What To Teach Your Kids (and Adults) About Investing

Providing for your children’s education is an important part of your financial plan. But, for the most part, that education won’t teach your children very much about basic financial literacy. The money lessons that kids learn from their parents can help to fill that gap and instill habits that will improve their Return on Life.

 

You can teach these three simple financial lessons to your kids with activities that illustrate the basics of financial planning.  And remember the quip, ‘Everything I need to know, I learned in Kindergarten’?  Same goes for the principals of good financial planning, so these lessons are still good for us adults to hear regularly as well.

 

  1. “Pay yourself first.”

 

Many families have a rule that X percent of any money a child earns for chores or receives as a gift has to go into a custodial account. This is a good way of helping kids understand the importance of investing in their futures.

 

However, many parents don’t take the essential next step of showing kids how their savings have grown over time. This can create awkward feelings around money and make it hard for kids to appreciate the end result of their responsible behavior. Just updating a simple spreadsheet together after a big birthday deposit can give kids a greater sense of control and deeper feelings of satisfaction around how they’re handling their money.

 

  1. “Money makes money.”

 

Your kids have probably learned about Ben Franklin flying a kite in a lightning storm. You can teach them Franklin’s lesson about the magic of compound interest: “Money makes money. And the money that money makes, makes money.”

 

Thanks to higher-than-usual interest rates, your child’s custodial savings account might be providing a good lesson on compounding right now. It’s also a great time to shop around for a new savings account as many banks are offering higher rates to entice new customers — especially online.

 

Most financial institutions also allow parents to open custodial brokerage accounts for their children, which can be another option for those special self-payments. Some brokerages also sell shares of companies that kids will recognize, like Disney, as a physical framed certificate. These gifts can help kids connect how they spend their time and money with an understanding of how the stock market creates and compounds wealth for shareholders.

 

Again, check in on these accounts every month or every quarter and show your child how their money is doing. Down periods are an opportunity to introduce the concept of volatility. Even modest losses might sting at first. But seeing their ROI move up and down over the course of a year will eventually help your kids get comfortable with managed risk. And if they start eying their toy shelf for other companies they might want to invest in, you can start talking to them about the power of diversification.

 

  1. “Plan ahead.”

 

Kids often think money works like a vending machine: swipe, tap, punch in some numbers, and what they want magically appears. Instant gratification is such a basic part of their lives that they rarely stop to think about where money comes from or how adults manage it to fulfill so many different needs. They see the end result, but not the plan.

 

Reviewing your monthly budget probably won’t hold your kids’ attention for very long. Instead, create new budgets that provide for both short-term and long-term goals that will interest your kids. Break down the cost of a new bike or video game over a couple weeks of allowance money. Or, show them your saving plan towards a big family vacation to illustrate how your financial plan provides for current needs while also progressing towards bigger goals.

We are always happy to help our clients have life-centered planning conversations with their children, especially older teens who are starting to earn their own money. Give us a call and let’s start your kids on a path towards a healthy relationship with their money.

 

February Market Update

For the investor looking for market details and explanations, this February Market Update article is for you.  Broad market index and tech stock investors were in command throughout January, even as the month ended with a Federal Reserve (Fed) meeting taming some potentially over-enthusiastic March rate cut bulls. 

 

With the tech and major market index rally continuing its run since November, I thought now would be a good time to inform you of the latest developments set to impact Americans in the months ahead. 

 

Major Stock Indexes

 

January was good for long-term investors in U.S. stocks, especially in large tech with AI exposure.  If you haven’t heard of Nvidia before, you will from now on.  Market bulls (ie, investors expecting the market to continue its run upward) were cheering the prospects of a more accommodating Fed in 2024, with the rate decision and Fed statement happening on the last day of the month. 

 

For the month of January, the S&P 500 added 1.59%, the Nasdaq 100 tacked on 1.82%, and the Dow Jones Industrial Average rose by 1.22%.

 

Mixed/Slowing Inflation Signals

 

The overall trend for inflation was mixed in January, even as Consumer Price Index (CPI) data came in a bit hot.

 

CPI: The December Consumer Price Index showed a 0.3% monthly increase in December and a 3.4% increase versus one year ago. Estimates were for a 0.2% monthly gain in December and a 3.2% gain year-over-year. Shelter and services pricing remained sticky.

