The core inflation rate, which excludes volatile items like food and energy, also dropped to 5.3%, the lowest since November 2021.

![Inflation](https://d391fpr6ao9qle.cloudfront.net/images/blog/2023-06-30-june-monthly-insights/Inflation@2x.png
)

3️⃣ **Federal Reserve Interest Rate:**

The Federal Reserve maintained its key interest rate at approximately 5% for June 2023, indicating a pause in its monetary tightening policy. However, the Fed hints at potential rate hikes should inflation persist.

![Federal_Funds_Rate](https://d391fpr6ao9qle.cloudfront.net/images/blog/2023-06-30-june-monthly-insights/Federal_Funds_Effective_Rate.png
)

4️⃣ **Rising Credit Card Delinquency:**

The credit card delinquency rate in the US has climbed to 2.43% in Q1 2023 from 1.67% in Q1 2022, reflecting an increasing struggle among consumers to meet their credit card payments.

![Consumer_Loans_Delinquency_Rate](https://d391fpr6ao9qle.cloudfront.net/images/blog/2023-06-30-june-monthly-insights/Consumer_Loans_Delinquency_Rate.png
)

5️⃣ **Housing Market Adjustments:** 

The median sales price for new houses sold in the United States fell to $420,800 in April 2023, following a high of $496,800 in October 2022. Nevertheless, prices have risen approximately 35.7% since April 2020.

![Median_Sales_Price_for_New-Houses_Sold_in_the_US](https://d391fpr6ao9qle.cloudfront.net/images/blog/2023-06-30-june-monthly-insights/Median_Sales_Price_for_New_Houses_Sold_in_the_United_States.png
)

6️⃣ **Heavy Truck Sales:** 

In a promising sign of economic recovery, US heavy truck sales have returned to their pre-Covid level of 560k units.

![Motor_Vehicles](https://d391fpr6ao9qle.cloudfront.net/images/blog/2023-06-30-june-monthly-insights/Motor_Vehicle_Retail_Sales_Heavy_Weight_Trucks.png
)

7️⃣ **Consumer Sentiment:** 

Consumer sentiment rose to 63.9 in June from 59.2 in May. Despite being at a four-month high, the index remains historically low, hinting at consumers' expectations of future economic challenges.

![Consumer_Sentiment_Index](https://d391fpr6ao9qle.cloudfront.net/images/blog/2023-06-30-june-monthly-insights/Consumer_Sentiment.png
)

8️⃣ **Weekly Jobless Claims:** 

US weekly jobless claims have dropped by 26,000 to 239,000, marking the largest decline in 20 months. This unexpected dip suggests resilience in the U.S. economy.

![Initial_Claims](https://d391fpr6ao9qle.cloudfront.net/images/blog/2023-06-30-june-monthly-insights/Initial_Claims.png
)

9️⃣ **Industrial Production:** 

The US Industrial Production shrank by 0.2% in May, against the prediction of a 0.1% growth. While the manufacturing index saw a slight uptick, the indexes for mining and utilities both witnessed drops.

![Industrial_Production_Index](https://d391fpr6ao9qle.cloudfront.net/images/blog/2023-06-30-june-monthly-insights/Industrial_Production_Index.png
)

Despite some challenges, overall, the U.S. economy has shown signs of resilience and recovery. Stay tuned for our next update as we continue to navigate this ever-changing economic landscape.

Monthly Economic Insights - June 2023


You've probably heard about day trading and how it can magically turn you into a millionaire overnight, right? It sure sounds tempting, but let's get real. The cold, hard truth is that about 95% of day traders actually end up losing money. Shocking, right?

You might wonder, "If so many people are losing money, who's making all the profits?" That's where 'quant funds' come into the picture. These are the big players who are really good at making profits from the losses of regular traders.

How do they do it? Let's take a look at a guy named Jim Simons. His story is told in the book "Jim Simons: The Man Who Solved The Market," and it's a really good guide to how the stock market works.

According to Simons, there are three things you need to win at active trading:

1. A pack of tech geniuses who eat, sleep, and breathe code.
2. An exclusive stash of data gathered from all corners of the globe and every segment of the economy.
3. A beast of a computer that can run algorithms designed by your genius squad and fed by your unique data.

Simons used these three things when he started Renaissance Technologies (RenTec) in the early '80s. How well did he do? His fund made an amazing 66% return every year from 1988 to 2018, while the S&P 500 only made about 8% per year in the same period.

Are you trading stocks without these three things? If so, you're probably losing money, and that money is probably going to firms like RenTec. So, if someone tries to sell you a course on day trading, remember: if they were really making money on the market, they wouldn't need to sell you anything. Simons, for example, never sold any courses because he was busy actually making money.

Feeling a bit down? Don't! Even if you're a small investor, you can still win at the stock market game. While firms like RenTec are good at short-term trading, you can use your knowledge and passion for certain industries to predict long-term trends. It will take some work—about 5-10 hours of reading and research every week—but it's definitely worth it.

So, instead of losing money by day trading, why not invest for the long term? And remember, even RenTec found out that they can't keep making money once their fund grows beyond around $10 billion. This shows that even the biggest players in the stock market have limits, which means we regular folks have a chance to succeed in our investments too.


Can you make money by day trading in stocks?


Welcome to this week's edition of the Economy and Stock Market Roundup. As we navigate through the complexities of the global economy,

This week, we delve into a range of topics, from the impact of interest rate hikes on the U.S. stock market and housing prices to the political implications of Argentina's soaring inflation rate. We also cover the Bank of England's decision to raise its benchmark interest rate to a level not seen since 2008 and Federal Reserve Chair Jay Powell's defense of the recent pause in rate hikes. Lastly, we highlight Warren Buffett's record-breaking charitable contributions, which now total over $51 billion.

**Markets End Losing Week Amid Economic Concerns**

U.S. equities ended the week with losses due to growing concerns that more Federal Reserve interest rate hikes could slow economic growth. The Dow, S&P 500, and Nasdaq all slipped more than 1% for the week. Tech stocks, which had posted solid gains earlier in the week, reversed course and were the biggest drag on the market. IBM, Microsoft, Salesforce, and Tesla shares dropped more than 1%.

**Higher Interest Rates Impact U.S. Home Prices**

U.S. existing home prices fell in May from a year earlier by the most in over 11 years. This decline is attributed to the rise in interest rates, making mortgages more expensive and dampening the demand for homes. This is a significant shift in the housing market, which has been experiencing a boom due to low-interest rates and increased demand during the pandemic.

**Argentina's High Inflation Rate Influences Political Shift**

Argentina is experiencing an annual inflation rate of 114%, the world's third-highest, leading to a shift in political preferences. The rising cost of living has increased the number of people unable to afford basic necessities from 30% in 2018 to 43% today. This economic crisis is influencing voters to favor politicians who offer radical solutions to the country's economic problems.

**Bank of England Raises Interest Rate to 5%**

The Bank of England (BoE) has increased its benchmark interest rate by 0.5 percentage points to 5%, the highest level since 2008. This marks the 13th consecutive rate hike since December 2021 as the central bank grapples with high inflation. The UK's consumer price index rose by 8.7% in the 12 months to May, and core CPI, excluding energy, food, alcohol, and tobacco products, rose by 7.1% in the same period.

**Fed Powell Says June Rate Pause 'Prudent' but US Inflation Battle Not Over**

Federal Reserve Chair Jay Powell defended the decision to forgo an interest rate rise at the recent policy meeting but signaled that the battle against inflation is not yet finished. Powell stated that skipping a rate rise last week was "prudent" given "how far and how fast" the Fed has lifted its benchmark rate since March 2022. However, he hinted that the central bank still has more to do in terms of squeezing the economy to get inflation under control.

**Warren Buffett's Charitable Giving Tops $51 Billion**

Warren Buffett has donated another $4.64 billion of Berkshire Hathaway stock to five charities, bringing his total giving since 2006 to more than $51 billion. The annual donation is Buffett's largest and consisted of about 13.7 million of Berkshire's Class B shares. The majority of the shares were donated to the Bill & Melinda Gates Foundation, which has received more than $39 billion of Berkshire stock overall. Buffett is gradually giving away nearly all of the fortune he built at Berkshire Hathaway, which he has run since 1965.

As we conclude this week's roundup, allow us to introduce you to a tool that can help you take control of your financial future: [Xillion's Financial Independence Tool (FIT)](https://xillionapp.com/product/financial-independence/)

FIT is not just a tool, but your personal financial playground. It allows you to project your future net worth, track your individual asset's performance over time, and even play around with the asset mix to see how it impacts your future net worth and financial independence plan.

Whether your goal is buying a home, a car, planning a vacation, or sending your kid to college, Xillion keeps track of these goals along with your financial independence goal. All you need to do is link your bank and retirement accounts, add your real estate and other assets, and set your financial independence target. Our algorithm does the rest, forecasting your net worth and assets, and planning your financial independence right at your fingertips.

So why wait? Start your journey towards financial independence with Xillion today. See you next week!

Weekly Market and Economy Roundup - 24 June 2023



Welcome back to the Xillion weekly recap for June 16! This week, we look at the Fed’s big decision, China’s economic recovery, and Beyoncé’s role in Swedish inflation (not kidding).

**The Federal Reserve announced that it would pause rate hikes.** After ten consecutive rate hikes, the Federal Reserve [decided](https://www.wsj.com/articles/fed-interest-rate-your-money-59578a4b) to give the U.S. market a reprieve and hold interest rates steady. The decision comes even as the U.S. labor market remains near historically low levels of unemployment. If you’re surprised to hear this, that’s probably because you are a knowledge worker — the labor market has been particularly favorable to service workers, while knowledge workers have been impacted by tech and bank layoffs.

What does the rate hike mean? Most directly, it means the cost of borrowing money won’t go up even further. For consumers, that impacts mortgages, auto loans, and credit card rates. Markets reacted favorably to the interest rate pause, but the Fed isn’t likely to stop here.

**Meanwhile, the reserve bank in China actually cut interest rates to stimulate spending.** The People’s Bank of China is responding to a slower-than-anticipated economic recovery. China’s property market and consumer spending [have both](https://www.bloomberg.com/news/articles/2023-06-15/china-s-recovery-weakens-as-industrial-retail-activity-slow?campaign_id=4&emc=edit_dk_20230615&instance_id=95105&nl=dealbook&regi_id=83898312&segment_id=135632&srnd=premium-asia&te=1&user_id=021de9cb2594a2cb417a3eb1198a2dc8) struggled in recent months. Chinese Premier Li Qiang [said](https://www.wsj.com/articles/chinas-stimulus-pivot-is-prompted-by-fears-slowing-growth-could-worsen-5d35d34?mod=hp_lead_pos2): “The external environment is becoming more complex and severe, and the slowdown in global trade and investment will directly affect the recovery process of our country’s economy.”

On a related note, China’s tech stocks haven’t experienced the same AI boost as their American counterparts. Alibaba’s stock price is basically flat since the beginning of the year. Baidu and Tencent fared better, as they were up 26% and 11% since the beginning of the year, respectively. Still, those figures pale in comparison to the performance of American tech stocks.

![BIDU](https://d391fpr6ao9qle.cloudfront.net/images/blog/2023-06-16-economy-roundup-2023-06-16/BIDU_2023-06-17_11-25-39.png
)

**Is Beyoncé responsible for inflation in Sweden?** It sounds ridiculous (and it is) but economists at Danske Bank claimed that Beyoncé’s concert in Stockholm impacted nationwide inflation. Many of the 46,000 concert-goers are traveling from abroad just to see the two concerts. They are driving up demand for hotels and dining. The chief economist [explained](https://www.ft.com/content/abc431c4-426d-4a9f-9674-f437ed504eb7?campaign_id=4&emc=edit_dk_20230615&instance_id=95105&nl=dealbook&regi_id=83898312&segment_id=135632&te=1&user_id=021de9cb2594a2cb417a3eb1198a2dc8) how the concert contributed to 0.2% of the rise in inflation, noting: “Beyoncé is responsible for the extra upside surprise this month. It’s quite astonishing for a single event. We haven’t seen this before.”

**Financial tip of the week:** For your 401k, it’s best to avoid target date funds because they have higher fees. What should you do instead? Invest in low-cost index funds. Xillion [can help you](https://twitter.com/gags_sandhu/status/1668521629536645122?s=20) figure out which funds are best aligned with your financial goals. We recently created an index fund comparison tool that will help you compare different options and customize your portfolio based on your risk preference.

Weekly Market and Economy Roundup - 16 June 2023



Welcome to the first Xillion weekly recap! We’re experimenting with this format to bring you a roundup of the most interesting, relevant market news. Subscribe to Xillion accounts to get a fresh edition every Friday!

This was an exciting week, as Apple gave us a preview of its vision for spatial computing, the stock market officially entered Bull territory, and Saudi Arabia continued to flex its dealmaking muscles. Plus, we preview the Fed’s big upcoming decision.
	
![Apple](https://d391fpr6ao9qle.cloudfront.net/images/blog/AAPL_5_Year.webp)

**Investors aren’t convinced by Apple’s foray into AR.** On Monday, Apple unveiled Vision Pro, its VR / AR headset. The stock briefly [hit an all-time high](https://www.cnbc.com/2023/06/05/apple-shares-on-pace-for-record-high-ahead-of-vr-headset-unveiling.html) leading up to the annual Worldwide Developers Conference, but it proceeded to dip after the actual unveiling.

