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These are the top Money and investment trends to watch out for in 2020 – USA TODAY

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All in all, 2019 was a pretty strong year for the economy.

Job growth was brisk, with both inflation and interest rates low. Economic growth was decent as recessionary fears have abated. Consumers remain confident, highlighted by solid holiday sales.

But this doesn’t mean everyone is prospering. Here are some money and finance trends to watch for in the coming year:

Continuing debt overhang

Now 10 years into the economic recovery, plenty of Americans are only treading water. Pay raises have been spotty, and many people continue to live paycheck to paycheck. Too many households still lack emergency funds, let alone long-term investments.

Some 82% of people who participated in a survey released this month by Fidelity Investments said they’re in a similar or better financial position compared to last year. Yet in the same poll, respondents revealed continuing anxiety about making ends meet and keeping debts under control.

Dealing with unexpected expenses was the top concern among respondents heading into the new year. Another was keeping a lid on debts. The top three New Year’s resolutions cited by respondents are to save more, pay down debt and spend less.

Many individuals still aren’t prepared to meet unforeseen money pressures.

“A large portion of the people I talk to in a given year find that their financial troubles come in steps that cause significant hardship: medical debt, a job loss, a major car repair, a family emergency,” said Jonathan Walker, executive director of the debt-focused Elevate Center for the New Middle Class in Fort Worth, Texas.

Yet many people just keep adding debt until the hurdles eventually become too high, with unexpected challenges finally pushing them over the edge, he said.

Retirement help coming

Plenty of Americans are unprepared for retirement. Reasons include not saving enough, making premature withdrawals and not having access to 401(k) plans through work.

That could start to change now that the SECURE Act, with broad bipartisan support, was passed by the House of Representatives and the Senate this month as part of a federal spending bill.

Among other things, the legislation would expand access to retirement-savings programs for part-time workers and people employed by small businesses, by providing employer incentives and making it easier for small businesses to band together to create 401(k) plans and benefit from economies of scale.

In addition, it would make annuities available in workplace 401(k) plans, providing investors with a way to lock in guaranteed income for life.

The legislation also would tweak Individual Retirement Accounts. Seniors with traditional IRAs who don’t need to spend their money immediately could delay required minimum distributions until age 72, up from 70½ currently. Also, older workers could continue to sock away money into IRAs. Currently, contributions must stop after age 70½.

The IRA changes reflect “the reality that people are living longer today,” said Paul Schott Stevens, president and CEO of the Investment Company Institute.

Good investment results still likely

It might be hard for the stock market to repeat a year like 2019, with the Dow Jones Industrial Average and other barometers up more than 25% through mid-December. But solid economic growth, low interest rates and other factors create a backdrop where the market’s positive momentum could persist.

“The remarkable longevity of the (economic) expansion and a continuation of low inflation and unemployment are all significant positives,” said J.P. Morgan’s markets insight team in a December forecast.

A possible slowdown ahead in economic growth, and rising wages, could put pressure on corporate profits, which could hamper stock prices, the forecast added. So could the threat of higher taxes, more trade tensions and a bloated federal budget deficit expected to top $1 trillion in the current fiscal year.

But while J.P. Morgan sees risks rising, it still expects the stock market to “grind higher” in 2020.

Incidentally, years when presidential elections are held tend to be favorable for stocks, and 2020 falls into that category. The broad market as represented by the Standard & Poor’s 500 has advanced in 19 of the past 23 presidential-election years, dating to the 1920s.

The country might be sharply divided when it comes to politics, but elections also tend to bring a lot of excitement and even optimism.

Rhetoric but little action on taxes

It’s unlikely that we’ll see passage of a major federal tax bill in the coming year — not with a deeply divided Congress in an election year. But Americans will be hearing a lot more about tax proposals as the campaign swings into high gear.

Most proposed changes are coming from Democratic presidential contenders. These include calls to raise tax rates for the highest-earning Americans, expand the earned income tax credit, boost the amount of personal income subject to Social Security taxes (from a current cap at $132,900) and jack up tax rates on dividends and capital gains. 

Most radical are the proposals to tax the wealthiest Americans on their net worth, as advanced by Democratic presidential candidates Bernie Sanders, Elizabeth Warren and others.

To help people keep track of these ideas, the Tax Foundation has compiled a tax-plan summary for the leading presidential contenders here or at taxfoundation.org.

Could these proposals become law after the election? it would be a stretch for the most extreme changes, but you never know.

Most respondents in a December survey by the Pew Research Center said they felt today’s economy has mainly benefited the wealthy. A majority of respondents cited poor people, those lacking college degrees, the elderly, young adults and the middle class as groups now being hurt.

Broader help from employers

Workers — especially those at larger corporations — probably can look forward to more benefits and perks in the coming year beyond just paychecks, vacation/sick days, health insurance and perhaps a 401(k) savings plan.

Financial and health wellness programs continue to gain appeal, said Fidelity Investments in a recent review of workplace benefits. These include programs to help with mental and substance abuse as well as deal with student loans, budgeting and other financial pressures.

