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What Is Fibonacci Retracement in Crypto Trading?

A retracement level is the price at which a stock or cryptocurrency tends to see a reversal in its trend. Fibonacci retracement is a popular tool in technical analysis that helps determine support and resistance levels on a price chart.

What Are Fibonacci Retracement Levels?

Fibonacci numbers are a series where each number equals the sum of the two previous numbers. The most basic series is: 0, 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144, 233, 377 etc.

When it comes to technical analysis, investors use Fibonacci Replacement Levels, expressed as percentages, to analyze how much of a previous move a price has retraced. The most important Fibonacci Retracement levels are: 23.6% 38.2%, 50% and 61.8%.

Some analysts refer to 61.8% as “the golden ratio,” since it equals the division of one number in the series by the number that follows it. For example: 8/13 = 0.6153, and 55/89 = 0.6179.

The other Retracement levels reflect other calculations: Dividing one number by the number three places to its right equals 23.6%. For example: 8/34 = 0.2352. Bitcoin traders often use 78.6%, which is the square root of 0.618,

Some prefer the 0.618 and 0.382 levels because these are the retracement levels analysts believe are most likely to generate a trend reversal. These levels are considered inflection points where fear and greed can alter price action. When an asset is trending upward but loses momentum, it’s possible that a pullback to the 0.618 price level could result in a bounce upward, for example.

How Does Fibonacci Retracement Work and What Does it Do?

There are several theories as to why the fibonacci retracement works. Some of these include:

•   Fibonacci price levels reflect the effects of extreme fear and greed in the market. To use this to their advantage, traders might buy when people are panicking and sell when others are getting greedy.

•   Fibonacci patterns are often observed in nature as well as in mathematics. For example: fruits and vegetables. If one would look at the center of a sunflower, spiral patterns could appear to curve left and right. Counting these spirals, the total often is a Fibonacci number. If one could divide the spirals into those pointed left and right, then two consecutive Fibonacci numbers could be obtained. Therefore, it’s thought that these patterns may be important in financial markets as well.

•   The law of numbers: If a greater percentage of people practice Fibonacci crypto trading, then the likelihood of its accuracy increases.

At its core, a Fibonacci retracement is a mathematical measurement of a particular pattern. When it comes to Fibonacci in crypto, traders try to apply these patterns to price action to predict future price movements.

Who Created Fibonacci Retracements?

While traders commonly use Fibonacci in crypto today, the number sequences pre-date the invention of cryptocurrency by many centuries. Fibonacci numbers are based on the key numbers studied by mathematician Leonardo Fibonacci (or Leonardo of Pisa) in the 13th century, although Indian mathematicians had identified them previously. He was a medieval Italian mathematician famous for his “Book of the Abacus”, the first European work on Indian and Arabian mathematics, which introduced Hindu-Arabic numerals to Europe.

Formula

In an uptrend or bullish market, the formulas for calculating Fibonacci retracement and extension levels are:

UR = High price – ((High price – Low price) * percentage) in an uptrend market; where UR is uptrend retracement.

UE = High price + ((High price – Low price) * percentage) in an uptrend market; where UE is an uptrend extension.

For example: A stock price range of $10 – $20, could depict a swing low to swing high.

Uptrend Retracement (UR) = $20 – (($20 – $10) * 0.618)) = $13.82 (utilizing 0.618 retracement)

Uptrend Extension (UE) = $20 + (($20 – $10) * 0.618)) = $26.18 (utilizing 0.618 retracement)

If a stock pulls back $13.82 could be a level that the stock bounces back to reach higher levels than its swing high price, e.g. $20. In an uptrend, the general idea is to take profits on a long trade at a Fibonacci price extension Level ~ $26.18.

What Does a Fibonacci Retracement do?

Markets don’t go straight up or down. There are pauses and corrections along the way. To buy stocks in an uptrend, one would look to get the best price possible.

Some traders use Fibonacci Retracement to determine how much a stock could pull back before continuing higher. Traders can use these retracement levels to find optimal prices at which to enter a trade.

A swing high happens when a security’s price reaches a peak before a decline. A swing high forms when the highest price reached is greater than a given number of highs around it.

Swing low is the opposite of swing high. It refers to the lowest price within a timeframe, usually fewer than 20 trading periods. A swing low occurs when a lowest price is lower than any other surrounding prices in a given period of time.

Support and Resistance

Support is the price level that acts as a floor, preventing the price from being pushed lower, while resistance is the high level that the price reaches over time. Analysts often illustrate these as horizontal lines on a graph.

A support or resistance level can also represent a pivot point, or point from which prices have a tendency to reverse if they bounce (in the case of support) or retreat (in the case of resistance) from that level.

Learn more: Support and Resistance: What Is It? How To Use It for Trading

Limitations of Fibonacci Retracement

Fibonacci retracements in crypto or other markets may be slightly predictive. But over relying on them can be counterproductive for reasons such as:

•   Fibonacci retracements, like any other indicators, could be used effectively only if investors understand it completely. It could end up being risky if not used properly.

•   There are no guarantees that prices will end up at that point, and retrace as the theory indicates.

•   Fibonacci retracement sequences are often close to each other, therefore it may be tough to accurately predict future price movements.

•   Using technical analysis tools like Fibonacci retracements can give investors tunnel vision, where they only see price action through this one indicator. Assuming that any single indicator is always correct can be problematic.

A Fibonacci retracement in crypto trading could wind up being even less predictive than in other financial markets due to the extreme volatility that cryptocurrencies often experience.

Fibonacci Retracements and Bitcoin

Fibonacci retracements can also be used for trading cryptos such as Bitcoin (BTC), similarly to how they’re used in stocks. In this case, one would use the levels 23.6%, 38.2%, 50%, 61.8% and 78.6% to determine where the cryptocurrency price would reverse.

Crypto prices are very volatile, and leverage trading is common. Leverage is the use of borrowed funds to increase the trading position, beyond what would be available from the cash balance alone. Therefore, it can be important to have some reference as to when the price could reverse, to not incur major losses.

Using the Fibonacci Retracement Tool to Trade Cryptocurrencies

In order to get started with a Fibonacci Retracement Tool, a trader could find a completed trend for a crypto, say, Bitcoin, which could either be an uptrend or downtrend.

Below are some steps on how to use Fibonacci retracement tool:

1.    Determine the direction of the market. Is it an uptrend or downtrend?

2.    For an uptrend, determine the two most extreme points (bottom and top) on the Bitcoin price chart. Attach the Fibonacci retracement tool on the bottom and drag it to the right, all the way to the top.

3.    For a downtrend, the extreme points are top and bottom and the retracement tool could be dragged from the top to the bottom.

4.    For an uptrend or downtrend, one could monitor the potential support levels: 0.236, 0.382, 0.5 and 0.618.

Recommended: Crypto Technical Analysis: What It Is & How to Do One

Fibonacci Retracement Example for Bitcoin

In December 2017, Bitcoin fell from $13,112 to around $10,800, within a short timeframe. After that, it rallied up to $12k twice, but did not break above that level until 2021. That indicates a bearish pattern, as it couldn’t break above its previous high. In technical analysis it is called a double top.

On the Fibonacci tool, the $12k resistance point coincided with the 50% level of retracement. When the price could not reach this level, it started to fall again. In this scenario, traders using Fibonacci Retracement might consider this a good time to exit a long position or establish a short position. A short trade is based on the speculation that the price of Bitcoin is going to fall.

By February, 2018, the trade materialized as Bitcoin continued its downtrend falling all the way to $9,270. The short trade would have worked and traders could have realized a profit from using the crypto Fibonacci Retracement tool, although those who managed to HODL for years after that would have made even more.

FAQ

Does Fibonacci retracement work with crypto?

While the Fibonacci retracement tool is traditionally used for analyzing stocks or trading currencies in the forex market, some analysts believe it is also helpful in determining a crypto trading strategy.

How accurate is fibonacci retracement?

In crypto, Fibonacci retracement levels are often fairly accurate, although no indicator is perfect and they are best used in combination with other research. The accuracy levels increase with longer timeframes. For example, a 50% retracement on a weekly chart is a more important technical level than a 50% retracement on a five-minute chart.

What are the advantages of using fibonacci retracement?

Here are some benefits of using Fibonacci Retracement.

•   Trend prediction. With the correct setting and levels, it can often predict the price reversals of bitcoin at early levels, with a high probability.

