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Data shows that investment portfolios with lower annual fees ultimately offer investors the best value.
Many individuals have moved toward lower-cost investment options that have popped up in recent years.
Experts say that investors can be mindful of their expenses by reducing the frequency of their trading activities, which would lower overall transaction costs.

katleho Seisa | Getty

High fees can take a bite out of your portfolio returns, but the good news is that it’s becoming cheaper to invest.
Financial services firms charge clients a fee to invest their funds, typically withdrawn from their investment assets. When costs are high, they eat into returns over time.

Consider that over a 20-year period, an investment portfolio that’s generating a 4% annual return but assessed a 1% fee could lose nearly $30,000 more than a similar portfolio with a 0.25% annual fee, according to the U.S. Securities and Exchange Commission.
Indeed, costs are going down as asset management firms compete for clients’ dollars. Expense ratios on equity mutual funds averaged 1.04% in 1996, according to the Investment Company Institute. They tumbled to an average of 0.5% in 2020.
“In the retail fund market where products compete to be bought… costs have never been lower. Investors can get a globally diversified portfolio for less than 10 basis points, which is terrific,” Micah Hauptman, director of investor protection at the Consumer Federation of America, said. 
Why has it become cheaper to invest?
Some experts believe a major catalyst behind this trend is an increased awareness among individual investors, leading many to become more price conscious.
“Consumers have learned that costs are directly, or inversely, correlated to return,” Ron A. Rhoades, director of the personal financial planning program in Western Kentucky University, said. “Basically, higher fees and cost equals lower returns. A lot of academic evidence backs that up.”

Rhoades said the cost of investing has also fallen over time due to the rise of fiduciary investment advisors, who are required to act in their clients’ best interest and aim to keep expenses low, as well as online robo-advisors that offer financial services at a cheaper rate. 
“That’s put a lot of pressure on the asset management industry to come up with lower-cost solutions because that’s what investment advisors are requiring,” Rhoades said.
Increased competition, notably in the ETF market and between direct-sold mutual funds, has also contributed to lower investment costs, Hauptman said.
An additional catalyst toward the declining cost of investing, Rhodes added, are mandates from the Labor Department that went into effect more than a decade ago.
These rules require retirement plan service providers to disclose fees to plan sponsors and called for employers to issue fee disclosures to individuals participating in workplace retirement plans. This led savers to pay closer attention to costs, Rhoades said.
How investors can be mindful of their expenses 
Investors need to assess their fees in relation to the value they are receiving from their investments, Hauptman said. Most financial advisors charge clients based on how much money they manage for them, which is typically about 1% of assets. Some financial advisors may charge a flat fee or bill by the hour.
“It’s important for investors to not just look at one piece of the investing puzzle to the extent that they’re getting products and services,” Hauptman said. “They need to consider all of the costs that they’re paying, because all of the costs will ultimately erode their total returns over time.”
Sheryl Garrett, a certified financial planner and founder of the Garrett Planning Network, advised newer investors trading individual securities to do so minimally, and keep the rest of their investments “plain vanilla” in order to reduce the amount of recurring transaction costs.
Here are three steps to keep a lid on investment fees:
Check your expense ratios: Do some comparison shopping as you look through mutual funds and ETFs. Investment fees have come down considerably in the last couple of decades, but fund managers may charge more for eclectic offerings, such as strategies that focus on alternative investments.
Watch for other costs: If you’re investing through a brokerage account, keep an eye out for transaction fees, which can be very painful for the most active investors. Some firms also charge for broker-assisted trades. In a 401(k) plan, you could face costs in the form of administrative expenses – and those are in addition to the fund fees you pay.
Know how your financial advisor is paid: Ask up front whether your financial advisor is a fiduciary. Does your advisor charge based on assets under management, or does he offer a flat fee? Does he receive any commissions for products he recommends to you? Get these details in writing and be sure you understand them before you hire this professional.
Ultimately, the best investment is for individuals to become self-educated about their finances, Garrett said.