In part, these efforts address productivity and absenteeism: If companies can help their employees deal with personal problems, they could develop into more reliable and productive workers.

Fidelity also sees a trend toward greater social responsibility in the workplace including more company subsidies for charitable giving and volunteering, with more flexible work schedules and work spaces.

As for older workers, Fidelity expects to see more companies assist their employees and recent retirees in making retirement-plan withdrawals.

Until now, the focus has been in helping workers accumulate savings in 401(k)-type programs. Now, more employers apparently feel responsible for helping them pull out assets in a smart, efficient manner.

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Hutchins Roundup: Small businesses, foreign investment, and more – Brookings Institution

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Studies in this week’s Hutchins Roundup find nearly 40% of small businesses reported access to capital a major COVID-19 challenge, foreign investment leads to technology spillovers in investors’ countries, and more.

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In an April survey of more than 66,000 small business owners and employees, conducted via Facebook, Georgij Alekseev of NYU’s Stern School and co-authors explore the impact of the COVID-19 shock on operations, employment, and financing. The biggest challenge—reported by nearly 40% of businesses—was access to capital. While 78% of businesses were concerned about their cash flows for the spring, only a quarter could access formal sources of financing, and most relied on informal or personal sources of saving. Access to loan and credit guarantees, alongside salary subsidies and tax deferrals, were the most popular policy proposals among respondents. The authors note pervasive gender disparities in the responses. Older and larger, but also majority-male, businesses were more likely to be open and more optimistic about their survival. Female employers and employees reported greater effects of the pandemic on their work, particularly with regards to balancing caretaking and household responsibilities, and women were more likely to quit their jobs in response to school closures.

Foreign venture capital investment can help otherwise unfunded domestic firms succeed—but when the technologies are in critical areas such as artificial intelligence, fintech, and robotics, foreign investment has the potential to launch the U.S. into economically and militarily detrimental arms races, says Ufuk Akcigit of the University of Chicago and co-authors. Using data from foreign investments in U.S. companies between 1976 and 2015, the authors find that when there is foreign investment in a U.S. company, the investor’s country sees an increase in patent applications in similar technology and in citations of the U.S. start-ups’ patents. These “knowledge flows” are larger in patents subject to government secrecy orders. Moreover, the larger the technology gap between the U.S. and a given country, the more that country invests in the technology. But foreign investment also is associated with more patents generated by the U.S. startup. The authors conclude that, when weighing the merits of foreign investment, the U.S. government should consider both the benefits to U.S. innovation and the potential economic and military consequences of technology spillovers to other countries.

Keith A. Bailey and James R. Spletzer of the Census Bureau use the Longitudinal Employer-Household Dynamics (LEHD) survey data to measure multiple jobholding and find that 7.8% of workers in the U.S. are multiple jobholders and this rate has been trending upward over the past 20 years. The estimate is about 2 percentage points higher than the widely cited Current Population Survey (CPS) measure. The new measure counts individuals as multiple jobholders if, based on unemployment insurance records in the LEHD, they held at least one job consistently over three quarters and held one or more additional jobs within the same period; the CPS relies on a combination of survey responses and    point in time evidence of wages. The authors note that while differences in definitions and reference periods (quarterly vs. monthly) explain the different levels of multiple jobholding, they do not explain the different trends. Moreover, the new measure is strongly cyclical, increasing during expansions and decreasing in contractions; the CPS-based measure is not cyclical.  Using the new data, the authors find women and younger people are more likely to hold multiple jobs. In addition, they find that multiple job holding occurs across income groups and second or third jobs account for 25% or more of multiple jobholders’ incomes.

Federal Debt Held by the Public as a Percentage of GDP

Source: Congressional Budget Office

“I think financial conditions are very accommodative, unless you’re a small business or mid-size business in a person-to-person contact industry. I think we could do more. I think we should continue to look at whether there’s more that can be done there. The challenge on that is, we’re lenders not spenders. If we’re going to do more on, say, Main Street to make that a more accessible program, that’s more of a decision for Treasury and Congress than the Fed, because it’s going to involve taking greater risk of losses. But I do think looking at that will be appropriate,” says Robert Kaplan, President of the Federal Reserve Bank of Dallas.

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Nova Scotia investment advisor not to blame for losses, says lawyer – Wealth Professional

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But Chris Robinson, the defence attorney to Saturley, said that the 37 investors who are suing his client were not blind to the risks of the strategies, reported the Chronicle Herald. Robinson pointed to the fact that the largest loss incurred by a single family among the investors was $8 million, suggesting the plaintiffs are not financially naïve people.

He added that fewer than 10 of the plaintiffs have been with Saturley for less than a decade; over half have been his clients for at least 15 years. Each client, Robinson said, signed an investment policy statement, a discretionary trading agreement, and a margin account agreement when they first started working with Saturley.

“Every single one of those clients had as their goal capital appreciation, income generation,” Robinson told the Herald, adding that they had on average specified their own risk tolerances to be above average. “You cannot achieve the first two goals with a low-risk profile … It just doesn’t work.”