•   Flexibility. Fibonacci Retracement works for assets of any market and any timeframe. One must note that longer time frames could result in a more accurate signal.

•   Fair assessment of market psychology. Fibonacci levels are built on both a mathematical algorithm and the psychology of the majority, which is a fair assessment of market sentiment.

The Takeaway

The Fibonacci Retracement tool can help identify hidden levels of support and resistance so that analysts can better time their trades. Analysts believe this tool is more effective when utilized with types of cryptocurrency that have higher market-capitalization, like Bitcoin and Ethereum, because they have more established trends over extended time frames.They consider it less effective on cryptocurrencies with a smaller market capitalization.

Whether you use Fibonacci Retracement or other methods to create your cryptocurrency trading strategy, a great way to get started is by opening a brokerage account on the SoFi Invest investment app. You can use it to trade more than a dozen different coins, including Bitcoin, Ethereum, Litecoin, Cardano, and Dogecoin.

Photo credit: iStock/HAKINMHAN

SoFi Invest®
The information provided is not meant to provide investment or financial advice. Investment decisions should be based on an individual’s specific financial needs, goals and risk profile. SoFi can’t guarantee future financial performance. Advisory services offered through SoFi Wealth, LLC. SoFi Securities, LLC, member FINRA / SIPC . SoFi Invest refers to the three investment and trading platforms operated by Social Finance, Inc. and its affiliates (described below). Individual customer accounts may be subject to the terms applicable to one or more of the platforms below.
1) Automated Investing—The Automated Investing platform is owned by SoFi Wealth LLC, an SEC Registered Investment Advisor (“Sofi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC, an affiliated SEC registered broker dealer and member FINRA/SIPC, (“Sofi Securities).

2) Active Investing—The Active Investing platform is owned by SoFi Securities LLC. Clearing and custody of all securities are provided by APEX Clearing Corporation.

3) Cryptocurrency is offered by SoFi Digital Assets, LLC, a FinCEN registered Money Service Business.

For additional disclosures related to the SoFi Invest platforms described above, including state licensure of Sofi Digital Assets, LLC, please visit www.sofi.com/legal.
Neither the Investment Advisor Representatives of SoFi Wealth, nor the Registered Representatives of SoFi Securities are compensated for the sale of any product or service sold through any SoFi Invest platform. Information related to lending products contained herein should not be construed as an offer or pre-qualification for any loan product offered by SoFi Lending Corp and/or its affiliates.
Crypto: Bitcoin and other cryptocurrencies aren’t endorsed or guaranteed by any government, are volatile, and involve a high degree of risk. Consumer protection and securities laws don’t regulate cryptocurrencies to the same degree as traditional brokerage and investment products. Research and knowledge are essential prerequisites before engaging with any cryptocurrency. US regulators, including FINRA , the SEC , and the CFPB , have issued public advisories concerning digital asset risk. Cryptocurrency purchases should not be made with funds drawn from financial products including student loans, personal loans, mortgage refinancing, savings, retirement funds or traditional investments. Limitations apply to trading certain crypto assets and may not be available to residents of all states.
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Source: sofi.com

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The Problem with Today’s Hot Real Estate Investment Market

Jessica Schmidt (not her real name) is a qualified intermediary for a large national firm specializing in 1031 exchanges for investment real estate. Lately, she has been working 10-hour days, six days a week.

Some days she takes up to 50 calls a day from real estate investors seeking to cash in on a hot real estate market without paying large sums of tax on their highly appreciated real estate investment.

It’s a seller’s market, and most real estate investors can garner a quick sale on amounts they had previously only dreamed of.

Everything’s great, right? Not so fast.

A Seller’s Market Isn’t Exactly a Dream

Jessica usually spends 10-15 minutes with a caller explaining the rules and regulations of a 1031 exchange. She often refers callers to her website for educational videos on the 45-Day Rule, the 3 Property Rule, and the 180 Day Rule. These are all essential and specific requirements for an investor to take advantage of our tax code’s ability to defer taxes upon a property sale.

She explains that the seller must open an exchange “ticket” BEFORE the sale of their investment property closes. Then the seller has up to 45 days to identify a qualified replacement property.

And that’s where the situation gets sticky.

Problems Finding Replacement Properties

“The problem with the inventory in the marketplace is that there isn’t any,” the chief economist for a large national title company was quoted as saying at a recent economic forum.

Today, more often than not, hopeful 1031 exchange investors find themselves in quite the conundrum. According to Jessica, the high-ticket sale and the tax deferral via the 1031 exchange may be the easy part, but finding a suitable replacement property seems to be the biggest obstacle and a common dilemma.

A Potential Solution – DST, or Delaware Statutory Trust

With that in mind, Jessica has been increasingly offering her clients a different option to consider instead of a 1031 exchange: a DST, or Delaware Statutory Trust.

DSTs are passive real estate investments that qualify as replacement property for 1031 exchanges. DSTs invest in multifamily apartments, medical buildings, self-storage facilities, Amazon distribution centers, industrial warehouses, hotels and other vital real estate asset classes. The investments are passive in nature and generate regular monthly income to investors and the potential and opportunity for growth.

Many DSTs are syndicated with some debt, usually about 50% loan-to-value. However, the debt to investors is considered non-recourse, which means that an investor has no personal guarantee or personal liability for such debt. This could be very helpful, Jessica explains to her clients, because they all want to receive a full tax deferral, and the rules stipulate that in an exchange, the investor must reinvest the sale proceeds AND replace any debt.

DSTs have been around since 2004 when the IRS issued Ruling 2004-86, which made DSTs qualify for replacement in a 1031 exchange.

Must Be an Accredited Investor

DSTs are for “accredited” investors only, which means that an investor must have a net worth of at least $1 million apart from their primary residence or have an income of $200,000 for a single person or $300,000 for a married couple. And DSTs are offered as SEC-registered securities and therefore are obtained from broker-dealers or registered investment advisers. The advisers perform extensive due diligence on the real estate syndications and each specific DST-sponsored property.

Jessica concludes that DSTs could be a perfect solution for many of her clients and investors, especially those getting closer to retirement and maybe not wanting to actively manage real estate assets any longer. Between the tax savings, the passive nature of the investments, and the high-quality assets that are generally part of DSTs, many of her clients’ problems could be effectively solved using this important passive investment strategy.

Although DSTs are attracting billions of dollars of investment funds, most CPAs and real estate investors are still unaware of this important and viable solution that could potentially solve so many problems for so many real estate investors.

After explaining all this so many times in calls from clients the past several months, Jessica decided to come up with the following “Letterman” style Top 5 Benefits of DSTs for her clients:

5 Top Benefits of DSTs in a 1031 Exchange

1. Potential Better Overall Returns and Cash Flows

It depends upon the investor. Still, some investors find DSTs could offer a better risk-return profile than a property they might manage themselves.

2. Tax Planning and Preserved Step-Up in Basis

DSTs offer the same tax advantages of real estate that an investor would own and manage themselves. Depreciation and amortization are passed along to DST investors by their proportionate share. DSTs can be exchanged again in the future into another DST via a 1031 exchange.

3. Freedom

Passive investing allows older real estate owners the time and freedom to travel, pursue other endeavors, spend more time with family, and/or move to a location removed from their current real estate assets.

4.  As a Backup Strategy

In a competitive market, an investor may not be able to find a suitable replacement property for their 1031 exchange. DSTs might be a good backup option and could be named/identified in an exchange if only for that reason.

5. Capture Equity in a Hot Market

When markets are at all-time highs, investors may want to take their gains off the table and reinvest using the leverage inside a DST offering.

DST investments come with a risk common to real estate investing and are offered to accredited investors only and by private placement memorandum only. Therefore, a prudent investor would be best served by evaluating all details of each specific offering and the track record of the sponsor firm before investing in a DST offering.

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

Chief Investment Strategist, Provident Wealth Advisors

Daniel Goodwin is the Chief Investment Strategist and founder of Provident Wealth Advisors, Goodwin Financial Group and Provident1031.com, a division of Provident Wealth. Daniel holds a series 65 Securities license as well as a Texas Insurance license. Daniel is an Investment Advisor Representative and a fiduciary for the firms’ clients. Daniel has served families and small-business owners in his community for over 25 years.

Source: kiplinger.com

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5 Best Esports Stocks to Buy in 2022

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According to Grand View Research, the esports and gaming industry is growing rapidly. By the year 2027, it will be worth around $6.82 billion after enjoying a compound annual growth rate (CAGR) of more than 24%. 