As part of its National Financial Literacy Month efforts, CNBC will be featuring stories throughout the month dedicated to helping people manage, grow and protect their money so they can truly live ambitiously. More

As Republicans push for a plan to address the nation’s debt ceiling, experts are warning a debt default could have big consequences.
That could interfere with the country’s ability to issue Social Security payments, Treasury Secretary Janet Yellen said this week.
Here’s what experts say could be at stake as the debt ceiling negotiations move forward.

Speaker of the House Kevin McCarthy, R-Calif., speaks to reporters in Statuary Hall in the U.S. Capitol after announcing his debt limit increase plan on the House floor on April 19, 2023.
Bill Clark | CQ-Roll Call, Inc. | Getty Images

As Republicans scramble to put together a plan to fix the nation’s debt limit, experts are warning a failure to address the issue could have dire consequences for Americans’ finances.
“In my assessment — and that of economists across the board — a default on our debt would produce an economic and financial catastrophe,” Treasury Secretary Janet Yellen said in a speech Tuesday in Sacramento, California.

Residents of the California capital could lose their jobs, she warned. Meanwhile, payments would go up on mortgages, auto loans and credit cards.
“On top of that, it is unlikely that the federal government would be able to issue payments to millions of Americans, including our military families and seniors who rely on Social Security,” Yellen said.
More from Personal Finance:GOP senator touts ‘big idea’ Social Security funding fixExperts argue Social Security retirement age should not pass 67The return on waiting to claim Social Security is ‘huge’
A default on the U.S. debt would be unprecedented, as the country has paid all its bills on time since 1789, Yellen noted.
The extraordinary nature of such an event has called into question how the government would juggle payments, including Social Security benefit checks.

The U.S. Department of the Treasury would likely prioritize the payment of Social Security benefit checks, Jason Fichtner, a former Social Security Administration executive and vice president and chief economist at the Bipartisan Policy Center, told CNBC.com in January.
However, it is possible the Social Security Administration would delay payments to ensure it has enough cash on hand, he said.

More broadly, the Bipartisan Policy Center is watching the “X date” range, the point by when leaders need to act to protect the economy.
The U.S. hit its statutory debt limit in January, prompting it to start paying the government’s obligations through extraordinary measures.
But it can only do that for so long. Yellen previously said it is unlikely the cash will be exhausted before early June. In February, the Congressional Budget Office said the emergency measures to prevent a debt default may be exhausted sometime between July and September.
The Bipartisan Policy Center is currently working on a new “X date” projection that would factor in delayed income from federal tax returns that have been deferred until October, according to Shai Akabas, director of economic policy at the center.

A default on our debt would produce an economic and financial catastrophe.

Janet Yellen
U.S. Secretary of the Treasury

Early June is a time period the Washington, D.C.-based think tank is watching, Akabas said.
“It may be that in order to minimize risk, Congress would need to act before that time frame,” Akabas said.
But while Social Security payments may still go out, others are worried about the ramifications the Republicans’ proposed spending plan could have on the Social Security Administration’s funding.
On Tuesday, the National Committee to Preserve Social Security and Medicare wrote a letter to Congress urging leaders to oppose the Limit, Save, Grow Act of 2023.

The bill calls for limiting fiscal year 2024 discretionary spending to 2022 levels, which would result in a 6% cut to all agencies for the year, according to Max Richtman, president and CEO of the National Committee to Preserve Social Security and Medicare.
“The Social Security Administration (SSA) is a key agency that would be negatively impacted by such a dramatically reduced funding level,” Richtman wrote.
Such a funding cut would result in longer wait times for benefits and assistance, and could reduce access for in-person services, he said.
However, it is still too premature to know exactly the cuts the Social Security Administration or other agencies may face under the plan, according to Akabas. Notably, the Republican plan is far from a done deal, he noted.
“Even if that passes, it’s dead on arrival in the Senate, and the president has said that he would veto it,” Akabas said. “So there is no way that that is going to be enacted into law.”
However, now that House Republicans have put their opening offer down on paper, that may help open both sides of the aisle to a substantive discussion, he said. More

The Supreme Court’s decision on student loan forgiveness will be especially meaningful for borrowers who started college but never finished.
For them, managing education loans without the benefit of having higher earning potential is especially difficult.