One of the big hang-ups? The price tag of $3,500. In one [viral video](https://youtu.be/4swt0pm6K8s), an audience audibly gasped after Tim Cook announced the price tag. Apple-believers point to the high initial price point of the first iPhone, which many people considered too expensive to succeed. Others, such as NYU professor Scott Galloway, think it might be time to finally bet against Apple. Galloway [wrote](https://www.profgalloway.com/isnt-that-spatial/): “The Vision Pro demo video is a Covid time capsule: a parade of solitary, indoor individuals. The brief family scenes are cringe-worthy.”

Meta is another interesting facet of this. It’s stock dipped after the event, likely because people worry Apple will eat its lunch on the metaverse bet. The companies have very different visions for the virtual world — Apple seems to think it will look a lot like a regular computer interface but bigger, and Meta is betting on a video game-style, cartoonish metaverse. Meta has been trying to curtail its spending in recent months — though the efforts come after it spent $13.7 billion on the Reality Labs division last year. One initiative? Return to work. Last Thursday, Meta [called employees back](https://www.cnbc.com/2023/06/01/meta-will-require-employees-to-return-to-the-office-three-days-a-week-starting-in-september.html) into the office for a minimum of three days a week. This seemingly goes against Meta’s COVID-era bullishness on the corporate metaverse and work-from-anywhere policy.

![Xillion%20Market%20and%20Economy%20Roundup_%20June%209,%202023%20d101754f23954e6e9c06ba930b950b72/image2.png](https://d391fpr6ao9qle.cloudfront.net/images/blog/Tech_5_Years.webp)

**The Bull is back.** Amid all the talk of a recession, the S&P 500 officially [entered](https://www.wsj.com/livecoverage/stock-market-today-dow-jones-06-08-2023/card/s-p-500-heads-into-close-on-track-to-start-a-new-bull-market-EqBNAgVJ10k8mjSK0Ufb) a bull market on Friday, rising 20% from its low in October of 2022. The index is still below its all-time high.

Tech has been a big driver of the bull run. Six of the seven highest-valued companies now make up 28% of the total S&P 500 value. Those companies had a [tremendous run this year](https://www.cnn.com/2023/06/09/investing/bull-market-artificial-intelligence/index.html): Apple, Amazon, and Google are up more than 40%, Tesla is up 90%, Meta is up 120%, and [Nvidia](https://g.co/finance/NVDA:NASDAQ) is up more than 170%.

This group of companies is benefiting in part from the arrival and hype behind generative AI. Nvidia [crossed](https://www.theverge.com/2023/5/30/23742123/nvidia-stock-ai-gpu-1-trillion-market-cap-price-value) the trillion-dollar market cap threshold on May 30th. The company makes advanced graphics processors that can be used to run and train AI programs. It sells many of those advanced chips to public cloud companies such as Amazon, Google, and Microsoft.

**Saudi Arabia makes big moves.** LIV Tour and the PGA [announced](https://www.wsj.com/articles/pga-tour-deal-with-liv-golf-puts-sponsors-on-the-spot-4800c1c8) a merger deal after months of intense, acrimonious battle over the future of golf. The deal included an agreement to end all ongoing lawsuits between the two organizations. Importantly, however, it [could face](https://www.theatlantic.com/ideas/archive/2023/06/pgi-tour-liv-golf-antitrust-merger/674332/) antitrust review which might prevent it from going through.

In more relevant news for global markets, Saudi Arabia [announced](https://apnews.com/article/opec-oil-prices-saudi-arabia-russia-8d70999cb8258aebc3edbfdfcae278b7) earlier this week that it would further cut oil production in an effort to stabilize the market — which will likely mean higher energy prices.

![Xillion%20Market%20and%20Economy%20Roundup_%20June%209,%202023%20d101754f23954e6e9c06ba930b950b72/image3.png](https://d391fpr6ao9qle.cloudfront.net/images/blog/Unemployment_Rate.webp)

**Unemployment is still low.** Last month, the U.S. economy [added](https://www.wsj.com/articles/may-jobs-report-unemployment-rate-economy-growth-2023-65ae1e96) 339,000 jobs. That meant the unemployment rate stood at 3.7% — only slightly higher than the recent historic low of 3.4%. It will be interesting to see how the Fed reacts. Some analysts believe the Fed could take this as a sign that they can continue to hike interest rates, since the labor market has held up well thus far. The decision will come next week. We’ll see you on the other side!

Weekly Market and Economy Roundup - 9 June 2023


Our May 2023 economic insights summary:

1. [NASDAQ 100 Index Rallied 8.4% in May, Fueled by AI Stocks.](https://www.cnbctv18.com/technology/snp-500-rally-2023-nasdaq-apple-microsoft-nvidia-alphabet-amazon-meta-ai-gains-16816791.htm)
   So far, in 2023, the index has returned 31%. Surprisingly 70% of the gains came from 6 stocks; Apple, Microsoft & Nvidia, Meta, Amazon, and Alphabet.

2. [US House Passes Debt Ceiling Deal.](https://www.theguardian.com/business/live/2023/may/31/debt-ceiling-vote-house-republicans-mccarthy-biden-live-updates?filterKeyEvents=false&page=with:block-64773b518f08d8830e5af63c)
   The House approved a bill to raise the nation's debt ceiling while cutting some government spending over the next two years, averting a default crisis.

3. [US Interest Rates Raised to Highest Level in 16 Years.](https://www.cnbc.com/2023/05/03/fed-rate-decision-may-2023-.html)
   The Federal Reserve approved its 10th interest rate increase since March 2022, bringing the Fed funds rate to the target range of 5% to 5.25%. The Fed also dropped a tentative hint that the current tightening cycle is at an end.

4. [Unemployment Rate Falls to 3.4% in May, Lowest Since 1969.](https://www.bls.gov/news.release/pdf/empsit.pdf)
   The U.S. unemployment rate fell to 3.4% in May. The economy added 253,000 jobs, beating expectations of 200,000. The labor force participation rate remained unchanged at 63.2%. The number of people who are employed is now at a record high.

5. [US Inflation Below 5% for First Time in Two Years.](https://www.bbc.com/news/business-65547974)
   In April 2023, inflation was 4.9%, down from 5% in March, which is the lowest inflation rate in two years. However, inflation is still well above the Federal Reserve's target of 2%.

6. [Median Home Price Down Over 15% Since Oct 2022.](https://www.usatoday.com/story/money/2023/05/31/is-housing-market-going-to-crash/70260153007/)
   The median sales price of new single-family homes in April declined to $420,800 from a median price of $455,800 in March. The median home price in Oct 2022 was $496,800. The slump comes amid a rapid rise in mortgage rates.


Monthly Economic Insights - May 2023


Our April 2023 economic insights summary:

1️⃣ **The U.S. economic growth slipped in the first quarter amid still-high inflation and rising interest rates.**

[Real GDP](https://www.wsj.com/articles/us-gdp-economic-growth-first-quarter-2023-2ff4348c) growth was likely around 1.1% in the first quarter, slower than 2.6% in the fourth quarter of 2022. Many economists expect the economy to slow even more as the year progresses, predicting a recession in the second half of the year as the Federal Reserve continues its campaign to cool the economy and lower inflation.

2️⃣ **The U.S. unemployment rate fell to 3.5%**

[Employers added 236K jobs](https://www.nytimes.com/2023/04/07/business/economy/march-jobs-report-unemployment.html), down from an average of 334K over the prior six months. The year-over-year growth in average hourly earnings also slowed, to 4.2 percent, the slowest pace since July 2021.

3️⃣ **Inflation is cooling because of the slowing economy.**
Consumer Price Index (CPI) rose at an annual rate of 5% in March, [its lowest level since 2021](https://www.forbes.com/advisor/investing/current-inflation-rate/). CPI was down from a 6% year-over-year gain in February and below the 5.3% gain economists expected. Food prices were flat month-over-month and up 8.5% compared to a year ago. Energy prices were down 3.5% compared to February and are down 6.4% over the past 12 months. Used car prices were down 0.9% compared to February and 11.2% compared to March 2022.

4️⃣ **The housing market is slowing down.**
The [mortgage applications were up 10 percent](https://www.nytimes.com/2023/04/29/business/spring-housing-market.html), but the number of homes for sale is low. The mismatch is partly caused by homeowners who are inclined to sell but are sitting on the sidelines, scared off by the steep prices and mortgage rates they would face as buyers.


Monthly Economic Insights - April 2023


**🚨 🏦 Weekly Fed update 🚨 🏦 Here are the macroeconomic highlights:**

**1️⃣Wages are still growing.** In the first three months of 2023, employers spent 1.2% more on wages in the U.S. This may seem surprising if you are a knowledge worker, especially in tech, which has been hit hard by the interest rate hikes. But demand remains strong in lower-wage jobs, especially the service sector, construction, and hospitality.

**2️⃣ Inflation is sticking around.** Consumer inflation (as measured by the wonky personal-consumption expenditures price index) dropped to 4.2% in March compared to 5.1% in February.

**3️⃣ The economy is slowing down.** U.S. GDP growth is slowing down, in spite of the relatively strong jobs market. Consumer spending has remained around the same levels for the past two months.

**4️⃣ And still, signs point to yet another rate hike.** The Fed gets to decide on rate hikes next week, and many are predicting a 0.25% increase. That would slow down the econo


A Weekly Fed Update on the Latest Macroeconomic Highlights


🥑 Millennials are fed up — and it’s not from eating too much avocado toast! **Rather, they are tired of bad, condescending financial advice 🙅‍♂️**

Avocado toast became a symbol of this problem. The **"avo toast myth"** came into being when Tim Gurner, an Australian real estate tycoon, told 60 Minutes that young people could afford to buy homes if they simply made better financial decisions, like no longer buying “smashed avocado for $19 and four coffees at $4 each.”

This struck Millennials as ridiculous, and the data is on their side. Housing affordability in the U.S. hit another all-time low last year. According to research from Redfin, only 21% of homes in the U.S. were “affordable,” as defined by having mortgages below 30% of local median income. Residential housing value has gone up and up in recent decades. That raised the net worth of older generations, but it also locked younger generations out of the housing market.

In truth, the way to build wealth isn’t by skipping avocado toast or morning coffee. Sure, dining out can become a significant cost when done in excess. But the path to financial freedom is more about making the right financial decision early on, and letting time work its magic ⏲

[Xillion](https://my.xillionapp.com) can help put you on the path toward financial freedom, whether through our [Portfolio Optimizer](https://my.xillionapp.com/product/portfolio-analyzer), our [Mentor service](https://my.xillionapp.com/product/mentoring), or the [Home Buying Guide](https://my.xillionapp.com/product/home-buying-guide). And we promise, at no point will we tell you to stop buying avocado toast!


The Avocado Toast Myth: Millennials Seek Financial Advice Beyond Condescension


Remember, just because you don't see the fees being deducted doesn't mean they aren't there.

By spending just 10 minutes a week on [Xillion](https://my.xillionapp.com), they could have achieved age-based asset allocation and better returns.

![High Fees Funds](https://d391fpr6ao9qle.cloudfront.net/images/blog/high-fees-funds.webp)


Don't let high-fees funds drain your money


🌏 **Three macro trends to better understand the world economy 💹 :**

👵 **Rapidly aging developed countries.** In developed nations, people are living longer and birth rates are declining. That means societies are getting older. This has serious economic consequences, as aging populations tend to have lower rates of consumption, increased demand for healthcare services, and lower rates of workforce participation. These factors lead to slower economic growth, higher healthcare costs, and pressure on government benefits (pension plans, healthcare, etc.). Look no further than the weeks-long protests in France to see the culmination of these forces.

💵 **De-dollarization.** Many countries are reducing their holdings of U.S. dollars within their foreign capital reserves. Still, the U.S. dollar dominates compared to other currencies, as it represents around 58% of global reserves, according to the IMF. What does all this mean? Well, if the de-dollarization trend continues, the value of the U.S. dollar could further decrease, leading to higher inflation, higher borrowing costs for US businesses and consumers, and a decline in the purchasing power of the US dollar relative to other currencies. However, there’s a lot that remains to be seen with de-dollarization. For now, it’s just something to keep an eye on.

🏠 **Growing debt.** There’s a fundamental clash at the heart of economics: debt grows at an exponential rate, while economic productivity does not. Debt has reached record levels in many countries. Over the last two decades, household debt in the U.S. has nearly doubled, according to data from the Federal Reserve. High levels of debt can constrain economic growth and increase the risk of financial crises, particularly in countries with high levels of foreign debt denominated in foreign currencies. High levels of government debt can also limit the ability of policymakers to respond to economic shocks, as they may be constrained by concerns about increasing their debt levels further.

![Total Debt Balance](https://d391fpr6ao9qle.cloudfront.net/images/blog/total-debt-balance.webp)


Understanding the World Economy: Exploring three macro trends"


The stock market can be unpredictable, but that’s only if you look at a year or two. Over longer investment horizons, returns are quite stable — and very strong! There’s a reason people call the S&P 500 the greatest wealth-generating machine known to man.