Many esports and gaming enthusiasts who are looking for ways to exploit the stock market for financial freedom are starting to make investments. These investors know which companies in the space are the top dogs. The fact that most people enjoy video games makes research far less daunting when investing in esports than in other, less sexy industries like utilities. 

But with so many esports and gaming companies out there to choose from, how do you choose the best companies in the space to invest in? Here are some top stocks to consider.

Best Esports Stocks to Buy in 2022

The esports and gaming industry is booming, with much of the growth being a side effect from the recent pandemic. When COVID-19 took hold around the world, traditional sports halted, and consumers were looking for things to do while under lockdown orders. 

During this time, esports viewership grew rapidly. According to Statista, the growth in gaming interest is likely to continue. 

During the pandemic, those who were into video games had nothing better to do, and many who wouldn’t have considered playing them in the past found themselves picking up the controls and immersing themselves in the gaming ecosystem. 

Now, with a whole new wave of consumers in gaming and a growing esports audience, it’s time for the big players in the industry to capitalize. 

What stocks give you the biggest opportunities in the industry? Below you’ll find my top five picks, all of which are great options to consider.

1. Activision Blizzard, Inc. (NASDAQ: ATVI)

You Can’t Talk About Gaming Without Mentioning Activision Blizzard

  • Market Cap: Activision Blizzard is one of the largest gaming companies in the world, trading with a market cap of more than $54.5 billion. 
  • Earnings History: The company has a strong history of beating analyst expectations in terms of earnings, which it has done for the past four consecutive quarters. All told, the company has produced an average positive earnings surprise of over 9%. 
  • Dividend Yield: The current dividend yield on the stock is 0.67%. Over the past five years, the dividend yield on the stock has ranged from 0% to 0.88%, averaging 0.57%. 

Many who follow the esports and gaming industry closely will be surprised to see Activision Blizzard on this list, considering the wave of blues that has hit the company and the stock. To address the elephant in the room, the stock has recently seen a dramatic decline as a result of delays in the launches of Overwatch 2 and Diablo IV, leading analysts to downgrade the stock. 

On top of the delays, the company has been dealing with a PR nightmare after an employee walkout resulting from management’s tone-deaf response to allegations of sexual discrimination and harassment. Additionally, co-head Jen Oneal stepped down after a short run in the leadership role that began in August 2021. 

Nonetheless, there’s a strong probability that a significant undervaluation in the stock exists. 

The company is the owner of several esports leagues, hosting several esports events per year. Keep in mind, we’re talking about the company behind Call of Duty and Overwatch, two of the most popular video games ever made and the center of some of the most popular esports tournaments in the space.  

Although delays and discrimination are concerning, the stock has been thoroughly hammered, falling more than 32% from its highs in February. 

Keep in mind that these declines have happened even in the face of gains in revenue and earnings, and consistent earnings beats quarter after quarter. 

The bottom line is that even though the company is shrouded in bad press at the moment, general consumers and esports teams alike consider the company’s games to be legendary. 

Moreover, the biggest declines were seen shortly after the company announced delays in the launches of Overwatch 2 and Diablo IV. However, delays in game launches have become more commonplace these days, as the world’s leading producers of video games have begun focusing more on launching polished games free of glitches rather than rushing to market and patching bugs later. 

All told, there’s no question that Activision Blizzard will bounce back. The only real question is when it will happen. When it does, those who own the stock will be grinning from ear to ear. 

2. Electronic Arts Inc. (NASDAQ: EA)

Leader in Sports Gaming With Massive Franchises 

  • Market Cap: EA is another of the world’s largest esports and gaming companies, trading with a market cap of nearly $40 billion.  
  • Earnings History: EA has produced stellar earnings over the past four consecutive quarters, beating analyst expectations each step of the way. Over the past year, the average quarterly earnings surprise has been 18.7%. 
  • Dividend Yield: Like many others in the gaming and esports space, Electronic Arts currently pays no dividend. 

While Electronic Arts had its ups and downs throughout 2021, the stock has remained relatively flat, gaining less than 2% cumulatively. However, this is yet another company that many believe to be undervalued. 

Electronic Arts, better known as EA, isn’t just any game developer. It’s the developer that has signed into partnerships with the National Football League (NFL), Fédération Internationale de Football Association (FIFA), and several other massive sports franchises to develop a long line of games like Madden NFL and FIFA. The company is also the publisher behind non-sports-related hits like The Sims and Apex Legends. 

In the world of competitive gaming, there are few in the esports industry that have garnered nearly as much attention as EA. Gamers from all over the world dream of competing for six-figure prizes at some of the gaming industry’s most popular tournaments hosted by the company. 

If EA’s past is any indication, there will be plenty for investors to look forward to in the future. 

One of the biggest draws for investors has to do with the company’s coming game releases. Not only have EA’s sports-related titles done incredibly well, in November 2021 the company launched Battlefield 2042, another game in its popular Battlefield franchise. Many experts expect this to be the best-selling title from the franchise to date, setting the stage for strong Q4 revenues, as the game is likely atop many holiday shopping lists. 

All told, EA is a force to be reckoned with in the gaming industry, and thanks to a lackluster year of performance in the stock in 2021, a clear undervaluation is being born, setting the stage for a strong growth opportunity. 

3. Amazon.com, Inc. (NASDAQ: AMZN)

Yes, Amazon is in Gaming Too

  • Market Cap: Amazon is one of the largest companies in the world, currently trading with a market cap of nearly $1.8 trillion. 
  • Earnings History: Historically, the company has smashed earnings expectations, beating analyst projections in the past three out of four consecutive quarters. Even with a painful 32.75% miss in the most recent quarter, the average quarterly earnings surprise over the past year has clocked in at 38.2%. 
  • Dividend Yield: Throughout its history, Amazon hasn’t been a dividend-payer. Instead, it piles its profits back into the company in an effort to expand, and with the company being one of the largest in the world, those efforts have definitely been fruitful. 

You may be surprised to see Amazon on a list of the top gaming and esports companies, but it’s important to keep in mind that the company isn’t just an e-commerce powerhouse. It has its fingers in various areas of the tech industry as a digital conglomerate. 

The company isn’t a game publisher, although it does sell video games on its e-commerce platform. Nonetheless, the company is a key player in the gaming market even beyond its role in the retail distribution of video games.

Amazon acquired Twitch, one of the largest game-streaming platforms in the world, in August 2014. 

Twitch is a lot like YouTube. However, the big difference between the two is that while YouTube provides various types of streaming content, Twitch is a platform that focuses on streaming gameplay, giving players a way to show off their skills and esports teams a great venue for connecting with their audiences. This makes Twitch a top-pick among esports enthusiasts in terms of digital entertainment. 

However, when you purchase shares of this stock, you’re not just purchasing exposure to Twitch. You’re purchasing exposure to Amazon.com’s entire ecosystem of opportunities and enjoying the stability that comes along with investing in one of the world’s largest companies. 

At the end of the day, Amazon has grown from nothing to a dominant player in several high-value markets over the years and, by all accounts, that growth is far from over. 

4. Huya Inc. (NYSE: HUYA)

An Underdog That Could Become a Massive Winner 

  • Market Cap: Huya is the smallest company on this list by market cap, trading at an enterprise value of around $2.67 billion, and just making its way onto the large-cap playing field.  
  • Earnings History: As a smaller, newer company, Huya’s earnings have been interesting to follow. During a couple of the past four quarters, analysts didn’t even provide expectations. In the most recent quarter, analysts didn’t even expect that the company would produce a penny of profit, but it surprised investors by reporting earnings of $0.34 per share. 
  • Dividend Yield: Huya has not yet declared a dividend. 

Of all companies on this list, Huya is definitely the smallest and one of the riskiest bets. However, many argue that the stock is significantly undervalued at current levels, and I happen to agree. 

Huya was one of the pioneers in the game streaming industry in China and has quickly grown to become the largest game streaming platform in the region. As a result, many have compared it to Twitch, calling it the Twitch of China. 

As a game streaming service, the company plays an integral role in the esports industry in the region, connecting fans with teams and setting the stage for the next wave of Chinese esports stars. 

While what the company is doing from an operational perspective has been impressive, the idea behind the investment is more of a political bet than one aimed at the company’s operations. 