Why more students are dropping out of college

Although college enrollment declines have leveled off overall, the number of students who started college but then withdrew rose 3.6% in the 2020-21 academic year, according to the National Center for Education Statistics. There are now more than 40 million students who are currently unenrolled.
“Growing numbers of stop-outs and fewer returning students have contributed to the broader enrollment declines in recent years,” said Doug Shapiro, executive director of the National Student Clearinghouse Research Center.
Among students who put their education on hold, most said it was due to a loss of motivation or a life change, according to a report by education lender Sallie Mae. Others cite financial concerns, followed by mental health challenges.

“There’s a variety of issues students face in college, many unexpected,” said Rick Castellano, a spokesperson for Sallie Mae. “In some cases, it could be an unpaid bill.”

Students with ‘some college’ more likely to default

If Biden’s plan to cancel $400 billion in student loans is blocked, default rates may spike, the U.S. Department of Education has warned.
But the borrowers most in jeopardy of defaulting are those who start college but never finish.
“If you are a student who has some college but no degree you didn’t realize the benefit of that education and it’s even more difficult to repay the loan,” Castellano said.
The default rate among borrowers who leave with student debt but no degree is three times higher than the rate for borrowers who have a diploma.  
If a student defaults, it’s not only a loss for them, but also for the institution of higher education and the federal government, Castellano added. “It’s a key moment for all of those stakeholders.”

Forgiveness ‘is really focused on the back end’

Meanwhile, college is only getting more expensive. Tuition and fees plus room and board, books and other expenses for a four-year private college averaged $57,570 in the 2022-23 academic year; at four-year, in-state public colleges, it was more than $27,940, according to the College Board, which tracks trends in college pricing and student aid.

Arrows pointing outwards

Next year, some colleges said they will hike tuition even more, citing inflation and other pressures.
Still, many would-be students believe that getting a degree is worth it and continue to borrow to make college possible.
“Regardless of where the Supreme Court lands, forgiveness as a solution is really focused on the back end,” Castellano said. “It could absolutely help, but how do we ensure we’re not back in the same place five years from now?”
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SAGECents is a free app, designed to boost financial literacy among older LGBTQ+ Americans.
It’s a partnership between SAGE, a national organization dedicated to improving the lives of older LGBTQ+ people, and LifeCents, a financial wellness platform.
“They’ve faced a lifetime of discrimination and social stigma, so they’re at higher risk to face poverty, homelessness and poor health outcomes than their peers,” said Christina DaCosta at SAGE.

Willie B. Thomas | DigitalVision | Getty Images

Financial stability is a concern for many older Americans, and challenges can be greater among marginalized groups such as elders in the LGBTQ+ community. But a free financial literacy app called SAGECents is looking to change that.
LGBTQ+ Americans are less likely to feel confident about having enough for a comfortable retirement, according to a 2022 survey from the Employee Benefit Research Institute.  

What’s worse, 1 in 5 older LGBTQ+ adults faced poverty during the Covid-19 pandemic, a 2023 study from the Williams Institute at UCLA’s School of Law found.   

As part of its National Financial Literacy Month efforts, CNBC will be featuring stories throughout the month dedicated to helping people manage, grow and protect their money so they can truly live ambitiously.

“They’ve faced a lifetime of discrimination and social stigma,” said Christina DaCosta, chief experience officer at SAGE, a national organization dedicated to improving the lives of older LGBTQ+ people. “So they’re at higher risk to face poverty, homelessness and poor health outcomes than their peers.” 
Launched in 2020, SAGECents is a partnership between LifeCents, a financial wellness platform, and SAGE, with financial support from the Wells Fargo Foundation.
The app was developed based on survey feedback from the SAGE community, according to DaCosta. “We know that this is a population in need of support, especially financially,” she said.