 

PPI: For December, the Producer Price Index report came in below expectations, indicating mixed signals on the inflation front.

 

According to the report, wholesale prices declined by 0.1% month-over-month in December, lower than the expected gain of 0.1% estimated by Dow Jones economists.

 

PCE: According to the most recent Core Personal Consumption Expenditures (PCE) release, the rate of price increases slowed down as 2023 came to a close. 

 

The Fed’s preferred inflation indicator showed that prices were higher by 0.2% month-over-month in December and by 2.9% year-over-year. Dow Jones economists had expected respective increases of 0.2% and 3%. However, digging a little deeper and looking at the three and six-month averages of Core PCE on an annualized basis, we see it running under 2% (note: the Fed’s Target is 2%). This data, noted by former Vice Chair of the Federal Reserve Lael Brainard and provided by the Bureau of Economic Analysis, has inflation watchers cheering the current market environment.

 

Fed Put?

 

In plain English, a “Fed put” means that the Fed is standing by to change policy if needed, should the equity markets experience declines.  At present, it feels like there are the makings of a Fed put under the market. If storm clouds arise, the market is expecting the Fed to “come to the rescue” with rate cuts in 2024 if needed.  The market was expecting six rate cuts in 2024 before the January Fed meeting, even though the economy has been performing well as of late. This outlook is not the norm. Historically, rate cuts are seen in struggling or downtrodden economies that need stimulation.  The January Fed meeting tempered expectations for a March rate cut, with probabilities declining from 50% to 35.5% on January 31. However, it is still early in this election year, so pay attention.

 

This idea of a Fed put is a concept, not a guarantee, and seemed to be on the mind of many market participants at the start of February, indicating that the collective market mindset could be that any pullbacks may be short-lived.

 

Treasury Yields Steady in January

 

The widely monitored 10-year Treasury note yield was close to unchanged for the month of January, closing the month near 3.966% — about 10 basis points higher than December’s closing level near 3.865%.  This is the yield most closely tied to the movement of mortgage rates, so it is watched closely.  January marks two consecutive monthly closes below 4.00% in the 10-year yield.  The steadiness in rates is good news for sidelined prospective mortgage borrowers and great news for long-term investors in U.S. equities.

 

Fed Rate Decision

 

The last day of January gave us the first Fed meeting of 2024, as the Fed left interest rates unchanged in line with market expectations.  There were some changes to the Fed’s statement, however, as Federal Reserve Chair Jerome Powell seemed to want to tame the market’s excitement for a March rate cut.  “I don’t think it’s likely that the committee will reach a level of confidence by the time of the March meeting to cut rates,” Powell said.  The verbal statement indicating that a March rate cut is not likely poured some water on the fire of potentially overly enthusiastic stock market bulls as the major averages pulled back during and after Powell’s commentary.  Powell did signal rate cuts at some point in 2024, however.  “It will likely be appropriate to begin dialing back policy restraint at some point this year,” said Powell.

 

Pretty vague, huh?  Fed-speak is one of the hardest languages to learn!

 

Consumer & Employment Strong

 

Consumer health metrics remained strong during January, even as many analysts expect the consumer to “tap out”.  At the same time, labor market data exceeded expectations for December, showing 216,000 jobs created. Government jobs and health-care-related fields led the way.

 

Starting the month of February, the latest employment report blew away all expectations, showing 353,000 jobs created in January versus 185,000 estimates by Dow Jones. The labor market continues to surprise to the upside, and the market reaction was an interesting one.

 

January Labor Data Market Reaction

 

While the massively better-than-expected January jobs data indicates a stronger economy, it also shows that the economy may still be running hotter than the Fed wants to see. This reinforces the logical probability that a March rate cut could be off the table.

 

Major U.S. stock indexes didn’t seem to mind, though, as they cheered the data by trading to the upside on the day of. The jobs report was released the morning after positive earnings results from Meta (Facebook), Microsoft, and Amazon. So, perhaps this earnings effect outshined the March rate cut odds everyone seemed to be so fixated upon just a day before.

 

The probability for a March 25-basis-point cut was all over the place at the end of January and beginning of February, resting at a 20% chance on February 1 after sitting at a 46.2% chance on January 26th, according to the CME FedWatch Tool.