Over the past year, the Chinese government has been flexing its muscles, enacting a wide range of laws that have hampered businesses in several sectors, including gaming. As a result, investment interest in companies in the region have faded amongst fears that new laws may impact corporate earnings capabilities. 

Unfortunately, the selloff has been significant for some stocks, and Huya is one of those stocks. In the past year, the stock has given up more than 50% of its value, with no real negative catalyst to speak of. At the same time, the stock had no real reaction to the recent and dramatic earnings beat announced by the company. 

Over time, political fears in the region are likely to subside, and when this happens, the hardest-hit companies in the recent Chinese stock selloff will look like heavily discounted gold nuggets. I believe Huya falls into this class of stock. 

5. Take-Two Interactive Holdings, Inc. (TTWO)

A Growing Company with Significant Upside

  • Market Cap: Take-Two Interactive may not be the largest company on this list, but its market cap of more than $20 billion is nothing to shake a stick at.  
  • Earnings History: The company isn’t just known for beating earnings expectations, it’s known for smashing them. Over the past year, the average earnings surprise produced by the company was over 100%. 
  • Dividend Yield: Like many in the tech industry, TTWO does not pay dividends. 

Take-Two Interactive Holdings is a game developer that has had some pretty significant hits in the past. Its portfolio of companies includes game publishers like Rockstar Games, 2k, and Firaxis Games. Companies under its umbrella are the developers behind wildly popular franchises like Grand Theft Auto, BioShock, Borderlands, and Civilization, plus a wide range of other games that capture consumer attention and imagination like nothing else. 

Beyond its activities as a game developer, Take-Two is also a major player in the esports industry. The company currently owns a 50% stake in the NBA 2K League, one of the most popular esports leagues in the world. 

Unfortunately, however, 2021 wasn’t a great year for the stock. While the company smashed expectations in all earnings releases all year, the investing community seems to have shunned the stock, leading to declines of 12%. 

Nonetheless, many argue that the declines are an opportunity. The company has produced stellar revenue and earnings all year, and experts suggest more growth is on the horizon with positive guidance. 

Many investors, like Warren Buffett, have made massive amounts of money buying stocks when companies were down on their luck or the stocks were simply undervalued. What we’re seeing from Take-Two Interactive stock suggests it might be one of these opportunities. 

Consider Exchange-Traded Funds (ETFs)

If you’re not interested in doing the research required to choose individual stocks — or simply don’t have the time or don’t know how — don’t worry. There’s another way to gain exposure to solid picks in the esports industry. 

One of the best ways is to buy into a themed exchange-traded fund (ETF) that’s centered around esports. A couple funds to look into in this category include the VanEck Video Gaming and eSports ETF (ESPO) and the Global X Video Games & Esports ETF (HERO). 

ETFs pool money from a large number of investors and use those funds to buy shares in esports companies. As the companies grow or pay dividends, the profits are enjoyed by all shareholders of the fund. 

Final Word

The esports industry is an exciting one. Whether you’re a gamer or esports enthusiast, or you don’t play games at all, it can be an incredibly lucrative investment opportunity. 

However, as is the case when investing in any sector, it’s important to do your research before risking your hard-earned money. After all, each company is unique, offering investors a different mix of opportunity and risks. 

Fortunately many people find researching gaming stocks to be fun. After all, you’ll have the opportunity to learn about the companies behind the games you play, find out about upcoming titles, and potentially earn a return for doing so. 

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The Real Cost of Impulsive Investing

Worried man watching stock drop as he makes an investing mistake
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It seems to happen every fall. The stock market is rolling right along, hitting new highs every week or so. And then by September or October something spooks the markets.

Investors who have been ignoring economic warning signs all year suddenly start paying attention. Sometimes when the S&P 500 drops by 5% or so, they make a snap judgment to sell, ignoring the double-digit gains it’s posted so far.

They rely on CNBC to guide their next move. They spend every waking minute agonizing over whether to hang on or bail out.

Millions of people invest this way, on impulse. They worry whenever there is any sign of market turbulence and give in to their fears and then get burned.

We’ve all seen this movie and know how it ends. And who benefits the most? The huge institutional traders on Wall Street.

They profit by capitalizing on the impulsive behavior of Main Street investors. Motivated by the twin fears of “I can’t afford to lose” and “I don’t want to lose out,” these investors routinely buy high and sell low.

And Wall Street cashes in by selling high and buying low. Time after time, year after year.

The inevitable results of these David vs. Goliath trading interactions are so predictable that Wall Street has a euphemism for it: exploiting market inefficiencies. The big traders can predict with razor-sharp precision when regular investors will give in to their fears or greed.

Their analysts get access to the information they need to buy or sell shares of stock at the best price long before this same information percolates down to regular investors.

Here is how to understand and avoid self-defeating behavior.

Self-defeating behavior

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Emotions are the enemy of investing. When you’re plagued by doubt, you’re more likely to embrace certain thought patterns or superstitions that result in bad decisions. When you’re emotionally biased, you’re less willing to listen to views that could keep you from going down with the ship.

Psychologists have developed a whole field of study to identify these kinds of self-defeating thought processes: behavioral finance.

Numerous studies have shown that anxious investors often see and react to trading patterns that don’t really exist. They develop biases that aren’t easily shaken. And they fail to see the financial forest for the trees.

While hundreds of these behaviors have been researched and catalogued, there are a few that even the most experienced investors will recognize as applying to themselves at one time or another.

Loss aversion

Worried man holds up hands in a stop or halt motion
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Research has shown that investors are much more upset when their portfolio has dropped 5% in value than they are happy when it rises by 10%.

They’re more likely to hold on to a stock whose price is falling in the hope that it will bounce back. And they’re much more likely to sell a stock whose price has risen long before it’s reached its peak.

Framing

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Even though we consciously understand that a diversified portfolio helps to offset the falling price of one stock with the rising value of another, we still tend to obsess on the outsized profits or losses of individual stocks, regardless of how little overall impact one security has on our portfolio as a whole.

Anchoring

An investor panics over a market crash
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The way certain kinds of information are presented can influence our thinking. For example, when the stock market drops by 10% or more, the media has conditioned us into thinking of it as a market correction, with all of its associated doomsday fearmongering.

But that 10% is just an arbitrary numerical signpost that is no better at predicting a bear market than a 5% drop.

Availability bias

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People who have experienced a recent major event tend to believe that a similar event will occur when certain situations preceding the event have occurred.

A good example is the belief that rising rates of COVID-19 infections are likely to trigger a major stock selloff similar to the three-month bear market of 2020.

Conservatism bias

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When investors have a strong belief in a certain company they’ve invested in, they tend to cling to their faith even when the company hits a bad patch. The fall of Enron in the early 2000s is a textbook example.

Even when news about the company’s scandals came to light, too many investors believed Enron would emerge unscathed — and ultimately lost their entire investment.

So how do you avoid financial misbehavior?

Monkey Business Images / Shutterstock.com

It’s critical to increase your financial self-awareness. Recognize the beliefs and fears that drive these behaviors and make a determined effort to think before you act.

Start by diagnosing your financial health. If you feel confident that you’re on track toward saving enough for retirement, your children’s higher education, or other goals, then you’ll be less likely to engage in behaviors that could derail your investment plan.

This can be difficult to do on your own, which is why you might want to seek out the services of a qualified, fee-only fiduciary financial planner.

This professional can help you address your fears, overcome your inertia, and conquer your biases by helping you figure out exactly where you are financially today and what you may need to get back on track. And if you hire them to manage your investment portfolio, you can sleep easier knowing that your financial future is in good hands.

Disclosure: The information you read here is always objective. However, we sometimes receive compensation when you click links within our stories.

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Source: moneytalksnews.com

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Factoring Inflation into Your Retirement Plan

Right now, inflation is top of mind for everyone, perhaps especially retirees.

Inflation is important. But it is only one of the risks that retirees have to plan for and manage. And like the other risks you have to manage, you can build an income plan so that rising costs (both actual and feared) do not ruin your retirement.

Inflation and Your Budget

Remember that in retirement your budget is different than when you were working, so you will be impacted in different ways. And, of course, when you were working your salary and bonuses might have gone up with inflation, which helped offset long-term cost increases.

Much of your pre-retirement budget was spent on housing — an average of 30% to 40%. Retirees with smaller or paid-off mortgages will have lower housing costs even as their children are busy taking out loans to buy houses, and even home equity loans to pay for home improvements.

