Investors have a false sense of safety in the stock market

A psychologist by the name of Gerald Wilde came up with the term homeostatic years ago and I believe this is totally relevant in today's market. It essentially means that when the environment comes to feel safer, people’s behavior becomes riskier. A great example he used was that people will probably drive faster in a big SUV than in a little tin can of a car. Relating it to today's market, investors seem to feel safer because of the long bull market. As the market continues to rise in the longer term, investors' appetite for risk increases. They do not realize that their behavior is risky because they have a false sense that the market will not drop. While the risk of their investments is high, because of the confirmation day after day of the market going up, they don’t feel that they are taking any risk. From my perspective, the risk just seems like it continues to climb as people chase quick returns. AS an example, out of 672 launches of new exchange-traded funds…

IPOs look hot, don’t touch them, you’ll get burned!

So far in 2025 there have been over 150 IPOs which if you’re not familiar with the term, it stands for initial public offering. These IPOs have raised about $29 billion so far this year and it is a nice increase in the total number of IPOs when compared to recent years. At this time last year, just 99 IPOs had occurred and in 2023 it was even worse at 76. The exciting news reads “first day gains are averaging 26%, which is the best since 2020”, but it’s important to understand that those eye popping first day gains are not based off the first public trade but rather are gains on shares that were issued prior to heading to the market. Unfortunately, you as an investor have little to no chance of getting those…

What's going on with the real estate market?

This week we got both existing and new home sales for the month of August and there was a stark difference in the reports. The headline number for new home sales showed an increase of 15.4% compared to last year, while existing home sales were up just 1.8% over that timeframe. The first important consideration here is new home sales can be extremely volatile on a month-to-month basis, and they make up a smaller portion of overall sales. Pre-pandemic, new home sales were normally around 10% of total sales, but with the limited listings in recent years they have been closer to 30% of all sales. One other reason for the large difference is how the reports are calculated. New home sales look at people that were out shopping and signing deals in August, while existing home sales look at closings in the month, which means these were deals that were signed in June or July. Interest rates may have played a factor here as rates for the 30-year fixed mortgage were around 6.7-6.8% in June and July vs around 6.5-6.6% in August. This also doesn't include the…

Financial Planning: Insurance Vs Investments

When building a financial plan, it’s important to recognize that investments and insurance serve very different purposes. Insurance is designed to protect against loss. Life insurance provides for your family if you pass away, health insurance shields you from crushing medical bills, and auto insurance protects you financially from accidents or damage. You pay a known cost, the premium, to avoid a potentially devastating unknown cost, which makes insurance a valuable safety net. Investments, on the other hand, are meant to grow wealth and produce income. Stocks, bonds, and real estate help your money work for you overtime. While they can experience short-term volatility and uncertainty, most high-quality investments are built on solid foundations and have historically rewarded patience; those who can tolerate the ups and downs are almost guaranteed to come out ahead in the long run. The confusion comes when insurance products, like…

Companies Discussed: Compass, Inc. (COMP), PACCAR Inc. (PCAR) & Amazon, Inc. (AMZN)