 

Is the economy still too hot? What do the continuing and massive upside surprises in the job market mean for inflation?  This is interesting data for short term speculation, but as you have heard many times in the past, short term data is not very helpful in making long term decisions with your investments.  Pay attention to these data points, if you find it interesting, but don’t let any of it sway you from your financial planning course.

 

Q1 Letter to Clients

If there’s a message to take from 2023 markets, it is this: Timeless wisdom best informs timely decisions.

Here’s how Morgan Housel describes the same in his new book, “Same as Ever.”

“The typical attempt to clear up an uncertain future is to gaze further and squint harder—to forecast with more precision, more data, and more intelligence. Far more effective is to do the opposite: Look backward, and be broad. Rather than attempting to figure out little ways the future might change, study the big things the past has never avoided.”

Following are a few timeless tenets that offer timely investment insights for the year ahead.

There’s Never a Good Time to Time the Market

Perhaps most obviously, last year demonstrated how randomly—and rapidly—markets can move. As The Wall Street Journal reported at year-end:

“Almost no one thought 2023 would be a blockbuster year for stocks. They could hardly have been more wrong.”

Another financial journal observed:

“What was supposed to go up went down, or listed sideways, and what was supposed to go down went up — and up and up. The S&P 500 climbed more than 20% and the Nasdaq 100 soared over 50%, the biggest annual gain since the go-go days of the dot-com boom. … ‘I’ve never seen the consensus as wrong as it was in 2023,’ said Andrew Pease, the chief investment strategist at Russell Investments.”

Many financial pundits offered elaborate explanations for the year’s fortunes, and why (in hindsight) their projections were so far off. While their reasons may be accurate, the implication is, were it not for this, that, or the other thing, their forecasts would have been correct.

The problem is, there’s almost always “this, that, or the other thing” going on in this big, busy world. Thus, it really should come as no surprise that routine surprises regularly randomize the market’s next moves.

We’ve known this for years—since at least 1973, when Burton Malkiel published the first edition of “A Random Walk Down Wall Street.” Even after 50 years, Malkiel’s message represents one of the most timeless truths explaining why we don’t try to time market trends.

Beware of Catchy Catchphrases

In 2023, just seven stocks within the S&P 500 Index explained almost two-thirds of the index’s total annual gains. Their striking performance scored them the catchy title, “Magnificent Seven.”

What should we expect for this star lineup in the coming year? Search today’s popular press, and you’ll find timely tips galore on whether to bulk up on more magnificence, or sell while the selling is good. Forecasts hinge on the usual suspects: Whether inflation rises or falls, a recession lands or recedes, technologies advance or retreat, and so on.

Taking a more timeless view, we would suggest being wary of celebrated stocks bearing trendy titles. Chasing after stellar returns with their own nicknames may work for a while. But eventually, one of those “surprises” tends to come along, turning once-hot stocks into cold plays.

Which brings us to our next timeless tenet.

Diversification Is Perennially Prudent

Viewing 2023 up close, there may be a temptation to chase after the market’s recent winning streak, bulking up on more of that which has been so pleasantly surprising of late.

Zooming out, our perspective remains unchanged: Maintain a globally diversified portfolio, tailored for your needs. Treat an allocation to the Magnificent Seven (and the next trend, and the one after that) as one of many “pistons” powering the market’s perennial growth. But pair it with effective diversification, to temper the inevitable upsets that await us in the year(s) ahead.

In this spirit, I wish you a well-diversified investment portfolio in 2024, along with abundant concentrations of health, happiness, and harmonious well-being for you and yours.

 

 

4 Financial Best Practices for Year-End 2023

Scan the financial headlines these days, and you’ll see plenty of potential action items vying for your year-end attention. Some may be particular to 2023. Others are timeless traditions. If your wealth were a garden, which actions would actually deserve your attention? Here are our four favorite items worth tending to as 2024 approaches … plus a thoughtful reflection on how to make the most of the remaining year.  

