September proved to be a wild ride for both interest rates and inflation. We have your September market updates rounded up below.
Stock markets dipped at the end of August as investors reacted to Fed Chair Jerome Powell’s remarks from Jackson Hole. Powell stressed that the Fed would continue to hike interest rates to combat inflation.
Stock markets ended the first week of September higher as investors warmed up to the idea that further rate hikes could help with inflation.
New inflation numbers in mid-September showed a slowdown in August, with a sharp drop in gas prices. But costs for food, goods, and services were still high. Investors expected a bigger decline, resulting in a market pullback.
At the end of September, the Fed raised interest rates again — not a surprising move after the August inflation numbers came in high. The Fed also signaled another big rate hike to come before the end of the year.
As the Fed continues to use interest rates to steer the economy, here’s how that affects your investments.
Different types of investments weather changing economic environments differently. Let’s take a closer look at two types.
Shares in historically stable companies with a track record of turning a profit
Typically less volatile than growth stocks, even when interest rates are higher
Legendary investor Warren Buffet favors value stocks
Shares in fast-growing companies that need ample investments to grow, usually leading to lower profitability
Typically more volatile than value stocks, with bigger ups and downs
Higher interest rates can cause more volatility for growth stocks that haven’t produced high levels of profitability
Value stocks were a safe place to park your money over the past year as the Fed started tackling inflation. What type of stock will work from here? Why guess when you can diversify?
With an Acorns portfolio, you can gain diversified exposure to value stocks, growth stocks, and other assets, so your results aren't tied to just one thing.
Your portfolios mix is dependent on your risk profile.
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Dollar-cost averaging — or DCA — is as easy as this: making consistent investments, no matter what the market is doing.
Here’s a look at two hypothetical investors based on the performance of the S&P 500 in 2022 so far to illustrate this strategy in action.
Investor A makes a one-time investment of $512 in the S&P 500 on January 1, 2022, and doesn’t buy or sell any more shares from then on.
Investor B makes a daily $2 investment in the S&P 500 starting on the same day. By September, 2022, they’ve invested $512 in total.
So, who has more money now?
Investor B now has $480, compared to Investor A’s $420. While both investors are down in the short term, Investor B’s consistent investments weathered the S&P 500’s fluctuations so far in 2022 the best, beating the market by 12%!
Remember — every U.S. market downturn has ended in an upturn. By dollar-cost averaging in up and down markets and sticking with it, Investor B can smooth out their long-term returns, giving their money a better chance to recover and grow over time.
Ready to try dollar-cost averaging? Invest daily, weekly, or monthly with a Recurring Investment in your Acorns Invest account. Not an Acorns user? Sign up in under 5 minutes here.
This information is for educational purposes only and should not be considered investment advice or a recommendation to buy or sell any particular security, strategy, or investment product. Neither diversification or dollar cost averaging can ensure a profit or protect against losses. It involves continuous investing regardless of fluctuating prices levels.
Investments cannot be made in an index. Unmanaged index returns to not reflect any fees, expenses or sales charges. Past performance is not guarantee of future results and the index performance shown is not indicative of the performance of any Acorns portfolio. Example shown represents past performance of the S&P 500 from January 2022 to September 2022 .
This material has been presented for informational and educational purposes only. The views expressed in the articles above are generalized and may not be appropriate for all investors. The information contained in this article should not be construed as, and may not be used in connection with, an offer to sell, or a solicitation of an offer to buy or hold, an interest in any security or investment product. There is no guarantee that past performance will recur or result in a positive outcome. Carefully consider your financial situation, including investment objective, time horizon, risk tolerance, and fees prior to making any investment decisions. No level of diversification or asset allocation can ensure profits or guarantee against losses. Article contributors are not affiliated with Acorns Advisers, LLC. and do not provide investment advice to Acorns’ clients. Acorns is not engaged in rendering tax, legal or accounting advice. Please consult a qualified professional for this type of service.