On the other hand, while health care looms as a big cost for everyone, for retirees these expenses can increase faster than income. John Wasik recently wrote an article for The New York Times that cited a recent study showing increases in Medicare Part B premiums alone will eat up a large part of the recent 5.9% cost of living increase in Social Security benefits. As Wasik wrote, “It’s difficult to keep up with the real cost of health care in retirement unless you plan ahead.”

Inflation and Your Sources of Income

To protect yourself in retirement means (A) creating an income plan that anticipates inflation over many years and (B) allowing yourself to adjust for inflation spikes that may affect your short-term budget.

First, when creating your income plan, it’s important to look at your sources of income to see how they respond directly or indirectly to inflation.

  1. Some income sources weather inflation quite well. Social Security benefits, once elected, increase with the CPI. And some retirees are fortunate enough to have a pension that provides some inflation protection.
  2. Dividends from stocks in high-dividend portfolios have grown over time at rates that compare favorably with long-term inflation.
  3. Interest payments from fixed-income securities, when invested long-term, have a fixed rate of return. But there are also TIPS bonds issued by the government that come with inflation protection.
  4. Annuity payments from lifetime income annuities are generally fixed, which makes them vulnerable to inflation. Although there are annuities available that allow for increasing payments to combat inflation.
  5. Withdrawals from a rollover IRA account are variable and must meet RMD requirements, which do not track inflation.   The key in a plan for retirement income, however, is that withdrawals can make up any inflation deficit. In Go2Income planning, the IRA is invested in a balanced portfolio of growth stocks and fixed income securities. While the returns will fluctuate, the long-term objective is to have a return that exceeds inflation.
  6. Drawdowns from the equity in your house, which can be generated through various types of equity extraction vehicles, can be set by you either as level or increasing amounts. Use of these resources should be limited as a percentage of equity in the residence.

The challenge is that with these multiple sources of income, how do you create a plan that protects you against the inflation risk — as well as other retirement risks?

Key Risks That a Retirement Income Plan Should Address

A good plan for income in retirement considers the many risks we face as we age. Those include:

  1. Longevity risk. To help reduce the risk of outliving your savings, Social Security, pension income and annuity payments provide guaranteed income for life and become the foundation of your plan. As one example, you should be smart about your decision on when and how to claim your Social Security benefit in order to maximize it.
  2. Market risk. While occasional “corrections” in financial markets grab headlines and are cause for concern, you can manage your income plan by reducing your income’s dependence on these returns.  By having a large percentage of your income safe and less dependent on current market returns, and by replanning periodically, you are pushing a significant part of the market risk (and reward) to your legacy. In other words, the kids may receive a legacy that reflects in part a down market, which can recover during their lifetimes.
  3. Inflation risk. While a portion of every retiree’s income should be for their lifetime and less dependent on market returns, you need to build in an explicit margin for inflation risk on your total income. The easiest way to do that is to accept lower income at the start.  For example, under a Go2Income plan, our typical investor (a female, age 70 with $2 million of savings, of which 50% is in a rollover IRA) can plan on starting income of $114,000 per year under a 1% inflation assumption. It would be reduced to $103,000 under a 2% assumption.

So, what factors should you consider in making that critical assumption about how much inflation you need to account for in your plan?

Picking a Long-Term Assumed Inflation Rate  

Financial writers often talk about the magic of compound interest; in real numbers, it translates to $1,000 growing at 3% a year for 30 years to reach $2,428. Sounds good when you’re saving or investing. But what about when you’re spending? The purchase that today costs $1,000 could cost $2,428 in 30 years if inflation were 3% a year.

When you design your plan, what rate of inflation do you assume? Here are some possible options (Hint: One option is better than the others):

  • Assume the current inflation of 5.9% is going to continue forever.
  • Assume your investments will grow faster than inflation, whatever the level.
  • Assume a reasonable long-term rate for inflation, just like you do for your other assumptions.

We like the third choice, particularly when you consider the chart below. Despite the dramatically high rate of today’s inflation that affects every result in the chart, the long-term inflation rate over the past 30 years was 2.4%. For the past 10 years, it was even lower at 2.1%.

A Long-Term View Smooths Inflation Spikes

A table shows what a $1,000 item would cost today if purchased in years ranging from 2020 to 1991, showing inflation rates of 6.9% currently, down to 2.4% for 30 years.A table shows what a $1,000 item would cost today if purchased in years ranging from 2020 to 1991, showing inflation rates of 6.9% currently, down to 2.4% for 30 years.

Managing Inflation in Real Time

Whether you build your plan around 2.0%, 2.5% or even 3.0%, it is helpful to realize that any short-term inflation rate will not match your plan assumption. My view is that you can adjust to this short-term inflation in multiple ways.

  • Where possible, defer purchases that are affected by temporary price hikes.
  • Where you can’t defer purchases, use your liquid savings accounts to purchase the items, and avoid drawing down from your retirement savings.
  • If you believe price hikes will continue, revise your inflation assumption and create a new plan. Of course, monitor your plan on a regular basis.

Inflation as Part of the Planning Process

Go2Income planning attempts to simplify the planning for inflation and all retirement risks:

  1. Set a long-term assumption as to the inflation level that you’re comfortable with.
  2. Create a plan that lasts a lifetime by integrating annuity payments.
  3. Generate dividend and interest yields from your personal savings, and avoid capital withdrawals.
  4. Use rollover IRA withdrawals from a balanced portfolio to meet your inflation-protected income goal.
  5. Manage your plan in real time and make adjustments to your plan when necessary.

Inflation is a worry for everyone, whether you are retired or about to retire. Put together a plan at Go2Income  and then adjust it based on your expectations and investments. We will help you create the best approach to inflation and all retirement risks you may face.

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

President, Golden Retirement Advisors Inc.

Jerry Golden is the founder and CEO of Golden Retirement Advisors Inc. He specializes in helping consumers create retirement plans that provide income that cannot be outlived. Find out more at Go2income.com, where consumers can explore all types of income annuity options, anonymously and at no cost.

Source: kiplinger.com

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Understanding Economic Indicators

An economic indicator is a statistic or piece of data that offers insight into an economy. Analysts use economic indicators to gauge where an economic system is in the present moment, and where it might head next.

Governments use economic indicators as guideposts when assessing monetary or fiscal policies, and corporations use them to make business decisions. Individual investors can also look to these indicators as they shape their portfolios.

There are different types of economic indicators and understanding how they work can make it easier to interpret them.

What Is an Economic Indicator?

An economic indicator is typically a macroeconomic data point, statistic, or metric used to analyze the health of an individual economy or the global economy at large. Government agencies, universities, and independent organizations can collect and organize economic indicator data. In the United States, the Census Bureau, Bureau of Economic Analysis (BEA) and the Bureau of Labor Statistics (BLS) are some of the entities that aggregate economic indicator data.

Some of the most recognizable economic indicators examples include:

•   Gross domestic product (GDP)

•   Personal income and real earnings

•   International trade in goods and services

•   U.S. import and expert prices

•   Consumer prices (as measured by the Consumer Price Index or CPI)

•   New residential home sales

•   New home construction

•   Rental vacancy rates

•   Home ownership rates

•   Business inventories

•   Unemployment rates

•   Consumer confidence

Private organizations also regularly collect and share economic data investors and economists may use as indicators. Examples of these indicators include the Fear and Greed Index, existing home sales, and the index of leading economic indicators.

Together, these indicators can provide a comprehensive picture of the state of the economy and shine light on potential opportunities for investors.

How Economic Indicators Work

Economic indicators work by measuring a specific component of the economy over a set time period. An indicator may tell you what patterns are emerging in the economy — or confirm the presence of patterns already believed to be established. In that sense, these indicators can serve as a thermometer of sorts for gauging the temperature of the economic environment or where an economy is in a given economic cycle.

Economic indicators can not predict future economic or market movements with 100% accuracy. But they can be useful when attempting to identify signals about which way the economy (and the markets) might head next.

For example, an investor may study an economic indicator like consumer prices when gauging whether inflation is increasing or decreasing. If the signs point to a steady rise in prices, the investor might then adjust their portfolio to account for higher inflation. As prices rise, purchasing power declines but investors who are conscious of this economic indicator could take action to minimize negative side effects.

Recommended: How to Invest and Profit During Inflation

Types of Economic Indicators

Economic indicators are not all alike in terms of what they measure and how they do it. Different types of economic indicators can provide valuable information about the state of an economy. Broadly speaking, they can be grouped into one of three categories: Leading, lagging, or coincident.