If you invested in the S&P 500 for any 25-year period since 1928, there’s no way you could have made less than a 5% return. In fact, you would have a 94% chance of making between 7% and 15% annually. Over 25 years, a 12% annual return rate turns $100,000 into nearly $2 million!

It’s important to get your investments right early on. It can make a difference of millions of dollars over the course of your career.

![Rolling Returns of S&p500](https://d391fpr6ao9qle.cloudfront.net/images/blog/rolling-returns-of-sp500.webp)

Xillion’s Portfolio Analyzer and 401k Optimizer will scan your portfolio and search for inefficiencies. We’ll suggest ways you can optimize your path toward financial success. Get started with a [FREE Xillion Account](https://my.xillionapp.com/signup) today!


Do you know why the S&P 500 is the greatest wealth-generating machine?


Apple has recently launched its highly anticipated Apple Card Savings Account, which enables iPhone users to open a high-yield savings account through Goldman Sachs from the Wallet app offering an annual percentage yield (APY) of 4.15%, which is over ten times the national average.

Here is everything you need to know about it

• 4.15% APY (Annual Percentage Yield)

• Account from Goldman Sachs

• Exclusive for Apple Card Holders

• No Minimum Balance Requirement

• FDIC Insured Upto $250,000

• Maximum Deposit Limit: $250,000

• Zero Fees

• Auto-Credit of Daily Cash Earned


Everything you need to know about Apple Card Savings Account


Salary is important, but your standard of living has a lot to do with location.

Researchers at MIT calculated the living wage for different cities in America. It means “the hourly rate that an individual in a household must earn to support his or herself and their family.”

| Location                	| Living Salary 	|
|-------------------------	|---------------	|
| Parker, West Virginia   	| $82,388       	|
| Detroit, Michigan       	| $84,926       	|
| Columbus, Ohio          	| $85,176       	|
| Santa Fe, New Mexico    	| $90,188       	|
| New York, New York      	| $104,707      	|
| Boulder, Colorado       	| $104,915      	|
| Los Angeles, California 	| $109,865      	|
| San Diego, California   	| $114,212      	|

Source: MIT Living Salary Calculator for 3 Children Household

**Any surprises?**

When making financial goals, it's important to consider location. That's why Xillion's tools — like our [Money Score](https://www.xillionapp.com/product/money-score/) and [Financial Independence](https://www.xillionapp.com/product/financial-independence/) tool — include cost-of-living considerations. [Get started](https://my.xillionapp.com/signup) on your personalized financial journey at Xillion today!

Are you aware of the living wage in the United States?


The Western retirement model is under strain. Developed nations are growing much older since people live longer and have fewer children. By 2050, the proportion of the world population over the age of 65 is expected to [nearly double](https://www.who.int/news-room/fact-sheets/detail/ageing-and-health) relative to 2015 rates. This strains the retirement system, as more older people need money and fewer young people put money into the system. France [responded](https://www.npr.org/2023/03/20/1164705654/france-retirement-age-emmanuel-macron-no-confidence-vote-protest) by trying to raise the government retirement age from 62 to 64 — but the move has been met with widespread protests.

XN_EMBED_LINK

In the U.S., all workers pay into social security in exchange for the promise that they’ll receive payments in retirement. Social Security benefits can start to be reimbursed between ages 62 and 70, and you get more money if you wait longer to start receiving payments. Payments are also calculated based on your income during working years, and the [average payment comes](https://www.wsj.com/articles/retirement-charts-social-security-savings-health-efa1962b) out to $1,825 per month or $21,900 per year. 

**There are a few reasons why you shouldn't rely on social security for retirement.** 

- First, $1,825 per month is hardly enough money to live comfortably, especially since healthcare costs tend to grow in retirement, per Xillion research. Many Americans do in fact [try to retire](https://www.nytimes.com/2021/08/09/opinion/aging-nursing-home-medicare.html) on social security alone, and that has contributed to a sad crisis for elderly poverty and homelessness in the U.S. The typical nursing home room in the U.S. [costs](https://www.nytimes.com/2021/08/09/opinion/aging-nursing-home-medicare.html) $93,000 per year, and that doesn’t include so many other common expenses for older Americans. 
- Second — and of even greater importance — social security is heading toward crisis since funds are [expected](https://www.ssa.gov/oact/TRSUM/index.html?utm_source=link_newsv9&utm_campaign=item_258335&utm_medium=copy) to dry out by 2035. As previously mentioned, it’s simply a matter of demand, supply, and demographics.  Over 80% of working Americans believe that social security will provide reduced or no benefits by the time they retire, [according to](https://www.pewresearch.org/social-trends/2019/03/21/retirement-social-security-and-long-term-care/) a Pew Poll from 2019.

There are many supposed rules of thumb for calculating optimal retirement savings. But really, there’s no single plan for everyone, according to Xillion's research. Instead, your retirement goals should reflect your own priorities: how much you want to travel, where you want to live, how often will you dine out, etc. You also need to budget for unexpected expenses such as emergency medical costs (the [average](https://www.wsj.com/articles/retirement-charts-social-security-savings-health-efa1962b) 65+ year-old in America spends over $7,000 per year on medical expenses) or an earlier exit from the workforce than anticipated. 

![Retirement Source](https://d391fpr6ao9qle.cloudfront.net/images/blog/retirement-income-source.png)

If you are young and in the prime of your career, these considerations can feel far off. Many young people struggle to plan so far out given all the crises we seem to face: global warming, a proxy war with Russia, political turmoil, and the prospect of AI labor displacement. Still, we’ve faced similar problems before. If an American in the 1960s decided not to invest their $10,000 in the S&P 500 due to the Cuban Missile Crisis (“why bother, we’re all going to die”) they’d miss out on $3.4 million in retirement money today. 

What’s the best way to plan for retirement? Invest today, and do it the right way. [Xillion’s Portfolio Optimizer](https://my.xillionapp.com/product/portfolio-analyzer) can help you find the optimal investments for your path toward financial independence. Depending on your salary and current savings, you might even be able to “retire” much sooner than anticipated. One recent Xillion customer discovered how to make an additional estimated $4.5 million from their 401k investments over the next 30 years — all within a few minutes.

Counting on social security in retirement? Think again.


When we talk about good investing, too often we focus on the ability to pick stocks and index funds. And while this is important, it overlooks one of the most underappreciated differences between good and great investors: **optimizing taxes**. Understanding capital gains can easily cut your investment tax bill in half — and sometimes it’s just a matter of holding an investment for a few more days.

Capital gains are profits generated from selling assets for a profit. Beginning with the Revenue Act of 1921, the U.S. government [introduced](https://www.americanbar.org/groups/taxation/publications/abataxtimes_home/21fal/21fal-ylc-moon-revisiting-capital-gains/#:~:text=The%20first%20preferential%20rate%20for%20capital%20gains%20was%20introduced%20in,marginal%20rate%20of%2065%20percent) short- and long-term capital gains taxes as a way to encourage long-term investments that provide market stability and encourage economic productivity. Here are the basics to understanding how these taxes work for equities in brokerage accounts (retirement accounts have different rules): 

- **You only incur taxes on investment once you “realize” the profit or loss.** That means once you sell the investment. Taxes are calculated on an annual basis and your gains are netted from losses (more on that later).
- **If you realize the gain on an investment in less than a year, you pay a higher tax called a short-term capital gain tax.** This is usually the rate of your marginal ordinary income tax. “Marginal” is a big deal here, because that means the highest rate you pay, not the effective tax rate. 
- **If you realize the gain after more than a year of holding the asset, then you pay a lower tax rate called the long-term capital gains rate.** This rate is [either](https://www.nerdwallet.com/article/taxes/capital-gains-tax-rates) 0%, 15% or 20%, depending on your income tax bracket. 
- For example, if you filed alone in 2022 and made $180,000 in income, you would pay a short-term capital gains rate of 32%. But if you held that same asset for more than a year, you would pay only 15%. **That cuts your tax bill in half!** 
- Similarly, if you are married and have a [joint income](https://www.nerdwallet.com/article/taxes/federal-income-tax-brackets) of $80,000, you would pay a short-term capital gains tax of 12% but a long-term capital gains tax of zero! 

**There’s another critical element to understanding capital gains: offsetting gains and losses.** You calculate capital gains tax at the end of a year, based on your net taxable gains and losses. This is important since losses can be used to offset gains and reduce tax liabilities. If losses exceed gains, up to $3,000 [can be used](https://www.irs.gov/taxtopics/tc409) to offset ordinary income, and any excess losses can be carried forward to offset future capital gains in future years, $3,000 per year max. 

Many investors overlook the importance of capital gains taxes when making investment decisions. This oversight can lead to unnecessary tax liabilities, reducing net returns and hindering long-term financial goals. [Xillion’s Portfolio Optimizer](https://my.xillionapp.com/product/portfolio-analyzer) is designed with capital gains in mind. We help users find index funds designed for a buy-and-hold strategy, reducing taxable events on the path toward financial independence. 

So next time you are preparing to execute an order, keep in mind the tax implications. Investing isn’t just about being in the highest-returning asset all the time — it also depends on your current portfolio and the tax implications of moving money into a new asset. 

Becoming a Better Investor Through Tax Optimization

The Federal Reserve has two primary duties: promote price stability (tame inflation) and keep unemployment low. Unfortunately, those two goals often directly conflict with one another. When labor demand is low, companies can attract workers with lower wages, so the price of goods and services goes down. On the other hand, high employment means workers can bargain for higher wages, thus increasing the cost of goods and services. 

The Fed has been raising interest rates at a historic pace since March 2022. The official reason is to lower inflation to a [2% goal](https://www.nytimes.com/2023/03/24/business/inflation-federal-reserve-interest-rates.html#:~:text=%E2%80%9CWe%20will%20get%20inflation%20down,Fed%20doctrine%20settled%20years%20ago.), which is true but not the whole story. To get 2% inflation, the Fed wants (and perhaps needs) to raise unemployment. Officially, they call this an "unintended consequence," but that's a pretty pathetic excuse. It's like saying a dead cow is an "unintended consequence" of hamburgers. Or that death is an "unintended consequence" of war. In other words, it may be "unintended," but it is also a direct and predictable consequence --- one that you choose to accept if you embark on a certain endeavor. 

Fed Chairman Jerome Powell understandably avoids framing the interest rate hike in terms of unemployment. In a [heated exchange](https://youtu.be/bIHH5Kh2dU0) with Senator Elizabeth Warren, Powell said "We actually don't think that we need to see a sharp or enormous increase in unemployment to get inflation under control." Warren responded by pointing to the Fed's own projections, which propose rate hikes that would lead to 2 million lost jobs. Warren also noted that, in 11 or the last 12 times that the U.S. unemployment rate went up by at least one percentage point, it then went up by another percentage point within the year. The Massachusetts Senator likened "planned" unemployment to a runaway train that's difficult to control once it gets started.

XN_EMBED_LINK

Powell is likely obscuring the Fed's intention to raise unemployment. This makes sense, as the optics would be horrible, especially after the Fed stepped in to [limit the losses](https://www.nytimes.com/2023/03/31/business/economy/silicon-valley-bank-federal-reserve-supervision.html) of relatively wealthy Silicon Valley Bank depositors. But the Federal Reserve needed to do *something* to curb inflation. And interest rate hikes hurt everyone, even if the working and middle-class bear the brunt of it. When the Federal Reserve was created after the Panic of 1907, the Wilson administration intentionally insulated it from political pressure because they knew the Fed would need to make difficult and unpopular decisions, just as it's doing now. 

One weird thing that doesn't get mentioned in this story: Wage inflation isn't even driving that much of the current inflation. Employers frequently gripe about how difficult it has been to hire people right now. While wages modestly increased after COVID, real wages (those adjusted for inflation) actually decreased since 2021. In fact, according to [an analysis from the Economic Policy Institute](https://www.epi.org/blog/corporate-profits-have-contributed-disproportionately-to-inflation-how-should-policymakers-respond/), labor costs only accounted for 7.9% of price inflation, compared to 53.9% from corporate profits and 38.3% from nonlabor input costs. Those other costs include rising energy prices resulting from the Ukraine war and Russian sanctions.

![what-is-driving-inflation](https://d391fpr6ao9qle.cloudfront.net/images/blog/2023-04-05-the-fed-wants-to-eliminate-jobs/what-is-driving-inflation.webp)

At least for now, despite all the scary headlines, the economy is doing quite well. In fact, the March unemployment rate stood at only 3.6% in the U.S. Wages have been cooling since the end of 2021, especially in the leisure and hospitality sector, which struggled to attract enough workers post-COVID.

**What does this mean for your job security?**

Many of Xillion's customers are knowledge workers in tech and business. Those sectors have actually been [hit harder](https://www.businessinsider.com/tech-company-layoffs-pay-salary-cuts-remote-work-recruiter-power-2023-2) and earlier than lower-wage jobs. If the Fed can tame inflation without causing much more damage, you may be in the clear. The Fed is playing with fire, but so far it has managed not to get burned --- unemployment is still low, and inflation is going down. 

