Today's sponsor

Hey Money Maniacs,

Welcome back to another edition of 5 Fact Friday! Here are this week’s biggest stories in the world of money:

1. 20% More 401(k) Millionaires 📈

Ever thought that hitting the millionaire mark with your 401(k) was a pipe dream? Well, the latest scoop from Fidelity might just change your mind.

Last year, the ranks of 401(k) millionaires grew by 20% in a single quarter.

That's right, maniacs. Consistent saving isn't just smart, it's millionaire-making! 💼💵

Let's dive into the digits.

The average 401(k) balance soared to $118,600 by the end of the fourth quarter, up 14% for the year.

But here's where it gets really interesting – Gen Xers who've been contributing for 15 straight years have an average balance of more than $500,000. That puts this entire cohort of 44 to 59-year-old savers on track for a comfortable retirement.

The younger crowd is making waves too. Gen Z opened 50% more Roth IRA accounts in 2023, and increased their contributions.

What's the secret?

Well, it's not so secret after all. It’s clear that a seven-figure net worth is within reach for those who:

• Make steady contributions

• Maximize that employer match (like 78% of savers!)

• Participate in market growth (i.e. own stocks)

With an average total savings rate of ~14%, reaching millionaire status is less about catching a lucky break and more about consistent effort over time.

So, if you've been on the fence about ramping up your 401(k) contributions, consider this your sign. And if you're not already contributing, it's never too late to start. Your future self will thank you! 🙌

The Wine Club Supporting Independent Winemakers

Take a flavor quiz to be matched with your perfect 6pk of wine and get $100 off your first order for $39.99 shipped. Customers only pay for wines they love - no questions asked. It’s the best way to get personalized shipments from award-winning indie winemakers. 

Take the quiz now

2. Crypto Rally Crashes Coinbase 👀

Ahh, it’s always a wild ride in the crypto world! This week, Bitcoin led the charge, and Coinbase... well, took a bit of a nosedive.

First off, Bitcoin's been partying like it's 2021, with ETF issuers scooping up BTC like there's no tomorrow. We're talking 10x more Bitcoin than what those hardworking miners can get their hands on.

As of Thursday afternoon, Bitcoin is trading at ~$62,000. That’s up 20% in a week and 45% in a month. (Nvidia, who?!)

Part of this demand is thanks to institutional investors beginning to allocate a small percentage of their funds to Bitcoin.

Fidelity Investments goes a step further, suggesting that investors devote 1% to 3% of their portfolios to crypto. With $12.6 trillion in assets today, that recommendation has the power to generate demand of 2 million Bitcoin at today’s prices.

But crypto never moves in a straight line, does it?

Here's the latest twist: Coinbase, the trusty steed of many a crypto trader, hit a technical snag right as Bitcoin flirted with $64,000.

Users faced the horror of seeing zeroes where their balances should be, sparking a social media frenzy. Was it a hack? A "rug pull"? Or just the universe's way of saying, "Chill, the bull market is here"?

Coinbase reassured everyone that their assets were safe, blaming the chaos on a massive spike in traffic. Meanwhile, Bitcoin did a dramatic dip and then bounced back, because what's a day in crypto without a little heart-stopping action?

3. Food Costs Keep Rising 🤨

Have you noticed your grocery bill creeping up month after month? Well, you're not alone.

With Americans now dedicating 11.3% of our disposable income to food, the highest since the early '90s, it's clear we're all in the same boat – and just trying not to sink.

So, what's the game plan?

Many of us are turning into coupon ninjas, clipping up newspapers and using cash-back platforms like Rakuten (guilty).

Others are getting down and dirty in the garden, growing their own veggies at a fraction of the cost. And we can’t forget about the DIY hunters and fishers out there, stocking the freezer with nature's bounty. 🎣🦌

For many, meal planning has become less about what we're craving and more about what's on sale. Kellogg’s CEO even suggested eating cereal for dinner to save a few bucks. But maybe he’s biased.

Of course, the shift to more budget-friendly eating comes with its challenges. Not everyone has the space for a garden or the means to bulk buy. Not everyone qualifies for that senior discount or has the social circle for a potluck.