 

1.     Feed Your Cash Reserves

With basic savings accounts currently offering 5%+ annual interest rates, your fallow cash is finally able to earn a nice little bit while it sits. Sweet! Two thoughts here:

Mind Where You’ve Stashed Your Cash: If your spending money is still sitting in low- or no-interest accounts, consider taking advantage of the attractive rates available in basic money market accounts, or similar savings vehicles such as short-term CDs, or U.S. Series I Saving Bonds (“I Bonds”). Your cash savings typically includes money you intend to spend within the next year or so, as well as your emergency, “rainy day” reserves. (Note: I Bonds require you to hold them for at least a year.)

Put Your Cash in Context: While current rates across many savings accounts are appealing, don’t let this distract you from your greater investment goals. Even at today’s higher rates, your cash reserves are eventually expected to lose their spending power in the face of inflation. Today’s rates don’t eliminate this issue … remember, inflation is also on the high side, so that 5% isn’t as amazing as it may seem. Once you’ve got your cash stashed in those high-interest savings accounts, we believe you’re better off allocating your remaining assets into your investment portfolio—and leaving the dollars there for pursuing your long game.  

 

2.     Prune Your Portfolio

While we don’t advocate using your investment reserves to chase money market rates, there are still plenty of other actions you can take to maintain a tidy portfolio mix. For this, it’s prudent to perform an annual review of how your proverbial garden is growing. Year-end is as good a milestone as any for this activity. For example, you can:

Rebalance: In 2023, relatively strong year-to-date stock returns may warrant rebalancing back to plan, especially if you can do so within your tax-sheltered accounts.

Relocate: With your annual earnings coming into focus, you may wish to shift some of your investments from taxable to tax-sheltered accounts, such as traditional or Roth IRAs, HSAs, and 529 College Savings Plans. For many of these, you have until next April 15, 2024 to make your 2023 contributions. But you don’t have to wait if the assets are available today, and it otherwise makes tax-wise sense.

Revise: As you rebalance, relocate, or add new holdings according to plan, you may also be able to take advantage of the latest science-based ETF solutions.  We’re not necessarily suggesting major overhauls, especially where embedded taxable gains may negate the benefits of a new offering. But as you’re reallocating or adding new assets anyway, it’s worth noting there may be new, potentially improved resources available.

Redirect: Year-end can also be a great time to redirect excess wealth toward personal or charitable giving. Whether directly or through a Donor Advised Fund, you can donate highly appreciated investments out of your taxable accounts and into worthy causes. You stand to reduce current and future taxes, and your recipients get to put the assets to work right away. This can be a slam dunk strategy to avoid an embedded capital gain and get a tax deduction for the full value going to the charity of your choice.  If you have appreciated assets, considering gifting these and holding on to your cash.

 

3.     Train Those Taxes

Speaking of taxes, there are always plenty of ways to manage your current and lifetime tax burdens—especially as your financial numbers and various tax-related deadlines come into focus toward year-end. For example:

RMDs and QCDs: Retirees and IRA inheritors should continue making any obligatory Required Minimum Distributions (RMDs) out of their IRAs and similar tax-sheltered accounts. With the 2022 Secure Act 2.0, the penalty for missing an RMD will no longer exceed 25% of any underpayment, rather than the former 50%. But even 25% is a painful penalty if you miss the December 31 deadline. If you’re charitably inclined, you may prefer to make a year-end Qualified Charitable Distribution (QCD), to offset or potentially eliminate your RMD burden.

Harvesting Losses … and Gains: Depending on market conditions and your own portfolio, there may still be opportunities to perform some tax-loss harvesting in 2023, to offset current or future taxable gains from your account. As long as long-term capital gains rates remain in the relatively low range of 0%–20%, tax-gain harvesting might be of interest as well. Work with your tax-planning team to determine what makes sense for you.

Keeping an Eye on the 2025 Sunset: Nobody can predict what the future holds. But if Congress does not act, a number of tax-friendly 2017 Tax Cuts and Jobs Act provisions are set to sunset on December 31, 2025. If they do, we might experience higher ordinary income and capital gains tax rates after that. Let’s be clear: A lot could change before then, so we’re not necessarily suggesting you shape all your plans around this one potential future. However, if it’s in your overall best interests to engage in various taxable transactions anyway, 2023 may be a relatively tax-friendly year in which to complete them. Examples include doing a Roth conversion, harvesting long-term capital gains, taking extra retirement plan withdrawals, exercising taxable stock options, gifting to loved ones, and more.