It all depends on how much more they want to raise rates. If the Fed actually wants to get inflation down to 2%, then interest rate hikes will need to continue for at least a few more months. According to the Fed's [own projections](https://www.nytimes.com/2023/03/24/business/inflation-federal-reserve-interest-rates.html), the U.S. can reach 3.3% inflation by the end of 2023 and 2.5% by 2024. 

The resultant economic pain might also be backloaded, especially since several of the drivers of inflation are not due to fiscal policy but broader real-world supply chain issues. Some economists have suggested the Fed should [revise](https://www.bloomberg.com/opinion/articles/2022-11-28/the-fed-shouldn-t-raise-its-inflation-target) its inflation target to 3% as a compromise. Powell has [rejected](https://www.reuters.com/markets/us/feds-powell-again-rejects-idea-raising-inflation-target-2023-03-07/) this suggestion.

![sp500-sectoral-allocation](https://d391fpr6ao9qle.cloudfront.net/images/blog/2023-04-05-the-fed-wants-to-eliminate-jobs/sp500-sectoral-allocation.webp)

Source: New York Times

**What does this mean for my portfolio?**

If you were only looking at Finance Twitter, you'd think we were already in the Great Depression. But overall, the stock market is doing well, and from mid-October until today, the S&P 500 has rallied 15%. We are still about 15% below the all-time high reached at the end of 2021. 

In recent months, tech stocks have been the [primary driver](https://www.nytimes.com/2023/03/31/business/tech-stocks-sp-500.html) of the market rally. Advancements in AI also represent a potential exogenous factor that could boost employment in the industry, even if the Fed policy works against it. 

The "soft landing" is still possible, but it's difficult to predict what will happen with the broader economy. We can only hope Powell manages to keep the "unintended consequences" under control.

The Fed wants to eliminate jobs, whether they admit it or not


**Money Score**: The personalized financial assessment that puts your interests first.

---

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What is money score and why you should care?


Our March 2023 economic insights summary:

1️⃣ [Banking crisis](https://www.wsj.com/articles/bank-collapse-crisis-timeline-724f6458) is slowly unfolding globally. Silicon Valley Bank collapsed when its customers made $142 Billion worth of withdrawal requests in just two days. And the Swiss giant, Credit Suisse collapsed after Saudi National Bank refused to give it more money.

2️⃣ The banking crisis has led the Fed to [slow down rate increases](https://www.wsj.com/articles/bank-failures-market-turmoil-fuel-bets-on-a-pause-in-fed-interest-rate-increases-4b487cd6). A big reason for the collapse of these banks was the decline in the value of the assets they were holding (T-bonds) after the Fed raised rates at the fastest rate in history.

3️⃣ Investors & the market thinks that the [rates will be cut soon](https://money.com/will-fed-cut-interest-rates-soon/) by the Fed. When rates start coming down, stocks are likely to start going up. If you have been thinking about buying some beaten down finance or tech stocks, this might be a good time to do so.

The rate cut will possibly reverse the 7-month decline in home prices in the US.

4️⃣ [Consumer sentiment](https://fred.stlouisfed.org/series/UMCSENT/) continues its upward ascent, after hitting its lowest point ever in Jun-2022.

5️⃣ [Manufacturing sentiment](https://www.ismworld.org/supply-management-news-and-reports/reports/ism-report-on-business/pmi/february/) is still going down and firmly indicates a shrinking economy. Overall, this means that the US economy is cooling, but still not as fast as the Fed would like because consumers are still spending money and are optimistic about the future.


Monthly Economic Insights - March 2023


Will AI change the world (and the markets)? Elon Musk and hundreds of technologists seem to think so.

In an open letter, they called on **"all AI labs to immediately pause for at least 6 months the training of AI systems more powerful than GPT-4."**

What do you think? Will markets benefit from advancements in AI?


Will AI change the world?


Compound interest is the eighth wonder of the world. He who understands it, earns it; he who doesn’t, pays it” - Albert Einstein


Power of Compounding


Just how big is Apple? The wearables business unit ALONE could be a Fortune 500 company (with more annual revenue than Oracle, Nike, American Express, Coca-Cola, and Tesla) 🤯

Apple's Wearables, Home, and Accessories business includes its Apple Watch, Airpods, Homepod, and Apple TV sales.

Sales went from "just" $12.8 billion in 2017 to $41.2 billion in 2022.


Apple's Wearables Unit: A Fortune 500 Company on Its Own with Higher Revenue Than Major Brands


📈 Since 1992, you had to ride out a grand total of seven bad years in the S&P 500 to see 1,727% return on your investment 💰

**Time in market >>> Timing in market**

Trust the process 💸


Long-Term Investing Pays Off: Trusting the Process Over Timing the Market with the S&P 500


**It’s time to rethink celebrity investors**

When you first become interested in investing, you’ll likely be shown dozens of YouTube, Instagram, and TikTok accounts that worship at the altar of the celebrity investor. If you’re lucky, you’ll end up following accounts that espouse the time-tested investing principles of someone like Warren Buffet. If you’re not so lucky, you’ll end up on one of the many dangerous TikTok accounts that teach you how to “get rich quick” on Robinhood by employing reckless day-trading tactics.

XN_EMBED_LINK

But in the middle of those two extremes is the celebrity investor. This group includes Bill Ackman, Ray Dalio, Charlie Munger, Michael Burry, George Soros, Steve Cohen, Cathie Wood, [Nancy Pelosi](https://www.businessinsider.in/investment/news/see-every-stock-trade-house-speaker-nancy-pelosiaposs-husband-has-made-since-2021/slidelist/92731756.cms) (joking, but only partially), Jim Cramer (good luck), and, of course, Warren Buffet.

These investors are all successful in their own right. But too often, we treat them as examples to follow for our own investing. In reality, celebrity investors are typically performing under a very different set of circumstances compared to those facing independent retail investors. Celebrity investors might own a hedge fund, work in the media (which means their job is to think and talk about stocks all day), or manage an index fund.

When you have billions of dollars in capital, investing becomes a different ball game. You don’t just go on Robinhood and buy a stock — you build a position through a professional intermediary. Similarly, your position might allow you to actually appoint new people on the board of a company. So while a retail investor is basically jumping on a train and going along for the ride, an institutional investor might be able to move the tracks and appoint a new conductor. Sometimes funds even have insurance policies on trades.

Social media has been a blessing and a curse for the independent investor. On the one hand, there’s never before been so much valuable information so widely available. On the other hand, there’s also never been so much bad information polluting the landscape. Especially with platforms such as TikTok and YouTube Shorts, the algorithms are optimizing for engagement — not optimizing your finances.

In this sense, celebrity investors can be great fodder for engagement. When Warren Buffet or Michael Burry take a giant position in a new company, the finance world wants to know about it. But again, it’s important not to try to invest like a celebrity investor — because we only see a glimpse of their operations.

We aren’t saying to remake your financial information ecosystem entirely. Celebrity investors are engaging, and they can teach you a lot about financial markets and investing. It’s simply important to be able to separate their actions from your own. Even when you keep the principles of investing in mind, it can be difficult to not be swayed by an [ominous Michael Burry tweet](https://markets.businessinsider.com/news/stocks/big-short-michael-burry-deletes-twitter-sell-stock-market-outlook-2023-2). It’s just like if you watch Jaws and then go to the beach — you might _know_ the risk of shark attacks is extremely low, but you still won’t feel comfortable swimming into the ocean.

The truth is that many of the best investor guides are the most boring. They don't have flashy public personas or make headlines with bold trades. Instead, they help investors quietly and consistently follow a set of proven investment principles that have stood the test of time.

Tools such as [Xillion’s portfolio optimizer](https://my.xillionapp.com/product/portfolio-analyzer) can help you stay on track, even when social media exposes you to all the noise. Aside from our investing tools, we also have a cohort of mentors who can assure you that you’re on the right path for your own financial journey — not Warren Buffet’s, nor Jim Cramer’s, nor Bill Ackman’s, but your own.


Why Following Celebrity Investors Isn't Always a Good Idea: Rethinking Our Approach to Investing


$AAPL has rallied a whopping 2,402% since 2010 (a CAGR of 28.4% excluding dividends)


Apple's Soaring Success: A 2,402% Rally Since 2010 with Impressive CAGR Excluding Dividends


Unmasking the True Cost of Retirement: How inflation magnifies monthly expenses over time. don’t let inflation erode your golden years - Start Planning Now!

Checkout [XillionApp](https://my.xillionapp.com/)


The Inflation Threat to Your Retirement: How to Plan and Protect Your Golden Years


Investing made simple: your guide to a $10,000 ETF portfolio 💰

![How to invest $10,000?](https://d391fpr6ao9qle.cloudfront.net/images/blog/how-to-invest-$10000.webp)

Checkout [XillionApp](https://my.xillionapp.com/product/invest)

How to invest $10,000?


Every great civilization in human history has gone through a cycle that includes a rise to power, a period of stability, and a period of decline. Eventually, the decline becomes so tumultuous that the empire itself collapses. 

Here we can see a graph from Ray Dalio’s recent book, **“Principles for Dealing with the Changing World Order: Why Nations Succeed and Fail,”** that illustrates this cycle of civilizations: 

![Ray Dalio’s Book](https://d391fpr6ao9qle.cloudfront.net/images/blog/us-invest-1.webp)

Dalio, the billionaire founder of the hedge fund Bridgewater, explains: “From examining all these cases across empires and across time, I saw that the great empires typically lasted roughly 250 years, give or take 150 years, with big economic, debt, and political cycles within them lasting about 50 to 100 years.” 

Dalio also talks about why we tend not to think in terms of grand historical cycles, even though we may accept these cycles exist. He believes this happens because “we are like ants preoccupied with our jobs of carrying crumbs in our very brief lifetimes instead of having a broader perspective of the big-picture patterns and cycles, the important interrelated things driving them, where we are within the cycles, and what’s likely to transpire.” 

**From all of this, Dalio basically concludes that the U.S. empire is on the decline (about 70% through its big cycle), while China is next in line to take its place as the next great civilization.** He tells the reader that “whoever wins the technology war usually wins the economic and military wars.” Perhaps of the greatest concern, Dalio puts the odds of the U.S. devolving into a civil war at “only around 30%,” which he concedes is “a dangerously high risk that must be protected against and watched closely.” To Dalio, polarization is one of the biggest internal issues facing the United States.

In conclusion, Dalio writes:

***“While we can’t know for certain whether the splits and conflicts in the U.S. will increase or reverse, we do know that the long-term momentum is toward increasing division and this is a serious risk. The fact that the U.S. is simultaneously deeply indebted, its international standing is weakening, and it is experiencing serious conflict should be concerning both to Americans and to non-Americans who depend on them. At the same time, in its 245-year history, the U.S. has shown a great capacity to bend without breaking.”***

An investor reading this book would likely conclude that it’s time to sell all U.S. equities and buy a Chinese stock market index. However, it’s worth considering opposing opinions. In his annual [letter to shareholders](https://www.berkshirehathaway.com/letters/2022ltr.pdf) in 2021, Warren Buffet reaffirmed his belief in the United States. The Oracle of Omaha [wrote](https://variety.com/2021/biz/news/warren-buffett-letter-berkshire-hathaway-1234917087/): 

***“Today, many people forge similar miracles throughout the world, creating a spread of prosperity that benefits all of humanity. In its brief 232 years of existence, however, there has been no incubator for unleashing human potential like America. Despite some severe interruptions, our country’s economic progress has been breathtaking.***

***Beyond that, we retain our constitutional aspiration of becoming ‘a more perfect union.”’Progress on that front has been slow, uneven and often discouraging. We have, however, moved forward and will continue to do so.***

#### Our unwavering conclusion: Never bet against America.

Over many decades, Buffet has been proven right on his conviction to bet on the U.S. economy. Between when Buffet took over Berkshire Hathaway in 1965 and 2022, the company [produced](https://www.berkshirehathaway.com/letters/2022ltr.pdf) 3,787,464% in overall gains, mostly by investing in American companies. During that same time period, the S&P 500 has experienced a rise in value of 24,708%. If you look at a histogram of annual returns from the S&P 500, the results have been overwhelmingly positive — not exactly what you would expect from an economy in the later stages of decline.

![Histogram of Annual Returns](https://d391fpr6ao9qle.cloudfront.net/images/blog/snp-returns-since-1992.webp)

You might think, ***well yeah, but this time is different***. And that’s true — this time may be different. The United States faces incredible polarization, climate change, a difficult debt problem, waning manufacturing productivity, worsening education outcomes, the prospect of a third World War, an inefficient healthcare system, and a population decline (to name just a few of our many problems). Of course, the U.S. is not alone among developed nations in grappling with most of these issues.

[Valerie Hopkins on Twitter: "Right now there are changes, the likes of which we haven't seen for 100 years," Mr. Xi told Mr. Putin through an interpreter after the state dinner as the leaders bid farewell. "And we are the ones driving these changes together.”](https://twitter.com/VALERIEinNYT/status/1638299396885315585)

But we have no way of knowing when the U.S. will really enter a final decline until it happens. Borrowing Dalio’s technique of looking at patterns of history, we can see that people are also generally bad at predicting when a civilization would crumble — some Romans thought their empire would collapse centuries before it became strongest, and some Ottomans thought their empire was at its peak just before it collapsed. As the saying goes: Change comes slowly, then all at once. 