He also said National Bank Independent Network should shoulder the blame for being quick to demand that the investors’ margin accounts be paid up.

In the second week of March when the COVID-19 pandemic sent markets plunging, the plaintiffs’ accounts became under-margined; on March 9, the plaintiffs’ accounts held $22 million in all, and were under-margined by $3 million.

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Entrepreneurship and investing as social good – TechCrunch

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2020 has been a year of social upheaval. Around the world, society is identifying different problems in our culture and pushing for widespread change. While there are notable steps we can all take, from altering exclusionary company policies to signing action-oriented petitions, the VC and investment world has another, often overlooked option: Investing in change-the-world startups.

Increasingly, angel investors and institutional funds have begun allocating a portion of their funds to startups focused on diversity and social good, whether focused on democratized access to healthcare and education, or larger scale issues like climate change.

Initially, shifting funds to empower social good may seem like a hefty feat, however investors can embrace this mindshift in three simple steps: (1) redistributing stagnant investments; (2) leveraging democratized access to change-making startups; and (3) identifying founders tracking toward success.

Allocating more investments to foster change

Most of the world’s money is tied up in stagnant places. Whether invested in real estate, bonds or other traditional vehicles, this capital typically often shows conservative returns to investors — and has negligible impact on society. The intent isn’t malicious.

Most family offices and private wealth managers strive to minimize losses and these sorts of uniformed portfolios are safe. Even the most seasoned investors should incorporate more variety into their portfolios, determining where they can make profitable investments that yield higher returns while advancing societal good. Investors can take small steps to get more confident in expanding their strategies.

To start, reframe your thinking into seeing the potential opportunity rather than the risk. A good way to do this: Look at how high-risk public equities performed over the last five years and compare it to ventures within tech. Investors will see a significant disparity and the opportunity to make different returns.

The idea is not to put an entire profile in a single venture. Rather, an investor should take a portion of their portfolio in a high-risk investment sector, like public equities or fund structures, and put it in a similar risk profile with a better return. Gradually increasing these increments, starting at 15% and slowly scaling up, can help investors to see outsized returns while making a difference in the process.

A world of passion at your fingertips

For startups of all sizes, democratized access to investors will accelerate the use of capital for social good. Until recently, only the world’s wealthiest people had exposure to premium capital, but crowdfunding and accelerator programs have ushered in new opportunities, forging connections that might not have otherwise been possible.

These avenues have opened new doors for investors and startups. Access to developed networks or innovation hubs like Silicon Valley are no longer make-or-breaks for those looking to raise capital. Extended global opportunity for startups also means investors have more options to find promising ventures that align with their values, regardless of their location.

But while crowdfunding and accelerators have made the world more accessible, they come with sizable challenges. Despite making early-stage investment more obtainable, crowdfunding often does not bring the most valuable investors to the table.

Crowdfunding also inundates platforms with poor-quality deal flow, making it more strenuous for investors to connect with fruitful opportunities. Meanwhile, various accelerators and incubation platforms have emerged, which have advanced global connection, but tend to be quite noisy.

To succeed, entrepreneurs need more than capital. Rather, they need strategic support from experienced investors who can help them make decisions and scale in an impactful way. With a world of ideas at their fingertips, investors should take time to sift through their options and find the ideas that move them the most, prioritizing quality deals and looking toward platforms that curate promising connections.

Empowering entrepreneurs poised for success

Now is the right time to invest in startups. People who innovate during the pandemic have triple the hustle of those who build in safer economies. But while the timing is right, it’s equally important that the fit is right. I’m a big believer in investing in potential: Ambition, unwavering tenacity and empathy are desirable qualities that can help bring game-changing ideas to fruition.

If an investor funds a passionate leader with a strong vision and ability to attract talent, then the groundwork is laid to build something meaningful. When considering the change-makers to invest in, ask: Is this the right person to be building this company? Do they have the ability to attract and lead talent? Is the market big enough, and is there a significant enough problem to build a company around?

If the answer isn’t yes to all of these questions, it’s important to gauge if you can see a theoretical exit, or if the company is pre-seed or Series A, if they have the ability to scale to a decent size.

Despite this, investing in startups, no matter how good their intentions, can scare investors. One way to overcome trepidation is to invest in larger-stage startups that seem less risky and then wade into earlier-stage startups at your own pace. Special purpose acquisition companies (SPACs) are also becoming an interesting investment option.

SPACs are corporations formed for the sole purpose of raising investment capital through an IPO. The proceeds are then used to buy one or more existing companies, an option that could decrease anxiety for risk-averse investors looking to expand their comfort zone.

Any strategy an investor chooses to embrace social good is a step in the right direction. Capital is a tangible way to fuel innovation and bring about impactful change.

Democratized access to startups yields more opportunity for investors to find ventures that align with their values while diversifying their profiles can provide tremendous results. And when that return means disrupting the status quo and empowering societal change? Everyone wins.

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