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Technology is a better way of doing things. Marc Andreessen
🎡 What is Technology?
The wheel was technology when it came out, oil and gasoline were great technological advances at one point. Salt was an amazing technology that allow ancient cultures to turn bodies into mommies, it was used as a form of payment (SALary), to melt ice faster, and to signal wealth by accumulating it, among many other uses.
Today technology comes in many forms but is mainly thought of as the devices that allow us to speed up tasks, connect to the world, retrieve information, get educated, and work, and the superhighway that allows these devices to connect and interact.
We are witnessing exponential technological advances all around us, but we are still at a very early stage when it comes to this technology infiltrating and disrupting the major economic sectors of our world.
AI-Generated Matisse from the prompt: “How the world will be disrupted by tech.”
Like many ancient technologies, today’s technology is still adopted with skepticism and regulated by those bodies who benefit financially from the status quo and from “the way things ought to be.”
As a result of the arrival and explosion of digital currencies, blockchain, AI, genome tech, global satellite internet, sensors systems, automation, and many digital advancements, we will witness how technology will start biting at the larger sectors of GDP - Health, Education, Real Estate, Finance, Law, and Government.
How will technology infuse itself in every sector?
Here are a few examples:
Education:
One of the main motivators to go to school and educate ourselves is to get a better job or position within our industry. As employers and companies continue to change the criteria they use to hire workers and realize that an overprice, homogeneous, and outdated school curriculum is not providing students with the tools necessary to execute a job, they will search for candidates with real-life experiences, short but focus hands-on education, critical thinking skills, great communication skills, and exponential mindsets.
Some ways technology has already impacted education include:
Online learning:Online platforms offer a wide range of courses and educational resources for students to access from anywhere with an internet connection.
Personalized learning: AI-powered learning systems can adapt to each student's unique pace and learning style, providing a personalized educational experience.
Gamification: Games and simulations can be used to make learning more engaging and interactive and help students retain information better.
Virtual and augmented reality: VR and AR can be used to create immersive educational experiences, such as visiting historical sites or conducting virtual experiments.
Collaborative learning: Online tools and platforms allow students to collaborate and communicate with each other, regardless of physical location.
Overall, technology has the potential to greatly enhance the education experience by providing new and innovative ways to learn and interact with educational content.
🏥 Health
I am appalled at the fact that I don’t have easy access to my medical and dental records. This data should be saved on a private blockchain that I own allowing me to give and revoke access to doctors and other companies as needed. This technology exists but the bureaucracy does too, which impedes the ownership of certain data by those who should own it.
Some ways technology is already disrupting the healthcare system include:
Telemedicine: Patients can now consult with healthcare providers remotely, reducing the need for in-person visits and increasing access to care.
Electronic Health Records (EHRs): EHRs allow healthcare providers to store, manage, and access patient health information in a centralized and secure manner, improving patient outcomes and reducing medical errors.
Artificial Intelligence (AI): AI is being used to analyze patient data and make predictions about patient health, enabling healthcare providers to make more informed decisions and provide better care.
Wearables and remote monitoring: Wearable devices and remote monitoring systems allow patients to track their health data and share it with their healthcare providers, enabling them to better manage chronic conditions.
Robotic surgery: Robotics and automation are being used to assist in surgical procedures, reducing the invasiveness of procedures and improving patient outcomes.
Brain-computer interface (BCI)enables a person to control an external device using brain signals. BCIs could aid people with disabilities and improve any physical capability, among other uses. Implanter computer interfaces could be developed for other parts of the body to aid in functioning and communicate abnormalities to outward devices.
Overall, technology has the potential to greatly improve the healthcare system by providing new and innovative tools and solutions for delivering care, managing patient health, and improving patient outcomes.
Technology is disrupting finance in many ways, including:
Digital payments: The rise of digital payments and mobile banking is changing the way consumers interact with financial institutions and making transactions faster and more convenient.
Fintech: Financial technology (fintech) companies are using technology to provide new and innovative financial products and services, such as peer-to-peer (P2P) lending and robo-advisors.
Blockchain: Blockchain technology is being used to create secure and transparent financial transactions, reducing the need for intermediaries and improving efficiency.
