Here are three of the week’s top financial insights, gleaned from across the web:
Dividend Aristocrats are back
Dividend stocks are a surprise winner amid this market turmoil, said Hannah Zhang Institutional Investor. “For the year ended October, the Morningstar Dividend Yield Focus Index returned nearly 2 percent,” compared to a 19.2 percent decline for the broad market. In general, dividend stocks struggle in a rising interest rate environment, making newly issued bonds more attractive. Higher interest rates “also make it harder for companies to pay down debt, let alone maintain healthy dividend payouts.” But neither argument has held up this year. Why? One theory has investors flocking to “defensive stocks” — large, established companies that pay healthy dividends when tech stocks fall.
Wall Street’s worst deal
“If you think you lost a lot of money because your financial advisor was negligent, reckless or dishonest,” you could have a case, Jason Zwieg said in The Wall Street Journal – if you can sue. In most cases, however, investment advisors will have prospective clients sign an agreement that automatically submits disputes to arbitration rather than a court. In an arbitration, “you could find yourself bankrupt trying to recover the money you’ve already lost.” Arbitrators can charge up to $1,950 per hour, and the cost must be prepaid (split 50:50 by the client). An analysis of 21,605 state-registered consulting firms found that 2.3 percent of them had at least one arbitration claim for damages of at least $2,500. However, most advisors are not required to disclose arbitrations in their official brochures.
A budget hack that eats up money
Cash has found new life among young people, Peter Coy said in The New York Times. Jasmine Taylor, 31, has amassed more than 600,000 followers on TikTok (and another 280,000 on Facebook and Instagram), where she “regularly posts videos counting her hands,” her weekly income, which she hopes to receive in cash. She stuffs the money into “clear plastic envelopes in a brightly colored folder” and counts it all up on paper. Their system is called “cash stuffing,” and it has more supporters than meets the eye who say the “tangibility” of cash gives them better control over spending. A survey of 600 young Americans “found that 61 percent said they use some form of cash.” Most, like Taylor, are not “money purists.” She uses credit cards for online purchases, but pays them off in full.
This article was first published in the latest issue of The week Magazine. If you want to read more, you can try six issues of the magazine risk-free here.