Leading Indicators

Leading indicators are the closest thing you might get to a crystal ball when studying the markets. These indicators pinpoint changes in economic factors that may precede specific trends.

Examples of leading indicators include:

•   Consumer confidence and sentiment

•   Jobless claims

•   Movements in the yield curve

•   Stock market volatility

A leading indicator doesn’t guarantee that a particular trend will take shape, but it does suggest that conditions are ripe for it to do so.

Lagging Indicators

Lagging indicators are the opposite of leading indicators. These economic indicators are backward-looking and highlight economic movements after the fact.

Examples of lagging indicators include:

•   Gross national product (GNP)

•   Unemployment rates

•   Consumer prices

•   Corporate profits

Analysts look at lagging indicators to determine whether an economic pattern has been established, though not whether that pattern is likely to continue.

Coincident Indicators

Coincident indicators measure economic activity for a particular area or region. Examples of coincident indicators include:

•   Retail sales

•   Employment rates

•   Real earnings

•   Gross domestic product

These indicators reflect economic changes at the same time that they occur. So they can be useful for studying real-time trends or patterns.

Popular Economic Indicators

There are numerous economic indicators the economists, analysts, institutional and retail investors use to better understand the market and the direction in which the economy may move. The Census Bureau, for example, aggregates data for more than a dozen indicators. But investors tend to study some indicators more closely than others. Here are some of the most popular economic indicators and what they can tell you as an investor.

Gross Domestic Product

Gross domestic product represents the inflation-adjusted value of goods and services produced in the United States. This economic indicator offers a comprehensive view of the country’s economic activity and output. Specifically, gross domestic product can tell you:

•   How fast an economy is growing

•   Which industries are growing (or declining)

•   How the economic activity of individual states compares

The Bureau of Economic Analysis estimates GDP for the country, individual states and for U.S. territories. The government uses GDP numbers to establish spending and tax policy, as well as monetary policy, at the federal levels. States also use gross domestic product numbers in financial decision-making.

Consumer Price Index

The Consumer Price Index or CPI measures the change in price of goods and services consumed by urban households. The types of goods and services the CPI tracks include:

•   Food and beverages

•   Housing

•   Apparel

•   Transportation

•   Medical care

•   Recreation

•   Education

•   Communications

CPI data comes from 75 urban areas throughout the country and approximately 23,000 retailers and service providers. This economic indicator is the most widely used tool for measuring inflation. According to the Bureau of Labor Statistics, which compiles the consumer price index, it’s a way to measure a government’s effectiveness in managing economic policy.

Producer Price Index

The Producer Price Index or PPI measures the average change over time in the selling prices received by domestic producers of goods and services. In simpler terms, this metric measures wholesale prices for the sectors of the economy that produce goods, including:

•   Mining

•   Manufacturing

•   Agriculture

•   Fishing

•   Forestry

•   Construction

•   Natural gas and electricity

The Producer Price Index can help analysts estimate inflation, as higher prices will show up on the wholesale level first before they get passed on to consumers at the retail level.

Unemployment Rate

The unemployment rate is an economic indicator that tells you the number of people currently unemployed and looking for work. The BLS provides monthly updates on the unemployment rate and nonfarm payroll jobs. Together, the unemployment rate and the number of jobs added or lost each month can indicate the state of the economy.

Higher unemployment, for example, generally means that the economy isn’t creating enough jobs to meet the demand by job seekers. When the number of nonfarm payroll jobs added for the month exceeds expectations, on the other hand, that can send a positive signal that the economy is growing.

Consumer Confidence

The Consumer Confidence Index can provide insight into future economic developments, based on how households are spending and saving money today. This indicator measures how households perceive the economy as a whole and how they view their own personal financial situations, based on the answers they provide to specific questions.

When the indicator is above 100, this suggests consumers have a confident economic outlook, which may make them more inclined to spend and less inclined to save. When the indicator is below 100, the mood is more pessimistic and consumers may begin to curb spending in favor of saving.

The Consumer Confidence Index is separate from the Consumer Sentiment Index, which is also used to gauge how Americans feel about the economy. This index also uses a survey format and can tell you how optimistic or pessimistic households are and what they perceive to be the biggest economic challenges at the moment.

Retail Sales

Retail sales are one of the most popular economic indicators for judging consumer activity. This indicator measures retail trade from month to month. When retail sales are higher, consumers are spending more money. If more spending improves company profits, that could translate to greater investor confidence in those companies, which may drive higher stock prices.

On the other hand, when retail sales lag behind expectations the opposite can happen. When a holiday shopping season proves underwhelming, for example, that can shrink company profits and potentially cause stock prices to drop.

Housing Starts

Census Bureau compiles data on housing starts. This economic indicator can tell you at a glance how many new home construction projects in a given month. This data is collected for single-family homes and multi-family units.

Housing starts can be useful as an economic indicator because they give you a sense of whether the economy is growing or shrinking. In an economic boom, it’s not uncommon to see high figures for new construction. If the boom goes bust, however, new home start activity may dry up.

It’s important to remember that housing starts strongly correlate to mortgage interest rates. If mortgage rates rise in reaction to a change in monetary policy, housing starts may falter, which makes this economic indicator more volatile than others.

Interest Rates

Federal interest rates are an important economic indicator because of the way they’re used to shape monetary policy. The Federal Reserve makes adjustments to the federal funds rate — which is the rate at which commercial banks borrow from one another overnight–based on what’s happening with the economy overall. These adjustments then trickle down to the interest rates banks charge for loans or pay to savers.

For example, when inflation is rising or the economy is growing too quickly, the Fed may choose to raise interest rates. This can have a cooling effect, since borrowing automatically becomes more expensive. Savers can benefit, however, from earning higher rates on deposits.

On the other hand, the Fed may lower rates when the economy is sluggish to encourage borrowing and spending. Low rates make loans less expensive, potentially encouraging consumers to borrow for big-ticket items like homes, vehicles, or home improvements. Consumer spending and borrowing can help to stimulate the economy.

Stock Market

The stock market and the economy are not the same. But some analysts view stock price and trading volume as a leading indicator of economic activity. For example, investors look forward to earnings reports as an indicator of a company’s financial strength and health. They use this information about both individual companies and the markets as a whole to make strategic investment decisions.

If a single company’s earnings report is above or below expectations, that alone doesn’t necessarily suggest where the economy might be headed. But if numerous companies produce earnings reports that are similar, in terms of meeting or beating expectations, that could indicate an economic trend.

If multiple companies come in below earnings expectations, for example, that could hint at not only lower market returns but also a coming recession. On the other hand, if the majority of companies are beating earnings expectations by a mile, that could signal a thriving economy.

The Takeaway

Economic indicators can provide a significant amount of insight into the economy and the trends that shape the markets. Having a basic understanding of the different types of economic indicators could give you an edge if you’re better able to anticipate market movements when you start investing.

You can use these indicators to help shape your investing strategy. One way to get started building a portfolio is by opening an online brokerage account on the SoFi Invest trading platform, which you can use to trade stocks, exchange-traded funds (ETFs), cryptocurrency and even IPOs.

Photo credit: iStock/FG Trade

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The information provided is not meant to provide investment or financial advice. Investment decisions should be based on an individual’s specific financial needs, goals and risk profile. SoFi can’t guarantee future financial performance. Advisory services offered through SoFi Wealth, LLC. SoFi Securities, LLC, member FINRA / SIPC . SoFi Invest refers to the three investment and trading platforms operated by Social Finance, Inc. and its affiliates (described below). Individual customer accounts may be subject to the terms applicable to one or more of the platforms below.
1) Automated Investing—The Automated Investing platform is owned by SoFi Wealth LLC, an SEC Registered Investment Advisor (“Sofi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC, an affiliated SEC registered broker dealer and member FINRA/SIPC, (“Sofi Securities).

2) Active Investing—The Active Investing platform is owned by SoFi Securities LLC. Clearing and custody of all securities are provided by APEX Clearing Corporation.

3) Cryptocurrency is offered by SoFi Digital Assets, LLC, a FinCEN registered Money Service Business.