How SAGECents works

The app uses a chatbot and gamification — where user interactions are akin to playing a video game — to address topics like budgeting, retirement savings, debt, credit scores and more, with prompts to automate savings or check credit reports, for example. The data isn’t sold to third parties or used to upsell products, according to SAGE.

“We learned so much from different members of the community,” DaCosta said. “And that allowed us to really tailor the app to reach the different micro audiences within the community.”

They’re at higher risk to face poverty, homelessness and poor health outcomes than their peers.

Christina DaCosta
Chief experience officer at SAGE

There are links to customized resources throughout the app, including guides on Medicare for the LGBTQ+ community, Social Security for same-sex couples, estate planning for transgender individuals and more.
SAGECents users also have access to one free session from a financial counselor with the Association for Financial Counseling and Planning Education designation.
Within its first two years, more than one-half of SAGECents’ 1,200-plus users reported reduced debt and improved credit scores, according to a news release from the organization.

Why LGBTQ+ elders face more challenges

Ilan Meyer, senior scholar of public policy at the Williams Institute at UCLA’s School of Law, who co-authored the recent report, said there are several reasons why older LGBTQ+ Americans may face greater financial difficulties than the general population.
Older LGBTQ+ Americans are more likely to be single and to live alone, making them less likely to benefit from a partner’s health insurance or other “social welfare structures,” he said.
“You also have greater potential for alienation from biological families, especially in the older generation,” Meyer said. “And they’re less likely to have children, which is certainly a huge source of support for older adults in the U.S..”

What’s more, LGBTQ+ Americans are less likely to work with a financial advisor, according to the EBRI survey.
“When you’re a member of a stigmatized group, you’re more likely to be apprehensive or suspicious of services,” said the Williams Institute’s Meyer. “I’m glad to hear SAGE is doing this because I think for some people it might be a trustworthy source.” More

Recessions over the last half a century have ranged from 18 months to just two months.
Federal Reserve economists believe the next downturn may stick around for longer than usual.

Suriyapong Thongsawang | Moment | Getty Images

How long economic recessions last

Yet the next slowdown may not leave so quickly.
Federal Reserve economists are predicting that there will be a mild recession later this year, “with a recovery over the subsequent two years,” according to the minutes of the Fed’s March 21-22 meeting.
Because the economists blame the recent turmoil in the banking industry for the impending economic trouble, they expect the pain to endure for longer than usual: “Historical recessions related to financial market problems tend to be more severe and persistent than average recessions,” staff noted in the minutes.
Indeed, the longest recession in recent decades was the 2008 financial crisis, which slogged on for 18 months.

Another tricky aspect to the current economic conditions is that the Federal Reserve is deliberately trying to slow economic growth in the hopes of getting inflation under control, said Preston Caldwell, the chief U.S. economist at Morningstar. Cutting rates usually helps the economy rebound from downturns.
Still, Caldwell expects that the central bank will tame inflation by the end of this year, and be able to start bringing rates down in 2024, at which point the economy would start its recovery.

Preparing for a downturn

If you are worried about a recession and possible job loss, Cathy Curtis, founder and CEO of Curtis Financial Planning in Oakland, California, recommends updating your resume so that you’re as prepared as possible to look for a new position should you need to.
Keeping in touch with a network of people in your field can also help you learn about open positions or even get a referral, said Curtis, who is a member of the CNBC Financial Advisor Council.
Having a solid emergency savings account, anywhere from three months to a year’s worth of expenses salted away, is one of the best safeguards to help ride out a downturn without having to go into debt, experts say. More

Choosing whether to rent or buy has never been a simple decision — and this ever-changing housing market isn’t making it any easier. With surging mortgage rates, record rents and home prices, a potential economic downturn and other lifestyle considerations, there’s so much to factor in.
“This is an extraordinarily unique market because of the pandemic and because there was such a run on housing so you have home prices very high, you also have rent prices very high,” said Diana Olick, senior climate and real estate correspondent for CNBC.

