UPDATE

🌤️ Happy Tuesday

Good morning. We hope last week was productive for you and, whatever your personal and professional New Year’s goals are, you’ve been able to take steps to achieve them.

The arctic blast affecting much of the midwest and central US last week seems to be continuing. Cities like New York and Chicago all the way down to Dallas are set to have temperatures near freezing throughout the week, and even as late as next Monday.

In the case of cold temperatures, ice, heavy rains, or just general extreme weather conditions, remember to take precautions and take care of yourself 🙌

Read time: 3 minutes

WEEK IN REVIEW

📈 Market Performance

S&P 500 (5-day), via Google Finance

We’re officially in unchartered territory in terms of the S&P 500, and that’s a good thing. On Friday, the index broke its closing record after steady growth throughout the week, which helped propel the S&P past the record-breaking line. 

The index opened at 4,772.35 points on Tuesday morning and increased about 1.64% throughout the week until yesterday’s close of 4,850.43. Reaching a new milestone is good news, but seeing that progress continue as January comes to a close is certainly reassuring.

• This steady growth illustrates that the index has been increasing with little volatility throughout this current rally. Increases like this may happen over a few weeks or months but are much less likely to crash than if the growth was from a rapid spike.

🔐 How Does This Affect Different Investors?

Looking Down Wall Street by Ken Lund, via Flickr

We’ve been talking recently about how the S&P 500 is one of the primary indexes that make up Americans’ retirement accounts. Whether you have Fidelity, Charles Schwab, Vanguard, or another investment service, your retirement funds likely track the S&P in some shape or form. 

• Other funds may be mutual funds that invest in a series of government or corporate bonds, while some funds even pull out the largest companies from the S&P and put them in a large-cap fund. 

With the market reaching new heights, it’s around this time that many investors will look to start trimming down shares of their portfolios to liquidate these gains. However, with long-term accounts like 401(k)s and IRAs, this strategy doesn't play out the same. 

These accounts have special tax privileges and are designed specifically for retirement, which is why there are penalties for taking funds out early. 

• If you’re looking to take advantage of both long-term growth for retirement and short-term growth like what we’re seeing right now, consider opening a separate brokerage account. You could even use the same investment service as your retirement account. 

Psst, parents and teens: check out this special offer from Fidelity that earns your teen $50 once you open a youth account!

ENERGY & COMMODITIES

🔥 Need For Heating Heats Up Gas Prices

Shell Gas Station by Mike Mozart, via Wikimedia Commons

As of yesterday, the AAA gas prices index reports that the average price for a gallon of regular gas is $3.077. That’s up from last week’s average of $3.068, but marginally down from the weekend average of $3.078 (as of Sunday night).

It’s hard to pinpoint exactly where the almost one-cent increase could be coming from. Historically, gas prices are lower in the winter, with the lowest prices being somewhere in early February. There may be larger trends at play like ongoing conflicts in Eastern Europe and the Middle East which can put a strain on oil supply chains.

At the same time, any potential interruptions in refinery operations caused by the arctic blast in the US could quickly be reflected at the pump.

Gas Per Gallon Chart, via AAA

MARK IT. EXPLAINED

📎 Index Funds vs. Stocks (Repost)

Nasdaq, via Wikimedia Commons

While stocks might be easier to value because of their quarterly reports and cash flow statements, the majority of Americans don't pick and choose stocks. Instead, many choose the set-it-and-forget-it approach to investing. This is most commonly done with index funds or exchange-traded funds (ETFs).

• These usually gather anywhere from 20 to 500 companies in one tradable asset. This way, investors might be able to purchase a single asset that has a percentage of each company on the S&P 500 within it. This is ideal for investments like 401(k)s or pensions because these assets perfectly track the market over the long run.

However, those looking to trade within a year to five years might not see huge benefits from buying an index fund because of the risks of over-diversification. Essentially, over-diversification means having too much money spread out over too many stocks, which lessens the profit while not necessarily decreasing any risk.

• Diversification to a degree is one of the most beneficial and time-tested ways of bulletproofing your portfolio, but as mentioned above, too much diversification doesn't provide much benefit.

In an ideal world, those investments you wish to hold for an extremely long amount of time (say 20-30 years in an IRA) would be index funds that track the market and its average 7 to 10% increase per year, while investments that you hope to pay off in the medium term future would be stock-based.

Remember, stocks on average are always more volatile and risky than index funds. Please do your research before making any investing decisions.

ONE MORE THING

🤝 Keep in Touch

• For general announcements or updates on what we're working on, follow Abbas on Twitter 👉 @RealAbbasAkhtar

• Also, we want to hear your feedback! Send any comments or suggestions to [email protected]

Thanks again for reading!

Nothing MARK IT. publishes constitutes professional and/or financial advice, nor does any information published by MARK IT. constitute a comprehensive or complete statement of the matters discussed.