 

4.     Weed Out Your To-Do List

I love this one…it is at the top of my improvement goals.  Doing less instead of staying busy with more.  This year, we’re intentionally keeping our list of year-end financial best practices on the short side. Not for lack of ideas, mind you; there are plenty more we could cover.

But consider these words of wisdom from Atomic Habits author James Clear:

“Instead of asking yourself, ‘What should I do first?’ Try asking, ‘What should I neglect first?’ Trim, edit, cull. Make space for better performance.”

JamesClear.com

 

Let’s combine Clear’s tip with sentiments from a Farnam Street piece, “How to Think Better.” Here, a Stanford University study has suggested that multitasking may not only make it harder for us to do our best thinking, it may impair our efforts. 

“The best way to improve your ability to think is to spend large chunks of time thinking. … Good decision-makers understand a simple truth: you can’t make good decisions without good thinking, and good thinking requires time.”

Farnam Street

 

In short, how do you really want to spend the rest of your year? Instead of trying to tackle everything at once, why not pick your favorite, most applicable best practice out of our short list of favorites? Take the time to think it through. Maybe save the rest for some other time.

Is the Debt Ceiling Bringing You Down?

What does the U.S. debt ceiling debate really means for you? I am getting this question regularly, which means it is probably on the minds of many more folks.  As potential threats loom large, we’re seeing articles in abundance, explaining where we’re at, how we got here, and what to expect next.

We wouldn’t be human if we didn’t share in your frustration over the maddening lack of resolution to date. It’s stressful to watch huge, consequential events unfolding, over which we have no control. And who needs more stress in their life?

Which is why we encourage you to think of your investments as a bright spot of relief in an otherwise unmanageable world. In the face of everything we cannot control, the one place you can call your own shots is within your well-structured, globally diversified investment portfolio.

And here’s more good news: As an investor, you don’t really need to know that much about the real-time details of the debt ceiling negotiations. Instead, as with any other breaking news, a healthy degree of arm’s length disinterest will likely serve you best, especially if you might otherwise respond to the current fever pitch of news that’s news because it’s in the news.

To illustrate, let’s look behind three different doors to consider your most advisable investment strategy under various outcomes.


Door #1: Opportunistic Agreement

With history as our guide, it is perhaps most reasonable to expect today’s political brinksmanship-as-usual will lead to some form of resolution, probably arriving at the last possible moment. This is exactly how the debt ceiling debate has played out on multiple occasions, with each side of the isle using it as an opportunity to score new political points, and there is no reason to think this time will be any different.  Then what? Most likely, the “fix” will be partial and imperfect, and the hand-wringing will continue apace over the next challenges inherent in the latest patch.  The self-preserving nature of the Congressional representative role seems to always come through to make sure the economy doesn’t screech to a halt.  The talking points might shift, but markets will remain as volatile and unpredictable as ever. In this most likely scenario, we would advise …

Staying invested in your carefully constructed, globally diversified investment portfolio, structured for your personal financial goals and risk tolerances.


Door #2: Meltdown

What if negotiations in Washington fail? What if we experience U.S. credit rating downgrades, debt defaults, and unpaid Social Security benefits (to name a few of the uglier possibilities)? In a worst-case scenario, the U.S. dollar could lose its global currency status, a position it’s held since before most of us were born. What then?

If a worse- or worst-case scenario occurs, our marvelously efficient markets would once again respond by pricing in the good, bad, and ugly news well before we can successfully trade on it. Global diversification would be as important, if not more critical. Selling in a panic as markets adjust to the worsening news would remain as ill-advised as ever. In other words, your advisable course would remain …

Staying invested in your carefully constructed, globally diversified investment portfolio, structured for your personal financial goals and risk tolerances.


Door #3: Proactive, Compromising Agreement

Last, and probably least likely, what if Washington defies our doubts, and achieves a happy and timely debt ceiling resolution, with little to no harm done? Hey, anything is possible. In this best-case scenario, the breaking news would be better than most of us expect, so markets would likely respond at least briefly with better-than-expected returns, rewarding us for staying put. At the same time, just in case the next bit of news were to disappoint, or even be less exciting than expected, we’d want to temper any concentrated market exposures by, you guessed it …

Staying invested in your carefully constructed, globally diversified investment portfolio, structured for your personal financial goals and risk tolerances.