By the numbers, renting is often cheaper. On average across the 50 largest metro areas in the U.S., a typical renter pays about 40% less per month than a first-time homeowner, based on asking rents and monthly mortgage payments, according to Realtor.com.
In December 2022, it was more cost-effective to rent than buy in 45 of those metros, the real estate site found. That’s up from 30 markets the prior year.
How does that work out in terms of monthly costs? In the top 10 metro regions that favored renting, monthly starter homeownership costs were an average of $1,920 higher than rents.
But that has not proven to be the case for everyone.
Leland and Stephanie Jernigan recently purchased their first home in Cleveland for $285,000 — or about $100 per square foot. The family of seven will also have Leland’s mother, who has been fighting breast cancer, moving in with them.

By their calculations, this move — which expands their space threefold and allowing them to take care of Leland’s mother — will be saving them more than $700 per month.

‘You don’t buy a house based on the price of the house’

“You don’t buy a house based on the price of the house,” Olick said. “You buy it based on the monthly payment that’s going to be principal and interest and insurance and property taxes. If that calculation works for you and it’s not that much of your income, perhaps a third of your income, then it’s probably a good bet for you, especially if you expect to stay in that home for more than 10 years. You will build equity in the home over the long term, and renting a house is really just throwing money out.”
Mortgage rates dropped slightly in early March, due to the stress on the banking system from the recent bank failures. They are moving up again, although they are currently not as high as they were last fall. The average rate on a 30-year fixed-rate mortgage is 6.59% as of April — up from 3.3% around the same time in 2021.
But that hasn’t significantly dampened demand.
“As the markets kind of bubbled in certain parts of the country and other parts of the country priced out, we’ve seen a lot of investors coming in looking for affordable homes that they can buy and rent,” said Michael Azzam, a real estate agent and founder of The Azzam Group in Cleveland.
“We’re still seeing relatively high demand” he added. “Prices have still continued to appreciate even with interest rates where they’re at. And so we’re still seeing a pretty active market here.”

Buying a home is part of the American Dream

The Jernigans are achieving a big part of the American Dream. Buying a home is a life event that 74% of respondents in a 2022 Bankrate survey ranked as the highest gauge of prosperity — eclipsing even having a career, children or a college degree.
The purchase is also a full-circle moment for Leland, who grew up in East Cleveland, where his family was on government assistance.
“I came from a single-mother home who struggled to put food on the table and always wanted better for her children … it was more criminals than there were police … It is not the type of neighborhood that I wanted my children to grow up in,” said Jernigan.
The new homeowner also has his eye on building a brighter future for more children than just his own. Jernigan plans to purchase homes in his old neighborhood, renovate them and create a safe space for those growing up like he did.
“I’m here because someone saw me and saw the potential in me and gave me advice that helped me. … and I just want to pay it forward to someone else” Jernigan said.
Watch the video above to learn more. More

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Employers plan to hire just 3.9% more college grads in 2023 than they did in 2022, according to the National Association of Colleges and Employers spring job outlook.
Graduates can benefit from casting a wide net: Apply to a lot of jobs and be open to jobs in other industries that might be looking for your skill set.
In a tight job market, you may also need to work on your interviewing game to land that first job.

A graduating student of the City College of New York wears a message on his cap during the College’s commencement ceremony in the Harlem section of Manhattan.
Mike Segar | Reuters

This was adapted from CNBC’s Work It newsletter on LinkedIn about all things work — from how to land the job to how to succeed in your career. Click here to subscribe.
It’s almost time for the class of 2023 to take the stage, toss their hats in the air and, eventually, enter the workforce.