Artificial Intelligence (AI): AI is being used to analyze financial data and make predictions, enabling financial institutions to make more informed decisions and improve the accuracy of their risk assessments.
Cybersecurity: As financial transactions become increasingly digital, technology is also being used to improve cybersecurity and prevent fraud.
Overall, technology has the potential to greatly improve the financial sector by providing new and innovative tools and solutions for managing money, making transactions, and reducing risk.
⚖️ Law
Technology has the potential to greatly disrupt the legal sector by improving efficiency, access to justice, and decision-making. Some ways technology is already disrupting the law include:
Online legal services: Online platforms are providing legal services, such as document drafting and legal advice, making it easier and more convenient for people to access legal help.
Artificial Intelligence (AI): AI is being used in legal research, contract analysis, and predictive analytics, improving the speed and accuracy of legal work and also there may be AI lawyers.
Electronic discovery: Electronic discovery tools are being used in the litigation process to search, identify, and produce electronic documents and other digital data, streamlining the discovery process.
Online dispute resolution: Online dispute resolution platforms are being developed and used to resolve disputes, reducing the need for in-person hearings and improving access to justice.
Blockchain: Blockchain technology is being explored for its potential to improve the security and immutability of legal records, as well as for smart contract automation.
Overall, technology has the potential to greatly improve the legal sector by providing new and innovative tools and solutions for accessing legal services, conducting legal work, and resolving disputes.
Conclusion: technology has never ceased to advance and evolve. From the wheel to the printing press from automobiles to aviation, from dial-up internet to AI, advances will continue to exponentially grow and at faster rates. Regardless of regulations (i.e. crypto regulation), politicians and the government prohibiting access to certain networks, and laws that put developers behind bars, we will live in a world run by technology. What we shall do is learn as much as possible about these techs, understand them and use them to our advantage without ever losing our humanness.
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Good Thursday to you. According to a new Vanguard study, can you guess what percent of 401(k) investors are not contributing enough to qualify for their full employer match? a. 6%, b. 19%, c. 34%. Follow the wave 🌊 below for the answer.
The money topics for today are:
The new 60/40 portfolio
The oldest ETF turns 30
The difference that 1% can make
INVESTING
The New 60/40 Portfolio
The idea of the 60/40 portfolio was born over 70 years ago in the 1950s when Harry Markowitz, an economist and professor, began pioneering the idea of the modern portfolio theory (MPT).
The concept says that a portfolio's asset mix should be optimized for the greatest expected return given a level of risk and that investors should hold uncorrelated assets to minimize that risk. In layman's terms — diversification within your portfolio is key.
Subsequently, the 60/40 (stocks to bond ratio) portfolio was created as a standard way to invest. Given the exceptionally weird times we're in now though, some big players are betting on a big shift in the 60/40 allocation this year.
What's happening to the 60/40?
It's important to mention that the 60/40 portfolio is simply an outline — a guide — not an exact science. While it does suggest that mid-aged/moderate-risk investors hold roughly 60% stocks and 40% bonds, it doesn't specify exactly which stocks or which bonds should be held.
Historically speaking, the prototypical model of the 60/40 which holds something like $VTI and $BND has earned investors an annual average return of 7.87% going back 3 decades. As you may guess, the portfolio's best and worst years often coincide with the stock market's movement overall, and 2022 was one of its worst years on record — losing 16%.
Recent years: However, that return has been boosted if we zoom in. Since the financial crisis 14 years back, the portfolio has returned 11.5% per year on average. Since 1980, there have been 9 occasions where the 60/40 dropped more than 10% in a given year (one of which was last year). In 5 of those years, the portfolio ended the year green, and returns were positive in 8/9 years following that slump, with an average return of +17%.
As for 2023: 2022 was an abnormally bad year for the 60/40 as bonds didn't hold up their hedging end of the bargain, but in 2023 that's expected to flip. The bond market's plummet means that yields are now at a high point, and investors are piling in to take advantage.
Playing it: Yields are becoming so lucrative that some firms like BlackRock are suggesting only a 35% allocation to stocks with a 65% nod to bonds. It's valiant to assume such lofty performance from bonds, but there's no denying their rebound. Thus far, both stocks and bonds are off to a great start for the year.
