Headline: Save Money and Your Life?
Date: 12/5/2020
Body: I was reading this wonderful article in The Penny Hoarder, and something really hit me between the eyes. The article is linked below:
25 Ways to Save Money When You Don’t Know Where to Start (thepennyhoarder.com)
This article really gives some good food for thought (as it also gives thought to food.) and this is part of what I wanted to explore
Everything has its Season, everything has its Time…
Be very glad that this is not a podcast, else, you would’ve heard me sing that. All jokes aside, one of the tips from this article concerns the buying of food. Within the article, the tip is, “Shop Seasonally and Locally.” In the context of this article, it means that if you live in the Mid-Atlantic region, and it is either Summer or Fall, and you are looking for a vegetable, go towards any type of squash. This is good advice because if it is near (or in) the growing season, there is likely to be a LOT of squash.. And if they are local, distribution costs are nil (almost.) Because of these twin conditions, the prices of squash are likely to be low.
In a similar manner…
To get the best prices on merchandise, you might want to shop off-season. For instance, if you need a new gas grill, if you look to buy in April or May, you will find MANY people looking for the same thing at the same time. Manufacturers know this, and raise prices accordingly. But, nobody (almost nobody) is grilling in late October, so, when you go looking for grills, you will have less company. Manufacturers know this too, and thus offer price rollbacks to motivate people to buy the final units.
Are you going out of your gourd?
No, this has a point. When choosing investments like stocks or bonds, some of the same concerns apply. It is true, you cannot smell a stock, or pick it up and see how dense it is, but there are some similarities.
Seasonality
Just like in Nature, the financial markets have seasons. Instead of Fall, Winter, Spring and Summer, we have Recession, Growth, Maturation, Decline. It describes a sine wave, and acts pretty like the seasons. In the Recession times, the anti-cyclicals do well. (Think of these like stop-gap measures: Instead of a new car, you buy a used one. Instead of buying a new home, you fix up your current home.) Following this logic, the companies in these industries are likely to do well. As things ramp up, companies need more raw materials, so the price of commodities are likely to go up. In the maturation stage, technology stocks seem to do well (usually). And in the falling stage, financial services stocks tend to do well. However, the difference is that in the financial markets, investments are cheaper when they are NOT in their growing season. When you purchase investments “out of season” they are often “on sale” to encourage consumption.
Locality
OK, this one might be an over-extended metaphor, but I think it works. You might have a major facility of a company in your vicinity. You can see most of the employees are happy, you can see the “Now Hiring” signs up, and you can hear the gossip in the coffee shop. If you get a series of positive observations, it might be time to look at the numbers behind this company (which others might’ve overlooked.) To make things more concrete, you might live in or near Louisville, KY, and you note that the UPS air facility is always busy, the people seem relatively happy, and the gossip is good. So, you look at the numbers, and you decide that it might make a good investment, and you take a position. Your location might’ve given you access to information that others would’ve had to invest much time and money to discover.
Related, you might be employed in an industry, and that might make you a “local” who knows that neighborhood better than most. For instance, if you were a dog trainer, you might become aware of a new internet-based pet supply firm (e.g. Chewy) but many don’t see what the big deal is. Many might fear this to be another Pets.com, and shy away from the investment. But you like the way they seem to “get” owners, and pets, so you invest early. (Then you retire early.)
The Verdict:
Both Seasonality and Locality play a role in investment, just like any type of shopping. Buy at the right time, and in the areas that you have “local knowledge” and you are likely to get a much better price.
Editor’s Note: Please note that the information contained herein is meant only for general education: This should not be construed as Tax Advice. Personal attributes could make a material difference in the advice given, so, before taking action, please consult your tax advisor or CPA.