There are also many examples in recent memory when people thought the United States faced severe economic decline, only to be proven wrong. In the late 1970s, for instance, Harvard economists [were predicting](https://carnegieendowment.org/2010/03/18/japan-s-past-and-u.s.-future-pub-40356#:~:text=In%201979%2C%20Harvard%20economist%20Ezra,however%2C%20Japan's%20bubble%20economy%20imploded) that Japan would overtake the United States as the world’s leading economy. Today, the U.S. economy is more than four times larger than that of Japan, and the U.S. is still growing at a faster rate. Similarly, many of the Americans who lived through the Great Depression remained skeptical of the U.S.’s ability to achieve great economic prosperity — even as it was happening before their eyes (hence, the lingering habits of stuffing money in mattresses). 

So how should this impact your investing? Well, diversifying internationally is never a bad idea. But betting against the U.S. entirely means you are betting on an outcome that — if it comes true — will completely remake the world around you. Predicting which investments would grow in this scenario is incredibly difficult. For instance, you might not even know which currency you would want. So even if you believe you can predict the outcome, it would be even more difficult to predict how to properly invest according to that outcome. In this sense, it might be better to get on the status quo (U.S. equities performing at historical levels) and be proven wrong, rather than bet on a giant change in history and be proven right. 

The U.S. has reinvented itself in the past, but could it do it again? Could the stronger-than-ever NATO prevent the third world war for decades or centuries to come? Could Social Security and Medicaid — the largest contributors to federal debt — be reformed to avoid worse outcomes? Could population decline be reversed with thoughtful immigration policies? And most importantly, can ordinary Americans find a middle path between polar extremes? If America still is the best incubator of human potential, can it solve all these problems before they become unsolvable?

We saw a glimpse of American ingenuity in the early days of the pandemic. Within 72 hours of receiving the genetic sequence of the virus from Chinese scientists, the CDC and Moderna [were able to plot out](https://www.cnbc.com/2021/07/03/how-moderna-made-its-mrna-covid-vaccine-so-quickly-noubar-afeyan.html) a vaccine that was eventually delivered to millions of people around the world. Likewise, the government, corporations, non-profits, and ordinary citizens came together to manufacture, distribute and administer these vaccines to the most vulnerable citizens in record time. With its back up against the wall, the United States performed incredibly well.

The big question is, can America continue to approach all major problems with the same zeal and urgency? Our bet is: yes, it will.

#### So, don’t bet against the US.

To add your thoughts, visite our LinkedIn post [Is it time to invest in China instead of the U.S.?](https://www.linkedin.com/pulse/time-invest-china-instead-us-xillion-app/)








Is it time to invest in China instead of the U.S.?


We are excited to announce our [new comparison feature](https://www.xillionapp.com/compare-funds/) on our website that allows you to easily compare and analyze various ETFS and Mutual Funds side-by-side.

**Comparison of [QQQ vs SPY](https://www.xillionapp.com/compare-funds/QQQ-vs-SPY/):**

![QQQ vs SPY](https://d391fpr6ao9qle.cloudfront.net/images/blog/qqq-vs-spy.webp)

**Fund Details & Performance**

![QQQ vs SPY](https://d391fpr6ao9qle.cloudfront.net/images/blog/qqq-vs-spy-fund-details-n-performance.webp)

**Sector Allocation**

![QQQ vs SPY](https://d391fpr6ao9qle.cloudfront.net/images/blog/qqq-vs-spy-sector-allocation.webp)

**Conclusion**

The **Nasdaq 100 ($QQQ)** has better long-term returns but is more focused on technology stocks, which may be riskier.

The **S&P 500 ($SPY)** is more diversified across sectors, making it a better choice for those seeking a diversified portfolio.

However, investors willing to take on more risk for potentially higher returns may prefer the Nasdaq 100.

For more ETFs & Mutual Funds comparison, check [Xillion Compare Funds](https://www.xillionapp.com/compare-funds/)

Are you tired of spending countless hours researching ETFs and Mutual Funds?

How long will it take to double your money?

FDIC insurance is a federal program that protects depositors up to $250,000 per depositor per bank.

**[Xillion Protect](https://xillionapp.com/product/protect) is a tool that can help you take advantage of FDIC insurance** by diversifying your cashes across multiple FDIC-insured banks.
 
With Xillion Protect, your deposits are continuously monitored and safeguarded, giving you peace of mind that every dollar in your account is secure.

Xillion Protect also sends you real-time alerts if your deposits are not secure, allowing you to take action immediately and follow our step-by-step guide to secure them instantly.

Don't take chances with your hard-earned savings. Use Xillion Protect to help you diversify your cash, giving you the confidence and security you deserve

**Get started with a free [Xillion](https://www.xillionapp.com/signup) account today and start taking control of your financial future.**

How you can protect yourself from bank failure?


With summer approaching, many of us are opting for “staycations” rather than travel. In this economy, the idea of splurging on a vacation might seem irresponsible, but you’re not alone in thinking this way. In fact, about 48% of American workers decided not to take a trip in 2022 due to budget concerns, and only about 33% exhausted their allotted vacation days. 🏖️

When it comes to big financial decisions, there’s always uncertainty. That’s where [Xillion Mentoring](https://my.xillionapp.com/product/mentoring) can help. Connect with an expert who knows how to guide you on your journey to financial independence. From large decisions like buying a home, to smaller ones like whether or not you can book that trip to Cancùn, our mentors can guide you through it all. All you have to do is:

1. Determine the area of expertise that you want your mentor to have. Maybe you’re interested in investing, planning for retirement, or you’re generally not sure about handling your finances.

2. Swipe through mentor profiles that give you the full picture on their strategies, investing styles, and risk appetites.

3. Choose and connect with your mentor. Start chatting and getting to work right away.

**We all deserve a vacation**, and we deserve to easily plan for it. With products like Xillion Mentoring, you can talk to someone who understands your finances and makes decisions easier. Get started with this step to financial freedom today by signing up for a free [Xillion](https://my.xillionapp.com/home) account!

Vacations are a big expense — but can they be financially responsible? 🤔


## Top wealth creators of the decade (%) 10 Year CAGR

![Top wealth creators](https://d391fpr6ao9qle.cloudfront.net/images/blog/top-wealth-creators.webp)

*From the S&P500 Index as of 17, March 2023

Are you holding any of these stocks in your portfolio?


You're not alone. Recent bank failures like SVB Bank and Signature Bank have left people feeling uneasy about the security of their money.

That's why we created [Xillion Protect](https://xillionapp.com/product/protect) - a powerful tool that helps you diversify your deposits across multiple bank accounts, so you can maximize the safety of your money.

With FDIC insurance covering up to $250,000 per account, [Xillion Protect](https://xillionapp.com/product/protect) guides you through the process of managing multiple bank accounts. This makes it easy to spread your deposits across multiple banks, ensuring that your money is safe and secure.

We believe that everyone deserves to feel confident about their finances, and we're committed to helping you protect your hard-earned money. So don't wait - [Get started with a free account today!](https://xillionapp.com/) and start taking control of your financial future.

Are you worried about the safety of your bank deposits?


It’s a scary time to be a tech worker. For years, software engineers grew accustomed to rapidly rising incomes, job security, and a job market hungry for their talent. But since the Federal Reserve began raising interest rates, things have changed. It’s now difficult to find a large technology firm that hasn’t announced layoffs in recent months.

Just this week, Meta announced that it would cut around 10,000 jobs. It also stopped hiring for 5,000 open roles. This comes as Mark Zuckerberg is executing his plan for a “year of efficiency,” which already included 11,000 job cuts last fall.

Meta is hardly alone. Amazon, Alphabet, Microsoft, Salesforce, TikTok, Twitter, Tesla, IBM, Dell, and Ericsson all announced sizable layoffs in recent months. The highest number of tech employees were let go in January, with 108,080 estimated lost jobs.

Enough with the bad news. If you’re in the tech industry, you’re probably stressed enough about the economic situation. What can you do about it?

First, dealing with a down economy is as much about coping with anxiety as anything else. As hard as it may seem, try to focus only on the things that are in your control. Understand that everything will eventually be ok (think 2+ years ahead) because an economic recession lasts only around 18 months on average. The U.S. is still an incredibly robust economy. The tech industry is strong and key technologies such as generative AI promise to unlock vast leaps in productivity. Companies might be downsizing, but they’ll always have a need for software engineers, product managers, designers, etc.

Having an Emergency Fund is critical. Even if you keep your job, just knowing that you are prepared to handle the unexpected reduces anxiety and gives you peace of mind. It can determine whether you have sleepless nights or wake up refreshed, ready to code.

It’s also important to have the right size Emergency Fund. If you save too much, you risk losing out on precious investment opportunities — time in the market is critical for young workers. If you don’t save enough, however, you can cause undue financial strain in the event of an emergency.
So how do you calculate the right size for an Emergency Fund? We can help.

The Xillion Emergency Funds Calculator helps you calculate the right amount based on your family’s emergency needs.
	
	First, we factored in the obvious factors:

	1️⃣ Expenses

	2️⃣ Savings

	Then, we add the factors unique to you and your family:

	3️⃣ Income

	4️⃣ Job Security

	5️⃣ Severance & COBRA Package

	6️⃣ Spouse Employment

	Finally, we include macros inputs:

	7️⃣ Inflation

	8️⃣ Economic Growth

	9️⃣ Opportunity Cost of Excess Savings
	

✅ That’s how we calculate the exact amount that you should save. This amount is completely customized for your family’s unique circumstances.
These are uncertain times, but Xillion is here to help with your financial needs. A recession doesn’t need to upend your path to financial independence. With a little planning, you can be prepared to weather the storm and emerge stronger than ever!


How to prepare yourself for the uncertainty in the economy

How to prepare yourself for the uncertainty in the economy?


While having an adequate emergency fund is crucial to your financial health, holding too much cash holds you back from achieving long-term financial goals.

**OPPORTUNITY COST**

Opportunity cost refers to the cost of an alternative that you give up to pursue a certain action. In other words, when you make a financial decision, you're giving up the opportunity to do something else with that money.

**EXCESSIVE EMERGENCY FUND**

Now let's apply the concept of opportunity cost to your emergency fund. Imagine you have $90,000 saved in your emergency fund, but your monthly expenses are only $5,000. That means you have almost 18 months' worth of expenses saved up.

While that may seem like a good thing, the extra money in your low-interest savings account could be invested elsewhere with a higher expected return. Hence, the opportunity cost.

**INFLATION**

One factor to consider is inflation. Inflation decreases the purchasing power of your money over time. So your emergency fund isn't keeping up with inflation, you're actually losing money over time in terms of purchasing power.

**GROWING YOUR MONEY**

Another factor to consider is the growth of your money from the overall economic growth. If you're holding onto too much cash, you're not investing in the stock market or other investment opportunities that could grow your wealth.

**XILLION EMERGENCY FUND CALCULATOR**

So, how much should you actually keep in your emergency fund? This is where the Xillion Emergency Fund Calculator comes in.

By taking into consideration factors such as expenses, savings, income, job security, severance & COBRA package, spouse employment, inflation, and economic growth, the calculator can help you determine the right amount for your family's emergency needs.

Are you holding too much cash in your emergency fund?


The hottest acronym in finance? WWJPD 🔥 🚒

💸 In other words: What Would Jerome Powell Do 💸

Everyone wants to know how Federal Reserve Chair Jerome Powell will respond to the latest inflation data.

📈 Inflation is still stubbornly high at 6% in February. Normally, that would suggest the Fed will continue raising interest rates.

🛩 But some analysts on Wall Street think the Fed will actually cut interest rates. That would be a big deal, signaling the Fed is more interested in avoiding a "hard landing" than taming inflation by any means necessary.

Why?

The implosion of Silicon Valley Bank changes the calculus. Other regional banks are also struggling. The Fed likely fears that, if it continues raising interest rates aggressively, the banking sector will suffer a crisis that will spread across the broader economy.

Source: New York Times, "Inflation report’s details show price increase stubbornness."

What would the Federal Reserve Chair do now?


**TL;DR: the zero-interest-rate policy enticed SVB to take a position that it couldn't maintain once the Fed decided to raise interest rates.**

What just happened to Silicon Valley Bank? And what does it have to do with inflation?

The Federal Reserve decided to bail out Silicon Valley bank on Sunday, after depositors faced the prospect of losing all of their savings beyond the $250k FDIC amount.

**So what happened?** According to the WSJ, "in a world of near-zero interest rates, SVB put the money in long duration fixed-income assets in search of a higher return."

But after the Fed raised interest rates to slow inflation, SVB had to liquidate those assets before they matured. This happened as many depositors began taking out their money, fearing (and causing) a bank run that would make it impossible for SVB to fulfill withdrawals.

Impact of rising interest rates on Silicon Valley Bank


Silicon Valley Bank is the talk of the town. What's going on? And what can it teach us about investing?

Shares in Silicon Valley Bank fell by 62% in pre-market trading today. Yesterday, the shares fell another 60% in premarket trading, per CNBC. Nasdaq decided to halt the trading of the stock.

