4 money must-knows for 2023
Investing tips to consider with high interest rates, inflation, and an uncertain financial outlook.
April 6, 2023
April is National Financial Literacy Month, and with that in mind we’d like to share some important things to think about when trying to make the most of your money in 2023.
1. Market volatility doesn’t have to discourage you
In a dream world, stock prices would only go up. But while market swings are a reality that we must deal with, they don’t necessarily need to be a cause for concern. When you’re investing for the long run a down market can actually be a good time to do it. Think of it like a sale at your favorite store—a chance to buy stuff you want when the price is cheap.
And if you have recent investments that aren’t looking great right now, remember that long-term investing is generally a sounder strategy than trying to buy low and sell high (we call it time in the market vs timing the market). Historically, whenever the market has dipped, eventually it has always bounced back stronger than before.
2. Stay ahead of inflation
Inflation remains an issue in 2023, and you may have noticed increases in things like grocery expenses, utility bills, or how much you’re paying for pizza delivery on Friday night. Simply put, your money just isn’t worth as much as it was a short time ago.
If you want to prevent your money from losing value, you need to do something that can allow it to grow at the same rate of inflation or higher. Investing in the stock market has the potential to do that (although there’s also a risk of your investment decreasing).
Read more: Beating inflation through investing
3. Diversify to reduce risk
Spreading your money around is a great way to lower the risk of your investments declining in value (here’s more on diversification and why it matters). One way to do this is to invest in ETFs or mutual funds, which can help to distribute your money across a variety of stocks, bonds, or other assets. Make sure to do your research—there are funds which are quite focused and provide little diversification.
Having your investments span different sectors, sizes, and regions will also better diversify them. If you’d like to do this while targeting a specific segment of the market (like clean energy for example, or the 500 largest US companies), an index fund might be what you’re looking for.
Read more: Diversifying with index funds
4. Let high interest rates work for you instead of against you
As interest rates continue to rise, opens in new window,1 it’s worth thinking about how you may be able to take advantage of this trend. Some possibilities include:
- Paying off your credit card bills or other high-interest debt. Eliminating the interest you’re paying on monthly installments could save you more in the long run.
- Earn money by saving money in an account that pays you interest at a high rate.
- Consider investing in bonds, or funds made up of a high percentage of bonds. Interest rates and bond prices tend to go in opposite directions, so when interest rates are high bond prices are usually low. But when interest rates drop again, the price of bonds will likely go back up.
There is always risk involved in investing, but understanding what factors are in play can help you better assess what to do with your money in 2023.
In the Plynk app, one of the options available to you is the ability to browse “foundational funds” with different levels of risk. The “less risk” choice offers funds that are primarily focused on bonds.