Wednesday, March 15, 2023 |
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Silicon Valley Bank failure is the second largest in U.S. history—but your deposits are likely safe |
It's been a dramatic week in the financial sector. Following mass withdrawals at Silicon Valley Bank and Signature Bank, regulators stepped in, shuttering the institutions and seizing deposits in what became the second- and third-largest bank failures in U.S. history, respectively. On Monday, the Biden administration said no one with accounts at either bank would lose their money, in an attempt to reaffirm widespread trust in the nation's banking system. It's hard to take in news of bank failures without flashing back to the 2008 financial crisis, and experts are still parsing what the recent bank failures means for the economy and investment markets. In the meantime, here's what it means for you. Your deposits are likely safe. Cash you deposit in a bank is protected by the Federal Deposit Insurance Corp. This includes checking and savings accounts, as well as certificates of deposit and money market accounts — not investment accounts. The FDIC covers up to $250,000 per person, per bank, per ownership category. Consider diversifying. The tumble in SVB's share price and sharp downdraft in other bank stocks is a reminder that any single stock or industry is prone to volatile swings. If you're a long-term investor, building a widely diversified portfolio can reduce the chances of a catastrophe at one, or a handful of companies dragging your portfolio down. This isn't 2008. While bank failures are reminiscent of the global financial crisis, things are different this time around, experts say. For one, banks have healthier balance sheets than they did in 2008. For another, the government was proactive in stepping in to help. Nevertheless, you should be prepared for the possibility of a recession. That means building an emergency fund and making sure you have a long-term investing plan in place. |
Money Tip of the Week: Use Warren Buffett's 'secret sauce' In Berkshire Hathaway Chairman Warren Buffett's latest annual letter to shareholders, the billionaire shared his "secret sauce" for investing. If it's a secret, it's not a very closely guarded one. Buffett has shared his wealth-building philosophy publicly for decades, and the recipe never changes: making "investments in businesses with both long-lasting favorable economic characteristics and trustworthy managers." To invest like Buffett, ask yourself four questions: Do you understand the business? Not just how the business operates now, but how it will continue to be profitable a decade from now. Does the business have a durable competitive advantage? This could be powerful brand loyalty among customers or an innovation that competitors can't duplicate. Investing geeks call this a "moat." Does management have integrity and talent? Look to invest in well-run companies. "We do not wish to join with managers who lack admirable qualities, no matter how attractive the prospects of their business," Buffett wrote in a 1989 shareholder letter. Does the price make sense? Buffett is a value investor, someone who aims to buy shares at a discount. If a broad-based decline in the stock market leads to a more attractive price for your favorite company, that may be a time to buy. |
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Next Gen Investing: Beware of ChatGPT crypto scams |
If you hang around crypto exchanges, you may have noticed coins popping up based on virally popular AI chatbots, such as OpenAI's ChatGPT and Microsoft's Bing AI. As of Friday, a search on DEXTools, an interactive crypto trading platform that tracks prices, revealed about 287 tokens that mention "ChatGPT" in their name. But because neither OpenAI nor Microsoft have announced a crypto launch, these tokens could be part of a crypto scam known as a "rug pull." Crypto scammers generate hype for their coin, convincing investors to buy and drive the price higher. When the price hits a certain level, the scammers sell out and the coin can become worthless. For example, investors lost millions buying into a "Squid Game" token at the height of the Netflix show's popularity. To avoid getting duped, be wary of any coin bearing the name of a celebrity or popular product. And run the other way if a coin's promoters promise you'll get rich. "Only scammers will guarantee profits or big returns," the Federal Trade Commission's website warns. "Don't trust people who promise you can quickly and easily make money in the crypto markets." |
Worth the Money: Shark Flexstyle hair dryer |
I'll admit it. I was influenced by the onslaught of Instagram influencers who flounce around nondescript cities with perfect blowouts. One problem: I am not a French supermodel and I have to be at work at 9 a.m. every morning. So I caved and bought the Shark FlexStyle hair dryer ($299 for three stylers, at sharkclean.com). A lazy girl's dream! I can now dry and curl my hair in less than 20 minutes. And with a little dry shampoo, the blowout lasts multiple days. Plus, because I didn't buy Dyson AirWrap (which costs $599 at dyson.com), I'm practically saving money, if you think about it. —Megan Sauer, Success Reporter |
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