This is by no means a perfect hedge against black swan events, but it’s a good start and would allow for some long-term benefits by taking advantage of stocks in decline through strategic rebalancing.  We would be happy to offer more insights and analysis about the debt ceiling if you are interested in learning more. We’re also here to review your portfolio mix any time your personal circumstances may warrant a change. Otherwise, guess what we would advise you to do while the debt crisis continues? If you’re not sure, please give us a call. We always enjoy hearing from you!

Fee Reductions

Happy New Year!  I hope this message finds you well after enjoying the holidays.  I just have a quick note to share to start off our new year.  A longer post will be coming later this week as our quarterly letter to clients.

2020 was a tough year on many fronts, but one thing it taught us is that market performance in the short term is wildly unpredictable.  In addition, short-term performance will likely have a small impact, if any, on your probability of success with your own financial goals.  So it is really not worth your mental energy to ever spend a moment worrying about your short term investment performance.   Plus, none of us really have any control over investment performance.

What do we have control over?  From a planning and investment standpoint, we discuss fees quite often, and look to reduce this financial headwind where possible because this is something we can control.  Most of our clients have Dimensional Funds as core holdings in their portfolio, so we were happy to hear this fall that they announced that fees would be reduced across a broad range of their equity funds effective February 2021, representing an approximate 15% reduction on an asset-weighted basis.  They were already significantly lower than the average mutual fund expense ratio, so this is a great move in the right direction.  It is exciting because it means that, all else equal, our clients will get to keep more of the investment’s returns which will have a compounding effect on wealth over the years.

Reducing fees is only one way to increase your wealth over time.  Let us know if you would like to discuss the other planning tools that can be used to increase wealth as well.

Watch out for scams!

Most North Carolinian’s are working hard to take care of their families and help their neighbors in the current crisis.  Nevertheless, criminals seek to exploit the Covid-19 pandemic to further their scams.

We received the notice below from the North Carolina Secretary of State warning residents to be wary, and we want to share it with you.  If you or someone you care about comes across something questionable related to investing or charitable activities, please don’t hesitate to call. We can help you check it out.  PLC Wealth is here to help you and answer any questions you have.

Take care, and thank you for your business with PLC Wealth.”

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NC Secretary of State Offers Tips to Avoid COVID-19 Related Investment Scams

NC Secretary of State Elaine Marshall is cautioning investors that the ongoing Coronavirus pandemic will likely spark a surge of investment fraud.

 

“Sadly, scam artists will seek to exploit rising concerns about COVID-19 to draw people into investment traps,” warned Marshall. “Fraudsters often use the day’s headlines in their pitches, so expect to see them prey on the fear surrounding the unfolding Coronavirus pandemic and recent economic developments to promote sham investments.”

 

The North American Securities Administrators Association (NASAA), of which the NC Secretary of State’s Office is a member, is joining state regulators in offering tips to keep investors safe in these uncertain times.

 

Bad actors may develop schemes falsely purporting to raise capital for companies manufacturing surgical masks and gowns, producing ventilators, distributing small-molecule drugs and other preventative pharmaceuticals, or manufacturing vaccines and miracle cures.

 

Scammers also will seek to take advantage of concerns with the volatility in the securities markets to promote “safe” investments with “guaranteed returns” including investments tied to gold, silver and other commodities; oil and gas; and real estate. Investors also can expect to see schemes touting quickly earned guaranteed returns targeting seniors worried about economic disruptions and losses to their retirement portfolios.

 

“From guarantees of high returns without risk to promises of a miracle cures, if it sounds too good to be true, it probably is,” warned Secretary Marshall. “I urge North Carolinians to follow these tips to help protect your financial and physical health as you navigate these uncertain times.”

 

Investors are encouraged to call the NC Investor Hotline at (800) 688-4507 or email us at before signing over money in any investment opportunity. If you suspect an investment opportunity is fraudulent, you may report it at www.sosnc.gov. You can also find a wealth of investor education material at www.sosnc.gov/divisions/securities.