Going forward
There's never a perfect one size fits all approach to investing, but these guidelines like the 60/40 rule of thumb have proven to be a great ideological starting point. Opinions regarding 2023's deviation in the proper allocations here are yet another example of how things change over time.
Take this related lesson on this topic and earn Dibs 🟡 while you're at it:
Investing has been around for a long time, but the modern versions of it are still relatively young. Just last week, the first-ever ETF launched by State Street turned 30, and the $SPY which tracks the S&P 500 Index remains the largest fund today by many measures.
This millennial ETF kicked off a revolution in the name of low-cost, passive investing that's helped make the markets more understandable and changed the way we invest for good.
Changing history
ETFs over time: ETFs began with a disruptive idea challenging their mutual fund counterparts, but maybe at the wrong time. Investment banks were resistant to the newcomer and not a fan of the funds' seemingly low-cost, free-range structure that made it more difficult to profit on. Despite its eventual success, the $SPY was a slow burner just like its counterparts, and ETFs only had $2.4B under management by 1996.
The climb: By 2003, there were 123 U.S.-listed ETFs and about 1,000 by 2011. And today, there are over 2,700 publicly traded U.S. ETFs, collectively holding more than $7T in assets under management (AUM). $SPY today holds more than $380B in AUM.
Less is more: The original resistance met by ETFs was eventually overcome by the realization that when it comes to investing — less is more. Less fees, less trading, less aiming for the perfect stock selection, and just indexing the broad market — letting it do its thing.
Recent boom: ETFs have exploded even more in recent years since the pandemic gave way to a newfound love for investing across younger generations. While they still lag behind mutual funds by over $16T dollars, the gap is closing faster than ever.
As for the future
Despite some sparse claims to shed light on a potential market bubble caused by ETFs' popularity, these efforts have mostly been disproven for now. Investors continue to pour cash into these funds at an exceedingly high rate, and their low fee, and simplistic nature will likely keep them atop the market for the foreseeable future.
Take this related lesson on this topic and earn Dibs 🟡 while you're at it:
Planning for retirement is an inexact science for all of us, but one thing that's a constant truth is that the more you invest now, the more you'll have later.
Prices have always gone up, and the cost of retirement goes up with it. This has been exceedingly true the last couple of years as we've endured historic levels of inflation and economic uncertainty, making it more important than ever to sock away more dollars for the future.
A drop in the bucket matters
Contribution changes: The IRS made bigger-than-usual changes to our retirement account contribution limits in 2023 to account for the rising cost of living. Work-sponsored retirement plan contribution limits are going up by $2,000 to $22,500 for 2023, up from $20,500 in 2022 for those under 50. And the additional contribution allowed for those over 50 is increasing by $1,000 to $7,500 in 2023, up from $6,500 in 2022.
Increasing your contribution regularly: A recent study by Fidelity showed that for those not already maxing out their contributions, increasing your investments by just 1% annually can make a substantial difference come retirement. While a 1% increase may not seem like much (and that's precisely the point!), that additional 1% can make a big difference decades later. For example, a 35-year-old making $60K could potentially accrue an extra $85K by age 67.
Automate it: If your plan allows for it, setting up an automatic annual increase is the ideal hands-off approach to take here. And it takes only seconds to do.
Take this related lesson on this topic and earn Dibs 🟡 while you're at it:
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🌊 BY THE WAY
💰 Answer: 34% of 401(k) investors are not contributing enough to qualify for their full employer match (Vanguard)
🏛️ Fed raises rates a quarter point, expects 'ongoing' increases (CNBC)
🍏 Whole Foods asked suppliers to lower costs so they can cut costs to consumers (The Daily Wire)
🧭 ICYMI. How to navigate a world of expensive debt (Finny)
🏪 Why urgent care centers are popping up everywhere (CNN)
Finny is a financial wellness platform for employees. The Gist is Finny's twice-a-week (Tues & Thurs) newsletter covering personal finance, market trends and investing insights. The content team: Austin Payne, Carla Olson. Finny does not offer investment and stock advice.
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