Here's how the Wall Street Journal describes what happened: "The panic surrounding SVB kicked off Wednesday, when the company said it would book a $1.8 billion after-tax loss on sales of investments and seek to raise $2.25 billion by selling a mix of common and preferred stock."

This prompted fear in Silicon Valley about the possibility of a bank run. Prominent VCs including Founders Fund, Coatue Management and Union Square Ventures all told their portfolio companies to stop using SVB, according to Bloomberg.

The key dynamic on display: the contagion of fear in markets. Even though this is easy to diagnose, it's difficult to stop. Some investors, like Bill Ackman, are floating the idea of a government bailout to ease fear in the markets.

For an individual investor, the SVB case also highlights the importance of diversification of investments — across individual equities and market sectors.

Sources
- [CNBC - Silicon Valley Bank drops another 60% and is halted Friday as it’s shut down by regulators](https://www.cnbc.com/2023/03/10/silicon-valley-bank-tumbles-for-a-second-day-weighing-on-the-bank-sector-again.html)
- [Bloomberg - SVB Races to Prevent Bank Run as Funds Advise Pulling Cash](https://www.bloomberg.com/news/articles/2023-03-09/svb-ceo-becker-asks-silicon-valley-bank-clients-to-stay-calm)
- [WSJ - SVB Stock Halted After Sharp Selloff; Bank Exploring Possible Sale](https://www.wsj.com/livecoverage/stock-market-news-today-03-10-2023/card/svb-stock-price-slides-another-29-premarket-gdGa9ANN0vNESUUorGqm?mod=hp_lead_pos1)

Investing lessons from Sillicon Valley Bank collapse

📣What separates good investors from great investors? Understanding opportunity cost 💰

Opportunity cost is what you give up by choosing one investment over another 🤔

🏡 💹 For example, if you invest in real estate, you may miss out on potential gains from investing in an index fund. And if you choose an index fund, you may miss out on potential returns from a tech stock 🚀 🚀

We all intuitively understand opportunity cost, even if we don't think of it as such.

Great investors understand how to balance opportunity cost and risk. It's also important to know when to look for outside advice.

[Xillion's Portfolio Analyzer](https://www.xillionapp.com/product/portfolio-analyzer/) helps you optimize for opportunity cost. To give a simple example, you might be invested in an index fund with high fees, when a lower fee index fund with comparable assets is available. That's opportunity cost!

Get started with [a free Xillion account today!](https://www.xillionapp.com/)

What is Opportunity Cost?

As payment for managing a mutual fund, investors are charged an advisory fee. An expense ratio measures how much of a fund’s assets are used for paying this fee and other operating costs, and the general rule is that the lower this is, the better for investors. However, high fees aren’t always completely avoidable. They can dent your portfolio returns, and it’s often difficult to figure out if these expenses are worth it.

When we talk about expense ratios, a large chunk of this is annual ongoing payments for managers, legal fees, accountants, etc. These advisory fees are typically between 0.25% and 1% per year of your investment of the fund. While 1% might not seem hefty, it’s definitely considered a high fee — the more a fund trades, the higher your returns, and the more of your assets will be eaten up by high operating costs.

For example, let’s look at a model portfolio from Forbes. This portfolio is made up of 80% stocks and 20% bonds, and returns just over 10% per year since 1978. This, combined with a fixed $100/month investment over 45 years, grows this portfolio to about $1,050,000 before fees. But with an annual fee of 1%, our model investor would have only received a 9% annual return, making the portfolio value $740,000 instead. So this 1% fee wasn’t so small after all - it took away about 30% of the portfolio’s value!

Therefore, it’s important to keep on top of your mutual funds, and to figure out what financial decisions will lead to your portfolio earning the most with optimum level of risk. [Xillion’s Portfolio Analyzer product](https://www.xillionapp.com/product/portfolio-analyzer/) can help you with this.

The analyzer’s algorithm provides a clear and concise view of holdings from your brokerage accounts, and shows you how your portfolio is performing versus S&P 500. You’ll also receive recommendations and actionable steps customized towards getting returns that match your expectations.

Long story short, high fees for mutual funds can be scary, but we can help you understand which moves to make to optimize your portfolio and returns. [Sign up for a free account with Xillion today](https://www.xillionapp.com/) and take this step towards financial freedom!


Mutual Fund Fees and Expenses

As you embark on your career and financial journey, it's important to understand the basics of personal finance.

Here are five things young people should do to get their finances in order.

- **CREATE A BUDGET -**  Use a budget to track your income and expenses. This should help you find ways to cut back on unnecessary expenses. Optimizing expenses will only get you so far. Getting investments right early on is critical — and that’s where Xillion can help.
- **EMERGENCY SAVINGS -** Holding too much cash in an emergency fund limits your investment opportunities. But not having enough can put you in financial turmoil. Balance is important. [Xillion’s Emergency Fund Calculator](https://www.xillionapp.com/product/emergency-fund/) removes the guesswork.
- **START INVESTING EARLY -** How do you build wealth? It all comes down to compounding investment gains over time. Even if you can only invest a small amount each month, it can add up over time and help you achieve your financial goals.
- **PAY DOWN EXPENSIVE DEBT -** Carrying unnecessary high-interest debt can lead to a cycle of debt that’s difficult to break. Prioritize paying off any loan with an interest rate of more than 10% to reduce the financial burden and save money in the long run.
- **DIVERSIFY-** 60/40 stock-bond split doesn’t fit most investors, especially while they’re young. Xillion’s portfolio optimizer analyzes your investments & gives suggestions for optimizing allocation. Index funds can be a great way of laying a healthy foundation for your portfolio.
- Say goodbye to financial stress and hello to financial freedom with Xillion, your ultimate personal finance companion.[Get started with a free account today!](https://xillionapp.com/)

How Gen Z Should Prepare Their Finances

Most people forget: money in your emergency fund can still earn money 🚀 📈

💹 With the Fed raising the interest rates, savings accounts can finally offer attractive yields.

Some high-yield savings accounts offer a yield over 4% 🤯 These accounts are FDIC-insured, so the investment is virtually risk-free.

Example: Moving $20,000 in emergency fund cash to a high-yield account would produce an extra $800 over one year 💰 💴 💸

When you're a young investor, markets are the best bet for the long-term. But if you have a lot of cash in your emergency fund, consider putting it in a high-yield savings account.

And if you aren't sure how much to put in your emergency fund, Xillion can help. [Our Emergency Fund Calculator](https://www.xillionapp.com/product/emergency-fund/) helps you figure out exactly how much YOU need in your emergency fund.

[Get started with a free account today!](https://www.xillionapp.com/)

Optimize your retirement portfolio with Xillion

What is a High Yield Savings Account

**💸 Financial psychology is a funny thing:** if you could turn five minutes from today into millions of dollars 30 years from now, would you do it?

Of course! But the vast majority of Americans don't take the time to optimize their retirement portfolios 📆 🚀🔎

Xillion 401k Optimizer makes improving your 401k returns as easy as 1-2-3 in only 4 minutes! 🥂 🎇 🎉

**With 401k Optimizer, you get:**
- 1️⃣ to view all your existing & old 401k/IRA/403b accounts in one place. 📊
- 2️⃣ low-cost fund recommendations that will improve your portfolio significantly. 🏋️
- 3️⃣ clear picture of how much benefit you will get over time. 📈

💵 [Try Xillion 401k Optimizer](https://xillionapp.com/product/401k-optimizer/) FREE for one month and accelerate your journey towards financial independence. This could be the best 4 minute time investment ever! 🏁


🏡 First-time buyers made up the smallest share of home-buying activity in the U.S., at just 26%. 

For many young workers, home ownership feels unattainable — but renting forever has downsides too.

[Bloomberg - Americans Need to Be Richer Than Ever to Buy Their First Home](https://www.bloomberg.com/news/articles/2023-03-02/will-home-prices-fall-first-time-buyers-face-a-costly-housing-market?srnd=wealth&leadSource=uverify%20wall#xj4y7vzkg)

A mortgage locks you into a fixed payment rate, while rents tend to increase every year (or over a few years) 📊

📆 Interestingly, for the first time in five years, rents have fallen for six straight months 📆 National median: ~$1,350.

[WSJ - Apartment Rents Fall as Crush of New Supply Hits Market](https://www.wsj.com/articles/apartment-rents-fall-as-crush-of-new-supply-hits-market-2403c6ea)

[Xillion’s Home Buying Tool](https://xillionapp.com/product/home-buying-guide/) will walk you through all of these considerations so you can make the smartest financial decision. 

All you have to do is plug in the numbers and find out if it is sensible to invest in the property.

Guide for first-time home buyers


If you’ve invested in a 401k or other tax-benefit retirement account, chances are, you’ve come across a target date retirement account. Examples include “Vanguard Target Retirement 2050 Fund” or “Fidelity Freedom 2045 Fund.” While these funds are convenient, there are a few reasons why you might want to stay away from them.

But what exactly are these funds? **Target retirement funds are supposed to further simplify retirement investing by automatically shifting your allocation of investment assets - between stocks, bonds, and treasuries - as you get closer to retirement.**

For example, a retirement fund might start out with a higher percentage of stocks when you are younger and have a longer investment time horizon before retirement. As you get closer to retirement, the allocation might shift to a higher percentage of bonds, which are generally considered to be less risky.

In general, your investment portfolio should carry less risk as you get closer to retirement. You can usually afford to be invested in equities when you’re younger, since you have a long time horizon to stay in the market. Over the past 30 years, the S&P 500 has provided a [predictable return](https://www.fool.com/investing/how-to-invest/index-funds/average-return/#:~:text=S%26P%20500%20annual%20returns,rate%20of%2010.7%25%20per%20year) of around 11% per year. But when you retire, you rely on your investment savings to live. It’s not worth the risk that the equities markets go so low that you can’t afford to live.

In recent years, target funds have become a big business. Morningstar [compiled](https://www.morningstar.com/lp/tdf-landscape) the following data on target funds: 

-   Assets in target date funds stood at $3.3 trillion in 2021, up from $2.8 trillion in 2020.

-   Vanguard had the most money in target retirement funds, with more than $55 billion in investment inflows in 2021.

-   Fidelity, T Rowe Price, and Blackrock took the next-largest slice of market share, with 14%, 11.5%, and 8.8% of estimated share, respectively. 

Target funds might sound like a great option. In some cases, they can be. But there are a few drawbacks: 

-   **High Fees**. The average target fund had an asset-weighted fee of 0.34% in 2021, [according to](https://www.morningstar.com/lp/tdf-landscape) Morningstar. That is much higher than the fees you would pay by managing the money yourself. With Vanguard’s S&P 500 fund, for example, you only pay a fee of 0.03% — less than one-tenth the target fund fee! That’s a heavy price to pay for convenience.

-   **Too Conservative**. For younger people, target date funds can often be too risk averse. Most people under 35 years of age are better off investing in low cost S&P 500 or Russell 2000 index funds and not worrying about anything else until they are closer to 50 years old. Then you can rebalance your portfolio by spending only a few minutes every quarter. Here are the 10 year [returns](https://fundresearch.fidelity.com/fund-screener/results/compare/snapshot/averageAnnualReturnsYear3/desc/1?order=&tickers=FFFHX) of target funds vs S&P 500 and Russell 2000:

![target-retirement-funds](https://d391fpr6ao9qle.cloudfront.net/images/blog/2023-03-02-what-are-target-retirement-funds.webp)

-   **Lack of Customizability**. Everyone has their own journey toward financial independence. It’s important to optimize your path. That might mean investing in individual equities, in specialized index funds, or even angel investing. Target funds simply don’t give you the flexibility you need to optimize your retirement path. They can be useful if you aren’t willing to put the time in to customize your financial path — but by taking even a few minutes every month, you can forge a better path to financial freedom. 

**More on target date funds.**

Convenient? ***Yes***. Optimal? ***Definitely not***.

Xillion gives you the best of both worlds: convenience and optimization.

It only takes a few minutes to shift your funds from a high-fee target funds to your own mix of index funds and other investment types.

📉 Your 401k plans default to target date funds.

📈 But you can do much better by investing directly in low cost index funds like FXAIX, VOO, VUG etc. Why?

1️⃣ Target date funds have much higher fees (10x more) than the cheapest index funds.

2️⃣ Target funds are too conservative, especially for people under 40 years of age (see graph).

3️⃣ You can't customize your investments the way want.

**Xillion can help**. The convenience of target funds might be tempting. But Xillion can take a lot of the hassle out of forging your own financial path. For example, we’ll scan your portfolio to look for funds that have unnecessarily high management fees. We can also help you plan for retirement, mixing assets in a way that aligns with your financial goals. Get started today with a free [Xillion](https://my.xillionapp.com/home) account! 




What are Target Retirement funds?


🛡️ We use Plaid to connect your financial information to your Xillion account. From there, everything else updates automatically.

✅ Plaid is used by all major financial institutions. It's also trusted by fintech companies including Venmo, SoFi, and Robinhood.

**🕘 Setting up your accounts can take less than 5 minutes 🕘**. Get started with a free Xillion account today!

![Xillion Security](https://d391fpr6ao9qle.cloudfront.net/images/blog/xillion-plaid-secured.webp)



🔒 How secure is Xillion?