So, as we all try to keep our kitchens stocked without breaking the bank, I'm curious:

4. Reddit Files For IPO 🚀

Back in January, we discussed the possibility of the IPO party kicking off again. Well, it looks like Reddit might be first to the punch bowl!

Reddit officially filed its S-1 with the SEC, which is basically like sending out invites for its public debut. This hefty document spills the tea on Reddit's financials and business plans, all laid out for investors and the SEC to review.

The platform, known for its buzzing communities like r/wallstreetbets and r/todayilearned, aims to grace the NYSE under the ticker $RDDT. With over 73 million daily scrollers, it will be the first social media company to IPO since Pinterest in 2019.

Last year, the company’s sales grew 21% to a cool $804 million and its net losses shrunk 43% down to $91 million.

Reddit is still heavily under-monetized compared to other platforms with a $3.42 ARPU (average revenue per user). It’s up to investors to determine whether this is an opportunity for growth or a fundamental flaw in the forum’s culture.

Meanwhile, the company is also exploring a shiny new revenue opportunity – AI data licensing contracts.

Reddit has already signed $203 million worth of contracts with companies, including Google, that wish to train their large language models on Reddit’s forums without risk of legal backlash.

If all goes according to plan, Reddit is eyeing an early March debut and a $5 billion valuation. That's a bit of a tumble from its $10 billion private-market valuation back in 2021, but hey, who doesn’t love a comeback story?

Are you ready to take your investing game to the next level?

We empower investors like you with a daily newsletter which includes the insights needed to stay informed and make profitable decisions in the stock market.

Join Millions Who Trust The Early Bird

5. Asset Classes: Volume 2 - Bonds 💵

Imagine lending money to your friend, and in return, they promise to pay you back with a little extra for your troubles. That's a bond in a nutshell.

Mechanically, bonds are loans—often to a corporation or government entity—for a certain period of time at an agreed-upon interest rate.

In general, higher interest rates come from riskier borrowers. After all, you should only ever accept more risk if the price is right.

Keep in mind that bond investors do not own any equity in the underlying company.

Instead, they receive regular interest payments over the life of the loan. Plus, at maturity, the borrower repays the loan to the investor.

Are bonds safe?

Just like you and me, bonds are assigned credit ratings. But instead of Equifax and TransUnion assigning a score, bonds are rated by agencies like Moody's, Standard & Poor's (S&P), and Fitch.

These agencies are not infallible, but they do help investors get a sense of the bond issuer’s ability to pay back the loan.

Here are a few high-level bond categories, ranked from safest to least safe.

1. United States treasury bonds: Almost no risk

2. Investment-grade bonds (Apple, Coca-Cola, Honda, Visa, etc): Little risk

3. Non-investment grade bonds (known as high-yield bonds or “junk” bonds): High-risk

Why invest in bonds?

Bonds are a lower-risk, lower-reward alternative to stocks. They offer a reliable stream of income through interest payments, making them a popular choice among retirees. 

If you’re looking for lower volatility and a more predictable return on investment, bonds are for you. If you’re looking for a way to balance out the roller coaster ride of stock investments, bonds are for you too.

How to think about bonds

In most cases, bonds should not make up your entire portfolio. However, they’re a great yin to the yang of stocks.

The traditional 60/40 portfolio suggests allocating 60% of your investment portfolio to stocks for growth and 40% to bonds for income and stability.

But of course, the 60/40 portfolio isn't a one-size-fits-all solution. Depending on your age, financial goals, and risk tolerance, you can tweak these percentages.

Younger investors might lean heavier into stocks for growth, while those closer to retirement could prefer the safety net of bonds.

And there you have it, folks—a quick dive into the world of bonds. Where will we go next week? Only time will tell!

Thanks for tuning into this week's edition! If you enjoy 5 Fact Friday, follow me on Instagram and Twitter to stay in touch.

For more, check out my latest blog post titled: 9 Investment Models That Top Investors Swear By

Until next time,
Daniel

DISCLAIMER: None of this is financial advice. This newsletter is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. Please be careful and do your own research.