Year End 2022 Investing Update

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For the month of December, the DOW lost 1282 points. That is a 9.4% loss for the year. Interest and dividend income was $7,786 for the month. Withdrawals for living expenses came to $1,177 for December. For 2022 my investments are down by 11%. My only trade for the month was to move funds from a checking account into a treasury money market fund. This will now generate over one thousand dollars each month. At the current rate it will take 7 years to make up the money that was lost in 2022. The amount was 2x what I paid for my first house, lost in one year. Only 4 out of the past 12 months were positive and 7 of those months were down by 5 figures. Any gains made during the past two years have been erased.

During a typical year, there are usually 4 or 5 down months. Eight down months is very rare. If you are still working and contributing to a 401k, down months can be good because you are adding more shares to your account. If you are retired, it can be much harder to recover from. I am reinvesting dividends from six mutual funds. But it isn’t quite as good as putting 8% of your salary into your 401k every month. During the first six months of 2022 my non-IRA income averaged $614 each month. During the last six months the average was $946. That shows the impact of the Fed’s interest rate hikes. I started withdrawing a small amount from my retirement account each month this past year. That money goes toward paying the monthly credit card bill. The idea is to have enough money coming in to pay for monthly expenses while you let tax deferred investments continue to grow.

At some point during the next year interest rates will stabilize and possibly come down, if the economy starts to show signs of weakness. Most investors will be waiting for that to happen before moving back into the stock market. There are always opportunities, but when you add higher interest rates into the equation, there isn’t much point to jumping back in when you can get a 4% return with very little risk. Conservative investors have been waiting for this for a long time. Unless you played the short game at the beginning of 2022, it’s too bad we had to lose a big chunk of our nest egg in short order to get here. We still have the war in Ukraine and a pandemic that looks like it is here to stay. The housing market is also hurting from rate hikes. The value of my home lost about 2% of its value in 2022. Meanwhile, property taxes and home insurance increase every year.

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