Delayed investing can cost you a lot of money!

Starting investing early is key to reaching financial freedom sooner. Starting $1,000 investment every month now gives you 3x the money as compared to starting in 10 years from now.

Start investing now, so you can give your money more time to compound.

Take a look for yourself!

Don't know where to invest? At [Xillion](https://xillionapp.com), we take the guesswork out of investing and set you on the optimal path toward your financial goals. Get started with a free account today.



🕘 Delayed investing can cost you a lot of money!


😧 Nearly half (45%) of high-income earners are living paycheck to paycheck 💵 ➡ 💵

🤯 That wasn't even much higher than the overall U.S. adult average of 60%, according to a LendingClub report from January.

But here’s a fun fact: 

More Xillion customers had too much money saved up for emergencies than too little.

Always make sure you have enough funds in your savings account to handle an emergency. But don't save too much — otherwise you're missing out on investment opportunities.

📈 This is especially important as a young investor, since early investments have a chance to grow over decades.

How do you figure out the right amount to save? 🤔

Old-school finance talking heads would tell you that everyone needs 6-12 months of expenses in their savings account.

But Xillion wanted to create a better way. That's why we created the **[Emergency Fund Calculator](https://my.xillionapp.com/product/emergency-savings-guide)**.

First we factored in the obvious factors:

1️⃣ Expenses

2️⃣ Savings

Then added the things that are unique to you and your family:

3️⃣ Income

4️⃣ Job Security

5️⃣ Severance & COBRA Package

6️⃣ Spouse Employment

Finally added macros inputs into our algorithm:

7️⃣ Inflation

8️⃣ Economic Growth

9️⃣ Opportunity Cost of Excess Savings

✅ That’s how we calculate the exact amount that you should save. This amount is completely customized for your family’s unique circumstances. 💯

**[Calculate]((https://my.xillionapp.com/product/emergency-savings-guide)) your ideal savings amount today** — create a free [Xillion](https://my.xillionapp.com/home) account to get started! And follow us on LinkedIn for more learning opportunities!


Calculate ideal savings amount today


Our February 2023 economic insights summary:

⬆️ The US economy is still going strong, despite the Fed trying to slow it down by raising interest rates.

1️⃣ **Inflation [inched up ↗️](https://www.bls.gov/cpi/) slightly** after declining for many months, causing stocks to halt the upward cycle. This surprised everyone but we still maintain that inflation will likely come down to the 2%-3% range in the next 18 months or so.

2️⃣ The **January [jobs report](https://www.bls.gov/news.release/pdf/empsit.pdf) was unexpectedly strong**, with the unemployment rate at 3.4%, the lowest since 1969! As per SF Fed’s [research](https://www.frbsf.org/economic-research/publications/economic-letter/2023/february/role-of-immigration-in-us-labor-market-tightness/), lower immigration during 2017-2021 is one of the contributing factors to the US labor shortage. Tech layoffs do not make much difference in the overall US job numbers.

3️⃣ **Rents have been [falling ↘️](https://www.wsj.com/articles/apartment-rents-fall-as-crush-of-new-supply-hits-market-2403c6ea)** in the US for five straight months because of a softening economy and more apartments being built. We expect most of the COVID-related rent increase to come back to the pre-covid trend within the next 12-24 months.

4️⃣ The **Stock market seems to be in the neutral zone** based on the [52-week trend](https://twitter.com/gags_sandhu/status/1630319007151841280). We believe the market will not go back to the lows it experienced in Oct-2022.


Monthly Economic Insights - February 2023


👶 Gen Z was the only generation with rising 401k balances in 2022, but they still have a lot of room to catch up 📉 📅 One key investment advantage can bridge the generational asset gap ...

📈 Gen Z 401k accounts rose by 14% last year, compared to the average decline of 23% across all Fidelity accounts, according to the latest data from the retirement company.

So what’s going on? 🤔

🙅‍♀️ Unfortunately, Gen Z are NOT simply better at investing than everyone else 😅 Instead, they just have less money to begin with, so their contributions disproportionately increased overall account value.

Consider the following: 
➡ Gen Z had an average account balance of $6,000
➡ Everyone else: $103,900

🏔 That’s a lot of ground to make up 😬

But Gen Z (and Millennials) have a big advantage: time 🕰

Take that $6,000, for example. If a 25 year-old worker invests it in the S&P 500, what could they expect to have at age 55? Well let’s assume the 10% historical return of the S&P 500 over the past 20 years, and a contribution of $6,000 per year:

That would mean more than $1 million dollars by the age of 55. Not bad!

🛑 That doesn’t just happen automatically, though. Market changes over time. Sometimes fund options change as well. You can't expect everything to work on autopilot. To achieve long-term success, you just need to take a few minutes every few months to make sure you are set up for long-term success 🥂 🎇 🎉

[Xillion's portfolio optimizer](https://my.xillionapp.com/product/portfolio-analyzer) is perfect for making sure you're on track, avoiding costly mistakes that can add up to millions of dollars over a few decades.

Get started by creating a free [Xillion](https://my.xillionapp.com/home) account today! And follow us on LinkedIn for more investment tips and market updates.


👶 Gen Z was the only generation with rising 401k balances in 2022


## Wondering about the tax implications of your retirement contributions?

You're not alone. As the tax code grows increasingly complex, it can be tough to keep track of all the different ways investments impact your bottom line. But when it comes to 401(k) contributions, there's one big benefit that's worth paying attention to: the tax break.

**How does it work?**

When you contribute to most 401(k) plans, the amount gets deducted from your paycheck and reduces your taxable income.

**So you get two benefits:**

1️⃣ no taxes on the contribution (though you’ll likely pay a reduced tax upon withdrawing)

2️⃣ a reduced taxable gross income.

For example, if you contribute $20,000 from an income of $120,000, you don’t pay immediate taxes on that $20,000 and your taxable income goes down to $100,000.
This could reduce your tax bill by up to $5,000!

401(k) contributions can also help you lower your tax bill in the long run. In most cases, investment gains earned in a 401(k) account aren't subject to capital gains taxes until you withdraw the money in retirement. And if you're in a lower tax bracket by that point - after all, you will be retired - you could end up paying significantly less in taxes overall.

**So why should you take advantage of this tax benefit?**

Your equity investments can appreciate into the millions of dollars over a few decades, so the tax breaks add up. Plus, if your employer offers matching contributions, you're essentially getting free money that can help supercharge your savings.

Of course, there are limits to how much you can contribute to a 401(k) each year, and there are other factors to consider when it comes to retirement planning. But by taking advantage of these tax benefits, you can set yourself on a path towards financial independence.

**You need to optimize your portfolio within the retirement account in order to make the most of these tax breaks.**

[Xillion’s 401(k) Optimizer](https://my.xillionapp.com/product/401k-optimizer) scans your 401(k) account to look for all the inefficiencies. We’ll suggest simple changes you can make and show that those can add up to a big difference over time. For example, you might be in a fund with an unnecessarily high fee structure, or your investment portfolio might be too risk-averse.

To get started, set up your [Xillion](https://my.xillionapp.com/signup) account for FREE today and navigate to the Portfolio tab to see suggestions for how you can optimize your path to financial independence. And if you have any questions along the way, our [investment mentors](https://my.xillionapp.com/product/mentoring) are here to help.


Saving for retirement can lower your tax bill


**🏡 If you decide 'no,' you might finally be in the majority.**

Here's why:

📉 It might seem hard to believe, but rents are finally going down in the United States 📉

National median rent in January stood a hair under $1,350. That was a 3.5% decline compared to August of 2022, according to the Wall Street Journal.

📆 For the first time in five years, rents have fallen for six straight months 📆

What's going on? 

The WSJ attributes it to a few factors:

1️⃣ Rents just got 'too damn high.' The slowing market shows tenants may have reached their limit in affordability.

2️⃣ New rentals. The U.S. has been slow at building new apartments relative to its population. Finally, around 500,000 apartments are expected to open this year, easing the supply crunch.

All that led to a lease renewal rate of just 52% in January. It's a good time to have a moving company 🚛

But when you're considering whether to keep renting or not, think about the long-term financial picture. A mortgage locks you into a fixed payment rate, while rents tend to increase every year (or over a few years, in this case).

[Xillion’s Home Buying Tool](https://my.xillionapp.com/product/home-buying-guide) will walk you through all of these considerations so you can make the smartest financial decision. All you have to do is plug in the numbers and find out if it is sensible to invest in the property.

And if you still have questions, [Xillion mentors](https://my.xillionapp.com/product/mentoring) specialize in real estate and can guide you through the decision.

Get started with a free [Xillion](https://my.xillionapp.com/home) account today!




🏡 Deciding whether to renew your sublease? 🏡


**Yes, you read that right 😎**

🏛 The government wanted to make it easier for people with student debt to save for retirement 🧓

So last year, Congress passed the SECURE 2.0 Act of 2022. It makes it so that employers can match contributions under a 401k plan that go towards student loans. This can lower your tax liability as you pay off debt and eventually save for retirement.

📅 The plan is supposed to go into effect next year. Of course, you need to work for an employer offering the perk to take advantage of it.

One question we have: **How will this impact overall tuition bills?** It’s no secret that the U.S. has exorbitant higher education costs. Does this legislation address the soaring education costs on the wrong level? Maybe so, but that doesn’t mean you should avoid it 🤷‍♂️

As you look to save for retirement, it’s important to take advantage of all the benefits the government (and your employer) are willing to give you. Most employers match a portion of your 401k contributions.

Once you have the funds in your account, **Xillion can help you optimize** 🚀🚀 🚀

Our [401k Optimizer](https://my.xillionapp.com/product/401k-optimizer) helps you find the funds that get you to financial independence. Get started with a **free** [Xillion](https://my.xillionapp.com/home) account today. And follow up on LinkedIn for more tips!




Did you know your employer might soon be paying off your student loans? 👩‍🎓 😌


**💵 Do you want free money?**

1️⃣ Get the maximum 401k match from your employer.

2️⃣ Enroll in your company’s ESPP program.

✅ **401k Match:** Most employers match a portion of your 401k contributions. For instance, Microsoft matches 50% to employee contributions with no upper limit. If a Microsoft employee maxes out their 2023 401k contribution of $22,500, then Microsoft will contribute $11,250 to the 401k account. This is free money! But if you only contribute $10,000 to your 401k, Microsoft will only contribute $5,000, which means you will leave more than $6,000 of free money(!) on the table. Here’s the best part: all this money is pre-tax, so when you contribute $22,500 into your 401k, you are also saving taxes by reducing your taxable income!

🎯 You can then use **[Xillion 401k Optimizer](https://my.xillionapp.com/product/401k-optimizer)** to find the right funds for your 401k account that get you to financial independence.

✅ **ESPP**: Some companies, especially in tech, let employees purchase company stock at a discount, typically 10%-15%. If you work at say, Square, you can contribute up to $25,000 a year. Square will purchase company stock on your behalf at a discount twice a year, and every six months is called the offering period. It gets even better: the company purchases the stock at the lower of the first day or the last day of the offering period. If the stock was at $50 at the beginning of the offering period and rises to $60 at the end, you get a 15% discount on $50, and the company purchases stock for you at $42.50. You can decide to keep the stock as a long-term investment. Or you can sell the same day and pocket $17.50/share profit. This profit is free money. You don’t have to do anything, other than fill out a form with your HR department.

🔑 If you decide to sell your ESPP stock, you can use **[Xillion Invest](https://my.xillionapp.com/product/invest)** to explore what other investments to buy with this money.

💰 In both these cases, you need to first save and invest by making your contribution, and then you get free money as a consequence of this saving. In my experience, this process of saving is a huge benefit in itself because this money doesn’t hit your regular savings or checking account and doesn’t get spent right away. 💰


How To Get Free Money From Your Employer?


**Did you ever wonder about the history of the 401(k)? 🤔💭**

🏛 Back in the late 1970s, the U.S. government faced a serious problem: with the rise of inflation and the decline of traditional pension plans, workers were struggling to save for retirement.

In response, Congress created the **401(k)** to help workers set aside pre-tax dollars for retirement. The idea was that by incentivizing people to save, the government could help alleviate the burden on Social Security and other public retirement programs 💸 💰 👴

⏭ ⏭ ⏭ Fast forward to today, and the 401(k) has become a staple of the American retirement landscape. **There were $6.3 trillion in assets in 401(k) accounts as of September 2022.** These plans were held by 60 million active participants.

But why should you care about all of this? Well, for starters, the tax benefits of a 401(k) can be substantial. By deferring taxes on your contributions, you can potentially save thousands of dollars over the course of your career. And if your employer offers matching contributions, you're essentially getting free money that can help supercharge your savings 🚀🚀🚀

But these benefits aren’t automatic. It’s important to make sure you have your account optimized early on, so you can reap the benefits over time. With 401(k) and retirement accounts in particular, small changes made today can add up to millions of dollars in investment returns over a few decades.

[Xillion’s 401(k) Optimizer](https://my.xillionapp.com/product/401k-optimizer) analyzes and improves your portfolio in minutes by helping you compare different investment options quickly and clearly. This only takes a few minutes, but it can make the difference of whether you get to your desired financial destination or not.