For additional disclosures related to the SoFi Invest platforms described above, including state licensure of Sofi Digital Assets, LLC, please visit www.sofi.com/legal.
Neither the Investment Advisor Representatives of SoFi Wealth, nor the Registered Representatives of SoFi Securities are compensated for the sale of any product or service sold through any SoFi Invest platform. Information related to lending products contained herein should not be construed as an offer or pre-qualification for any loan product offered by SoFi Lending Corp and/or its affiliates.
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Stock Market Today: Rising Rates Put Another Scare Into Stocks

More commotion in the bond markets sent equities off to a rocky start for the week – though what was shaping up to be a significant gashing turned out to be just a scrape.

The yield on the 10-year Treasury jumped yet again Monday, to as high as 1.808% after starting 2021 at 1.510%.

“While rates have been volatile throughout 2021, the 10-year has not reached this level since prior to the pandemic,” says Lindsey Bell, chief money and markets strategist for Ally Invest. “Information received since the start of the new year is making the case for Mister Market that the Fed is going to raise rates and remove liquidity from the market at a faster pace than what was thought just over a week ago.”

Remember: The Federal Reserve’s members have signaled expectations for at least three hikes to the central bank’s benchmark interest rate in 2022. Kiplinger forecasts the Fed will raise rates four times, and over the weekend, Goldman Sachs predicted the same. JPMorgan Chase (JPM) CEO Jamie Dimon upped the ante Monday, saying “I’d personally be surprised if it was just four.”

However, heavy selling pressure Monday morning mercifully relaxed into the afternoon as 10-year rates backed off their highs.

Sign up for Kiplinger’s FREE Investing Weekly e-letter for stock, ETF and mutual fund recommendations, and other investing advice.

Fresh off its worst week in 11 months, the Nasdaq Composite dropped by as much as 2.7% at its nadir, to 14,530 – just about 80 points from official correction territory (a drop of 10% or more from a peak) – but managed to finish with a marginal gain to 14,942. The Dow Jones Industrial Average (-0.5% to 36,068) and S&P 500 (-0.1% to 4,670) closed down but well off their intraday lows.

stock chart for 011022stock chart for 011022

Other news in the stock market today:

  • The small-cap Russell 2000 slipped by 0.4% to 2,171.
  • Gold futures posted a marginal gain, settling at $1,798.80 an ounce.
  • U.S. crude oil futures slipped 0.9% to end at $78.23 per barrel.
  • Bitcoin, which sat at $41,912.19 on Friday afternoon, dropped below $40,000 earlier in Monday’s session but recovered to $41,714.45, a 0.5% decline. (Bitcoin trades 24 hours a day; prices reported here are as of 4 p.m.) 
  • Take-Two Interactive (TTWO) is upping its stake in the mobile video game world, announcing today that it is buying Farmville creator Zynga (ZNGA) for $12.7 billion in cash and stock. This works out to $9.68 per ZNGA share – a 61.3% premium to last Friday’s close. “This strategic combination brings together our best-in-class console and PC franchises, with a market-leading, diversified mobile publishing platform that has a rich history of innovation and creativity,” said Strauss Zelnick, CEO of Take-Two Interactive. “We believe that we will deliver significant value to both sets of stockholders, including $100 million of annual cost synergies within the first two years post-closing and at least $500 million of annual net bookings opportunities over time.” The deal is expected to close by the end of the second quarter as long as it gets the green light from regulators and shareholders. ZNGA shares soared 40.7% on the news, while TTWO fell 13.1% – potentially creating an attractive entry point for investors looking to pick up one of the best communication services stocks for 2022 at a discount.
  • Moderna (MRNA) was a rare splash of bright green today, jumping 9.3% after the biotech’s CEO Stephane Bancel told CNBC’s “Squawk Box” on Monday that the company is working on a COVID-19 booster that will target the omicron variant. Bancel said MRNA believes this will be the “best strategy for a potential booster for the fall of 2022” after discussions with various public health officials. This comes as the Centers for Disease Control and Prevention (CDC) said immunocompromised individuals are now eligible for a fourth vaccine dose, as detailed Monday in our free A Step Ahead newsletter.

Will Earnings Jolt the Market?

Interest rates might be dominating headlines now, but a new potential market mover kicks off later this week.

It’s the unofficial start of the fourth-quarter earnings season – and while you can check out a schedule of major reports here, big names to watch include Delta Air Lines (DAL), Wells Fargo (WFC) and BlackRock (BLK), which we’ve previewed here.

According to FactSet, analysts’ estimated earnings growth rate for S&P 500 companies in Q4 2021 is 21.7% – if achieved, that would be the fourth consecutive quarter that earnings growth has topped 20%, which should give investors something to look forward to.

“While there are real risks, expectations for continued hiring and spending will support growth in expected earnings,” says Jeff Buchbinder, chief equity strategist for LPL Financial, who adds that despite the risks of continued volatility “higher rates have usually been associated with strong market performance” too.

Investors looking for ways to potentially buy on the dip during short-term volatility could consider Kiplinger picks for the year ahead – such as our top stocks for 2022 or our best exchange-traded funds (ETFs).

That said, if you have a greater thirst for risk, and a speculative portfolio allocation you can afford to lose, you might consider swinging for the fences – with the pros’ help, anyway.

While Wall Street analysts typically don’t make bombastic calls, they have identified a few stocks that they see, ahem, “going to the moon” over the next year or so. These 30 names in particular have consensus buy targets implying at least 100% returns – and in many cases, much more. But watch out: This is a volatile bunch.

Source: kiplinger.com

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The Best Places to Live in California in 2022

From the beautiful beaches to the world-renowned redwood forests, California spans 900 miles along the Pacific coast and is the third-largest state in the U.S. The Golden State is home to almost 40 million people, making it the most populous state in the country. Full of iconic attractions, places and cities — think Disneyland, the Golden Gate Bridge and Hollywood, to name a few — people love this state.

With a landmass of 155,779 square miles and so many cities to choose from, where are the best places to live in California? Well, that depends on your budget and interests. Whether you’re a surfer looking to hang 10 or a wannabe actor seeking stardom, there’s a city that’s right for you.

Take a look at our list to see the best places to live in California.

Anaheim, CA

Anaheim, CA

  • Population: 346,824
  • 1-BR median rent: $1,730
  • 2-BR median rent: $1,995
  • Median home price: $770,000
  • Median household income: $71,763
  • Walk score: 63

Disneyland is in Anaheim so Mickey Mouse will be your neighbor! Snag yourself a season pass to Disneyland and you’ll have endless entertainment all year long. It’s the happiest place on earth. Well, that’s what Disney lovers will say, anyway.

Disney aside, Anaheim is a great city for families. It’s a suburban city full of apartments and homes that are affordable, compared to other cities in California. It’s also safe with good school systems.

You can enjoy time outside with a year-round mild climate, too. Take a walk through Yorba Regional Park or take your furry friend to La Palma Dog Park. Anaheim is full of parks, trails and outdoor activities. Everyone will find something to do here.

Irvine, CA

Irvine, CA

  • Population: 307,670
  • 1-BR median rent: $2,865
  • 2-BR median rent: $3,489
  • Median home price: $1,161,000
  • Median household income: $105,126
  • Walk score: 47

Irvine is home to one of the famous UC schools — UC – Irvine. But there are eight other universities in the town, as well. If you’re looking for a city with many opportunities for higher education, this is a great pick.

Irvine is making gaming history as the headquarters for Blizzard Entertainment. Blizzard Entertainment is the largest employer in the city and produced popular games like “Worlds of Warcraft” and “Diablo.”

A few other fun facts about Irvine: SNL star and actor Will Ferrell was born and raised in here. You can check out his elementary, junior and high school. And Irvine was the backdrop for scenes from “Ocean’s 11.”

Apartments in Irvine range in price but the city is in a great location and is constantly ranked one of the safest cities in California. Irvine is full of great parks, trails and sanctuaries so you’ll get a good blend of nature and city life.

Los Angeles, CA

Los Angeles, CA

  • Population: 3,898,747
  • 1-BR median rent: $2,725
  • 2-BR median rent: $3,739
  • Median home price: $950,000
  • Median household income: $62,142
  • Walk score: 79

Los Angeles, better known as L.A., is the second-most-populated city in the nation. When you think of L.A., you may think about celebrities and the Hollywood Walk of Fame, complete with more than 2,600 stars. From Universal Studios to Warner Bros., the film and TV industries have several headquarters here. Want to see the set of Central Perk from “Friends?” You can do that here. Care to visit Universal Studios theme park? Go ahead! For any film or TV buff, this is the city for you.