 

Schemes to Watch for: 

 

Private placements and off-market securities. Scammers will take advantage of concerns with the regulated securities market to promote off-market private deals. These schemes pose a threat to retail investors because private securities transactions are not subject to review by federal or state regulators. Retail investors must continue to investigate before they invest in private offerings and independently verify the facts for themselves.

 

Gold, silver and other commodities. Scammers may also take advantage of the decline in the public securities markets by selling fraudulent investments in gold, silver and other commodities not tied to the stock market. These assets are often promoted as “safe” or “guaranteed” means of hedging against inflation and mitigating systematic risks. However, scammers may conceal hidden fees and mark-ups, and the illiquidity of the assets that may prevent retail investors from selling the assets for fair market value. There are no “can’t miss” opportunities.

 

Recovery schemes. Retail investors should be wary of buy-low sell-high recovery schemes. For example, scammers will begin promoting investments tied to oil and gas, encouraging investors to purchase working or direct interests now so they can recognize significant gains after the price of oil recovers. Scammers will also begin selling equity at a discount, promising the value of the investments will significantly increase when the markets strengthen. Never lose sight of the risks associated with any prediction of future performance and remember that market gains may not correlate with the profitability of their investments.

 

Get-rich-quick schemes. Scammers will capitalize on the increased unemployment rate with false promises of quick guaranteed returns that can be used to pay for rent, utilities or other living expenses.

 

Replacement and swap schemes. Investors should be wary of any unlicensed person encouraging them to liquidate their investments and use the proceeds to invest in more stable, more profitable products. Investors may pay considerable fees when liquidating investments, and the new products often fail to provide the promised stability or profitability. Advisors may need to be registered before promoting these transactions and legally required to disclose hidden fees, mark-ups and other costs.

 

Real estate schemes. Real estate investments may be appealing because the real estate market has been strong and low interest rates have increased demand. Scammers often promote these schemes as safe and secure, claiming real estate can be sold and the proceeds can be used to cover any losses. However, real estate investments present significant risks, and changes to the economy and the real estate market may negatively impact the performance of these products.

 

How to Protect Yourself:

 

The NC Secretary of State’s Securities Division offers this guidance to help investors avoid investment scams:

 

Ask before you invest. Investors in North Carolina should call the NC Investor Hotline at (800) 688-4507 or email us at to find out if the salesperson and the investment opportunity itself are properly registered. Investors also can check the SEC’s Investment Adviser Public Disclosure database and FINRA’s BrokerCheck. Avoid doing business with anyone who is not properly licensed. If you suspect fraud, please report it to us at www.sosnc.gov.

 

Don’t get hooked by a phishing scam. Phishing scams may be perpetrated by those claiming an association with the Centers for Disease Control and Prevention, the World Health Organization, or by individuals claiming to offer medical advice or services. Watch out for con artists offering “opportunities” in research and development. These scams may even be perpetrated by people impersonating government personnel, spoofing their email addresses and encouraging victims to click links or open malicious attachments. These emails may look real and sound good, but any unsolicited emails with attachments and web links may be directing you to dangerous websites and malicious attachments that can steal information from your computer, lock it up for ransom, or steal your identity. When in doubt, don’t click.

 

There are no miracle cures. Scientists and medical professionals have yet to discover a medical breakthrough or develop a vaccine or cure for COVID-19. Don’t fall for online pharmacies claiming to offer vaccines and don’t send money to anyone claiming they can prevent COVID-19, through a vaccine or other preventive medicine.

 

Avoid fraudulent charity schemes. White-collar criminals may pose as charities soliciting money for those affected by COVID-19. Fake charities will frequently use sound alike names that mimic established charities. Rather than clicking on the links or responding to the email addresses or phone numbers provided in a text, email or social media post, do an internet search to find the charity’s website and reach out to them directly. A link in an unsolicited email could send you to an impostor site. Give generously but wisely to make sure your help is going to those who need it.

 

Be wary of schemes tied to government assistance or economic relief. The federal government may send checks to the public as part of an economic stimulus effort. It will not, however, require the prepayment of fees, taxes on the income, the advance payment of a processing fee or any other type of charge. Anyone who demands prepayment will almost certainly steal your money. And don’t give out or verify any personal information. Government officials already have your information. No federal or state government agency will call you and ask for personal