Get started with a free [Xillion](https://my.xillionapp.com/home) account today, and follow us on LinkedIn for more financial learnings.


Did you ever wonder about the history of the 401(k)? 🤔💭


Moving your 401(k) can be a massive headache. 🤒

🍀🍀🍀 Luckily, it just got easier thanks to a huge move from **Fidelity Investments, Vanguard, and Alight Solutions** 😮

**What happened?**

Three of the biggest retirement account providers recently entered a portability agreement to make it easier to switch accounts after you switch or move jobs 🏃‍♂️♻

**Why?**

15 million people have less than $5k in their 401(k) accounts when they change jobs 📈 💰

Over half of these individuals just cash out rather than move their retirements funds — this is a big no-no. But moving funds is time consuming and difficult, so many people don't think it's worth the pain 😥

The companies want to make it easier for people to transfer so they don't cash out, which can be a costly mistake.

**How does it work?**

🗓 The portability program is going live in April. From then on, automatic transfer will be the default option.

Xillion has recommended retirement account transfers since day 1, so this is great news to see. But transferring accounts is only a first step.

To start optimizing your portfolio, create your [Xillion](https://my.xillionapp.com/home) account and visit our [401(k) optimizer](https://my.xillionapp.com/product/401k-optimizer) tool.

Source: [New York Times, "A New Option for Moving Retirement Savings When Switching Jobs"](https://www.nytimes.com/2023/02/10/your-money/retirement-401k-job-switching.html)


Moving 401k funds just got easier


**Here’s our 401(k) Plan cheatsheet:**

**What?**

This retirement savings plan is sponsored by your employer, essentially directing a percentage of each paycheck into a separate investment account. There are two types:
Traditional: contributions are deducted from gross income, and taxes on the earnings are only due when you withdraw the money (usually in retirement).
Roth: contributions are deduced from your after-tax income, but you won’t owe additional taxes on earnings when you withdraw the money.

**Why?**

Because of the way these earnings compound, it’s in your favor to open a 401(k) when you’re young - your earnings could grow into a sizeable amount of money by the time you’re ready to withdraw it.

**How?**

Here’s how [Xillion’s 401(k) Optimizer](https://my.xillionapp.com/product/401k-optimizer) product will help you make that happen:

-   **Smart View**

See all your accounts in one place. This is especially important if you’ve been with multiple employers; you’ll get a view of all of your retirement accounts, making them much easier to keep track of.

-   **Track Funds**

Xillion analyzes all the current holdings in your accounts. Our algorithm helps you understand how your funds perform long term, auto-optimizing your holdings and suggesting better options.

-   **Happy Retirement**

Pick from our algorithm’s suggestions and switch to recommended funds. You’ll know where to invest those underperforming funds, too, so you can maximize your earnings for retirement.

Handling these accounts when you feel like you’re light-years away from retirement might seem a little confusing, but that’s what [Xillion](https://my.xillionapp.com/home) is here for. We’ll help you every step of the way - sign up with a free account on the Xillion App today!


401k Plan cheatsheet


**Author:** **[Gagan](https://my.xillionapp.com/mentor/gagan)**

1️⃣ 10% per year returns + Complete liquidity (being able to convert the investment into cash)

2️⃣ 12% per year returns + No liquidity for 3+ years

🕵️‍♀️ I was helping a friend, who is also a Xillion customer, solve some of their financial puzzles when this came up. They were being pitched an investment idea where their funds would be locked for years in return for slightly better returns than S&P 500 index.

🙋‍♂️ My suggestion: 

1️⃣ is a much better deal, assuming the same level of risk for both. 

Here’s why. 👇

💸 An illiquid asset should give twice as much return as a fully liquid asset such as the S&P 500 index fund (SPY) to be worth investing into. 🧠

💲 S&P 500 index long term returns are around 10%. And it is as liquid as cash because you can convert it to cash within hours, with 2-3 taps on your phone.

🏡 The popular illiquid asset most Americans own is a house. Most people buy houses with 80% loan. Real estate in the US appreciates around 4% per year, which is around 20% when you consider:

Purchase Price: $500,000

Down Payment: $100,000 (20%)

Bank Loan: $400,000 (80%)

1-Yr Price Appreciation: $20,000 (around 4% of the total value of the house)

Your Gain: 20% ($20,000 gain on a $100,000 investment)

🏡 Selling a house takes months and requires on average around 100 hours time investment. And you don’t see the money for 3-6 months after you make a decision to sell it.

🏦 A less popular type of illiquid asset is venture capital that also returns around 20% returns over the long term. But your money is usually  locked for 7+ years, quite possibly even longer. 🕘

🔑 So, next time someone pitches an investing opportunity to you with returns higher than S&P 500 index, ask them about liquidity. If it’s months or years, ask 20% returns, that is, twice the return of S&P 500.

🚀 And here’s a handy chart for you to keep in your back pocket or as your phone background! 🚀

![investment chart](https://d391fpr6ao9qle.cloudfront.net/images/blog/which-investment-is-better.webp)


Which investment is better?


**Author:** **[Gagan](https://my.xillionapp.com/mentor/gagan)**

Plans are worthless, but planning is everything” - President Eisenhower.

A bit of planning can prepare your family for the uncertainties of a recession. Here are some ways to weather a recession (relatively) easily:

1️⃣ Economic Cycles 📉📈: American & world economy goes through an economic recession every decade or so on average. Some preparation is necessary, but constant fear is uncalled for.

2️⃣ Job Security ☔: Knowing your (+ spouse) job security is important. For instance, the current recession seems like a high tech recession, with some slowdown in housing.

3️⃣ Belt Tightening 🥦: If you are in a vulnerable sector, reducing avoidable expenses helps establish “baseline living expenses”.

4️⃣ Emergency Fund 💵: Stash away some cash. Not too much, though. Use Xillion emergency fund guide to really nail it down (link in first comment).

5️⃣ Don’t Panic 🙅: Recessions happen every decade or so, and typically last around 18 months. Please don’t sell all your investments the moment stock market turns negative.

With a little bit of planning, you can skirt the worst of this and future recessions.


A bit of planning can prepare your family for the uncertainties of a recession


**📈 😯 📉 You just heard the market went way up (or down) and want to check your portfolio.**

Here's why that might not be such a good idea:

First off, there's technically no harm in checking your portfolio. We recommend you check on it at minimum once every six months 📆 🚀🔎

Why?

Because the market changes over time. Sometimes fund options change as well. You can't expect everything to work on autopilot. Success means taking a few minutes every few months to make sure you are set up for long-term success 🥂 🎇 🎉

**[Xillion's portfolio optimizer](https://my.xillionapp.com/product/portfolio-analyzer)** is perfect for making sure you're on track, avoiding costly mistakes that can add up to millions of dollars over a few decades.

With all that being said ... 👆

You shouldn't check on stocks after a big day or loss if you know you'll be tempted to overreact. When it comes to long-term investing, time and patience are the key ingredients.

👶 We're all human, and it's natural to feel glee or fear based on markets. The key is overriding that impulse.

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Should you check your portfolio today?


**TL;DR: To prepare for a recession, spend a few minutes reviewing job security, savings, expenses and investments.**

Recessions are an inevitable part of modern life. Still, there’s never a good time for one. Maybe you’re at a pivotal moment in your career, just a few months away from promotion. Maybe your family member has a chronic illness, and you can’t afford to lose health insurance. Perhaps you just signed a 30-year mortgage that was slightly out of budget. All of these factors make the prospect of a prolonged economic downturn even scarier.

Luckily, economic cycles have been churning for centuries, so we know a lot about how to deal with downturns. Each recession is different, but they all have similarities too. Over time, you can observe what investment and personal finance strategies work best. This will help you come out of a recession with your life and finances intact.

When a recession looms, you might be tempted to avoid taking stock of your financial situation - why add the stress if it’s out of your control? But it’s better to face the situation head-on so you can make appropriate adjustments.

So without further ado, here’s your recession checklist:

**Job Security:**

This includes both how likely you are to keep your current job, and how likely you are to get a new job in a down economy. It also depends on the sectors impacted. For example, if you got laid off as a recruiter at a Big Tech firm, it might take you longer in this recession to find another one because most tech companies have curtailed hiring. But if you are working in the services/hospitality sectors and get laid off, the chances of finding a job within a few weeks are very high.

**Spouse Job Security:**

If you’re married, consider the income of your spouse as well. Also factor in their job security and health benefits. If you work in different industries, this can be a positive thing since it diversifies risk.

**Severance Package:**

Some companies, especially in the tech space, give generous severance packages that pay employees their full salaries for many months after layoffs. Severance packages are an important consideration in a downturn — they can add months of financial stability, providing a safety net while you look for a new job. Still, it’s best not to rely too much on a generous severance package. Companies have the final say in whether they give severance. And a company might collapse, which could mean no severance.

**Monthly Expenses:**

Divide your monthly expenses into fixed and variable costs. Decide which fixed costs can be eliminated or reduced if needed. Also give yourself an honest assessment of what lifestyle changes you’d be willing to make. If you’re stressed about a recession, it can be worth making changes before anything happens — a fancy vacation isn’t worth taking if it creates weeks of prolonged financial stress.

**Savings:**

How much money do you have in an emergency savings fund? Xillion can [help you figure out](https://xillionapp.com/product/emergency-fund/) the ideal amount, factoring in many of the things we discussed in this blog. Consider your savings and investments in light of the other factors discussed here. How long would your savings last? At what point would you need to tap into long-term savings, like a 401(k)? If the answer makes you uncomfortable, consider putting more money in liquid savings.

**Portfolio:**

How exposed are you to the market? If things get bad, when would you need to tap into your investment portfolio for money? Ideally, you don’t want to be in a position where you need to tap into long-term investments to cover daily expenses. This is especially true for retirement funds with tax benefits. To learn more about how to optimize your investment portfolio, check out [Xillion’s Portfolio Analyzer](https://xillionapp.com/product/portfolio-analyzer/).

**A final word of advice: don’t overreact, especially when it comes to investing decisions during a recession. We know this is easier said than done.**

Most Americans aren’t sufficiently prepared for a recession. But if you’re reading this, chances are you are more diligent about preparing for the worst. In fact, there’s a chance you could be too conservative and miss out on big opportunities.

**Be cautious, but don’t panic.**

An average recession lasts around 18 months. The S&P 500 might go down 30% or 40% during a recession. Rather than sell your investments, it might make more sense to buy more of them because fortunes are built in bear markets [Xillion's Invest](https://xillionapp.com/product/invest/) helps you identify stocks and funds that are right for you).

You will get through this. And if you play your cards right, you’ll come out of it in an even better financial position than before.

**A mentor can help you maintain perspective.** Many of [Xillion’s mentors](<(https://xillionapp.com/product/mentoring/)>) have weathered severe recessions, emerging from the chaos in even better financial shape. Our mentors can advise you on how to make the most of a down economy. If you’re interested in talking to a mentor, sign up for a session [here](https://xillionapp.com/product/mentoring/).


Recession checklist — how to prepare for a downturn

Recession Checklist - How to prepare for a downturn?


## Which investment is better?

① 10% per year returns + Complete liquidity (being able to convert the investment into cash)

② 12% per year returns + No liquidity for 3+ years

🕵️‍♀️ I was helping a friend, who is also a Xillion customer, solve some of their financial puzzles when this came up. They were being pitched an investment idea where their funds would be locked for years in return for slightly better returns.

🙋‍♂️ _My suggestion: ① is a much better deal, assuming the same level of risk for both._ Here’s why. 👇

💸 An illiquid asset should give twice as much return as a fully liquid asset such as the S&P 500 index fund (SPY) to be worth investing into.

💲 S&P 500 index long term returns are around 10%. And it is as liquid as cash because you can convert it to cash within hours, with 2-3 taps on your phone.

🏡 The popular illiquid asset most Americans own is a house. Most people buy houses with 80% loan. Real estate in the US appreciates around 4% per year, which is around 20% when you consider:

Purchase Price: $500,000
Down Payment: $100,000 (20%)
Bank Loan: $400,000 (80%)
1-Yr Price Appreciation: $20,000 (around 4% of the total value of the house)
Your Gain: 20% ($20,000 gain on a $100,000 investment)

🏡 Selling a house takes months and requires on average around 100 hours time investment. And you don’t see the money for 3-6 months after you make a decision to sell it.

🏦 A less popular type of illiquid asset is venture capital that also returns around 20% returns over the long term. But your money is usually locked for 7+ years, quite possibly even longer. 🕘

🔑 So, next time someone pitches an investing opportunity to you with returns higher than S&P 500 index, ask them about liquidity. If it’s months or years, ask 20% returns, that is, twice the return of S&P 500.

![Liquidity Other Investment Ideas](https://d391fpr6ao9qle.cloudfront.net/images/blog/liquidity-investment-ideas.webp)

🚀 And here’s a handy chart for you to keep in your back pocket or as your phone background! 🚀


Best funds to maximize 401k returns

Co-Authored and Reviewed by Gagan Sandhu, MBA - The University of Chicago Booth School of Business, CEO of Xillion

Posted on October 30, 2023 . 1 min read