Los Angeles is one of the best places to live in California because it offers a little bit of everything. You’re within close proximity to several beaches. You can hike Griffith Park and see the Hollywood sign, see fossils from the Ice Age at the La Brea Tar Pits, check out more than 100 museums within the city and eat at a variety of restaurants and bars. To summarize, there’s no shortage of things to do in Los Angeles.

The City of Angels is home to more than 10 million people. Regardless of what you’re looking for, you’ll likely find it here in this diverse, urban city.

Oakland, CA

Oakland, CA

  • Population: 440,646
  • 1-BR median rent: $3,113
  • 2-BR median rent: $3,947
  • Median home price: $885,000
  • Median household income: $73, 692
  • Walk score: 83

If you’re a sports fanatic, then you’ve found your city. Oakland, CA, is the only city in the state to have three professional sports teams. You’ve got the Raiders, the Warriors and the A’s. Between football, basketball and baseball, you’ll be able to cheer on the home team year-round in one of the best places to live in California. Not a sports fan? Don’t worry. Oakland has a lot more to offer than sports.

One fun fact is that you’ll find hundreds of gnomes living here, too. Yes, you read that right — gnomes! Throughout the city, painted gnomes grace the utility poles. A mysterious artist paints them throughout the city for you to discover.

Oakland is a diverse city full of culture and history. It has a mild climate year-round and is full of great parks, trails and outdoor areas. Living in Oakland you’ll find the cost of apartments is comparable to other California cities.

Palm Springs, CA

Palm Springs, CA

  • Population: 44,575
  • 1-BR median rent: $1,955
  • 2-BR median rent: $2,095
  • Median home price: $523,000
  • Median household income: $53,441
  • Walk score: 39

Palm Springs is a diamond in the desert. It’s an affordable city with luxurious amenities like swimming pools, golf courses and tennis for all. If cities like L.A. or San Francisco are too big for you, Palm Springs is a perfect pick.

Tourists love it here but it’s also a popular place for retirees. Palm Springs is one of the best places to live in California if you’re looking for a low-key, relaxed atmosphere while still having the perks of California living. You’ll find great apartments in Palm Springs, lots of outdoor activities and a diverse cultural scene. But, it’s in the desert so expect extreme temperatures!

Palo Alto, CA

Palo Alto, CA

  • Population: 68,572
  • 1-BR median rent: $3,317
  • 2-BR median rent: $3,700
  • Median home price: $3,730,000
  • Median household income: $158,271
  • Walk score: 73

Palo Alto, also called “The Birthplace of Silicon Valley,” is one of the best places to live in California. It’s also a world-renowned tech hub. Some of the world’s most infamous tech unicorns, like Apple and Tesla, emerged from Palo Alto. Nearby is Stanford University, a top-ranked college. Palo Alto is a great city for tech-oriented students or individuals who are looking to start a company or join the ranks of one of the booming tech companies located there.

While Palo Alto is full of new tech and innovation, it’s also full of rich history. Spanish settlers explored and settled here. The city is even named after a 1,000-year-old tree located along the San Francisquito Creek.

This city is smaller compared to other cities in California, with around 65,000 residents. It’s a beautiful and safe place to live but you’ll find that rent and home prices are more expensive.

Sacramento, CA

Sacramento, CA

  • Population: 524,943
  • 1-BR median rent: $2,057
  • 2-BR median rent: $2,327
  • Median home price: $465,000
  • Median household income: $62,335
  • Walk score: 60

If you want to live in the heart of the state, Sacramento is the city for you as it’s the state’s capital.

This city is known for some pretty cool things. First, its nickname is the “City of Trees,” because it has more trees per capita than any other city in the world — although Paris is also a top contender. Despite the intense summer heat, the abundance of trees actually helps cool the city down. The community has lush, green trees and there is beauty in nature everywhere around you.

Another cool thing about Sacramento is its devotion to farm-to-fork eating. What’s that you may ask? Sacramento is full of produce and farmer’s markets — exactly 40 of them. That’s right! Forty in one city alone. Local farmers provide produce to local restaurants so the food you’re eating is literally from the farm straight to your fork (or mouth). You’ll eat well here.

This is a large city and you’ll find 1.5 million people living in Sacramento. You’ll also have plenty of things to do and will enjoy walking around this tree-lined city.

San Clemente, CA

San Clemente, CA

  • Population: 64,293
  • 1-BR median rent: $3,150
  • 2-BR median rent: $4,600
  • Median home price: $1,433,000
  • Median household income: $110,434
  • Walk score: 62

If you’re looking for a city with nostalgic, old-town beach feels, San Clemente is for you. Located right on the beach in Orange County, this charming city is like a postcard.

You’ve got the San Clemente Pier plunging into the ocean. You can take a stroll, go fishing or have a bite to eat. The beaches are stunning and appeal to avid surfers and young children alike. The lifeguards ensure that surfers have their own area to catch a wave while boogie boarders and families have their own space to swim in the ocean, too. Take a stroll along the coast on some awesome beach-side trails, too.

There are several boutique stores and restaurants on the famous T-street, as well. San Clemente is one of the best places to live in California if you’re looking for a quaint beach-side town. You can find apartments in the city that meet your budget and lifestyle needs.

San Diego, CA

San Diego, CA

  • Population: 1,386,932
  • 1-BR median rent: $2,582
  • 2-BR median rent: $3,285
  • Median home price: $800,000
  • Median household income: $79,673
  • Walk score: 71

San Diego is a beautiful, ocean-side city known for its great weather and scenic views. The average temperature is 70 degrees, so it’s sunny and pleasant almost every day of the year. You’ll find amazing beaches here and a town full of friendly people.

The U.S. Navy is the biggest employer in the city and has a naval base there. The Pacific Fleet stations in San Diego with 46 navy ships. Take a harbor cruise or visit the maritime museum to learn more about the naval history in San Diego.

If you’re looking for a city that’s easy-going, look no further. It’s a tourist destination, but it’s also home to over 3 million people. You can find a great apartment here and make it your next home.

San Francisco, CA

San Francisco, CA

  • Population: 873,965
  • 1-BR median rent: $3,193
  • 2-BR median rent: $4,257
  • Median home price: $1,480,000
  • Median household income: $112,449
  • Walk score: 93

The Golden Gate Bridge, cable cars and Alcatraz are just some of the iconic things you’ll find when living in San Francisco. You’ll also live in a city that’s full of diversity. San Francisco is known for being a liberal, open-minded city. In fact, it was home to the hippie movement of the ’60s. If you’re looking for a city that’s progressive, this is a good place to consider.

It’s also full of career opportunities. The tech sector is booming so you’ll find great job prospects in that industry. Keep in mind that the cost of living is more expensive here than in other cities in California.

San Francisco is both a large, urban city and a nature retreat. You’ll find everything you need downtown but then you can escape to Muir Woods where you’ll see redwood trees and forest scenes. If you’re looking for the best place to live in California, San Fran might be a good option to consider.

Santa Monica, CA

Santa Monica, CA

  • Population: 93,076
  • 1-BR median rent: $3,190
  • 2-BR median rent: $4,677
  • Median home price: $1,908,000
  • Median household income: $96,570
  • Walk score: 85

The pier in Santa Monica is arguably the most famous one of all. This iconic pier along the coast has an amusement park complete with a Ferris wheel (it’s solar-powered!), roller coasters and funnel cakes to go around. While that’s a tourist location, it’s fun for locals to stroll the pier and beach after a busy day at work.

Santa Monica is one of the best places to live in California because it’s a city that has it all. You’ll find great restaurants and shopping in the downtown area. You’ll enjoy relaxing walks along the beach. And you can rent great apartments in the city center. The demographics skew younger as you’ll find young professionals making this city home. Rent prices are steeper compared to other cities, but it’s a coveted place to live in California.

Find an apartment for rent in California

So, have we convinced you that California is the place for you? Whether you’re looking for a location in a bustling metro area or a beach-side apartment with ocean views, there are several best places to live in California. Pick your city, find your apartment and soon the Golden State will be your new home.

The rent information included in this summary is based on a median calculation of multifamily rental property inventory on Apartment Guide and Rent.com as of December 2021.
Median home prices are from Redfin as of December 2021.
Population and median household income are from the U.S. Census Bureau.
The information in this article is for illustrative purposes only. This data herein does not constitute a pricing guarantee or financial advice related to the rental market.

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