As if having the distinction of being the first graduating class to have been affected by Covid for all four years of their college life wasn’t enough, now they’re also graduating into a tough job market. With daily headlines about layoffs and the possibility of a recession, many employers are scaling back plans to hire new grads.
Employers plan to hire just 3.9% more college grads in 2023 than they did in 2022, according to the National Association of Colleges and Employers spring job outlook. That’s down sharply from a projection of a 14.7% hiring increase when employers were surveyed in the fall.
More from Personal Finance:How new grads can better their odds of landing a jobHere are the first moves to make if you lose your jobHow to understand your financial aid offer
Some of this is due to companies that really ramped up hiring in the past few years as the economy started to recover from the pandemic, and then started to back off amid an uncertain economic outlook.
“Some industries that planned large increases in the past are cutting back on their college hires,” said Shawn VanDerziel, the executive director of NACE. “This is especially true for technology companies, which are laying off employees after hiring in large numbers during the pandemic.”

The tech industry has experienced the most layoffs of any sector — accounting for nearly 40%, of all layoffs according to Challenger, Gray & Christmas — and they’re also seeing some of the most dramatic declines in hiring new grads.

Arrows pointing outwards

Source: NACE

Employers in the information industry said in the fall that they expected to hire 87% more graduates than they did a year earlier. Now, they are projecting a 17% decrease in hiring. Computer electronics manufacturers are expecting to increase hiring by about 19.1%, down from an expectation of a 41% increase in the fall.
Regardless of what you majored in or what industry you are targeting, there are a few things that you can do to find that first job after college despite the tough job market.

1. Apply across different industries and locations

A lot of grads have a specific idea of what type of job they want after graduation. But you can benefit from casting a wide net: Apply to a lot of jobs and be open to jobs in other industries that might be looking for your skill set.
“Despite these shifts, this market is promising for graduates,” VanDerziel said. “And there is still ample opportunity for tech graduates to use their skills in other industries.
“For example, our Winter 2023 Salary Survey report found that two-thirds of responding employers — across industries — are planning to hire computer sciences majors from the current class. They are still in high demand,” he added.
Landing a job may come down to a numbers game.
“College seniors should be interviewing with as many companies that they can and not worry about the industry or location,” LaSalle Network CEO Tom Gimbel told CNBC.

So, how do you cast a wide net and find jobs in other industries?
Gorick Ng, a Harvard career advisor and author of “The Unspoken Rules,” recommends starting with a sector or industry (education, health care, government, insurance, etc.) or geography (Texas, New York, Colorado, etc.). Search for one of those terms plus “fastest-growing companies” or “largest companies” or “hiring” — that will help you make a list of potential employers.
Ng has also complied a list of 800 employers that have a dedicated hiring program for college students, with links to each company’s careers page. You can check it out here.

2. Figure out what skills you have that are transferrable

Everyone has transferrable skills — you just have to figure out what they are and how they would apply to other industries.
Online learning site Coursera scoured data from a variety of places such as the World Economic Forum, LinkedIn and Glassdoor, and came up with a list of the most in-demand high-income skills that are transferrable across a variety of career paths. They offer a list of those skills and then some of the jobs — and pay — you can expect to get if you have these skills. Many of the jobs have salaries of $100,000 or more.
The most in-demand high-income skills are:

Data analysis
Software development
User experience
Web development
Project management
Account management
Content creation and management

So, if you have some of those skills, you might look to see what industries are seeking them. And, if you don’t have any of them, and you find yourself without a job this summer, you might consider doing some training to get a new skill.
That way, when you’re in an interview and the person asks: “What have you been doing this summer?,” you can impress them by saying that you were building out your skill set while looking for a job.

3. Work your network

When you are applying for jobs, “Don’t just aimlessly click ‘submit’ on those job applications — it’s a surefire way of throwing your resume onto a big pile that will never get looked at,” Ng said.
Instead, Ng says, reach out to people directly. That is one of the best ways to make a connection at a company — and get an interview.
Here are a few of his tips for finding them:

Begin with your first-degree network (the people you already know — they’re labeled as 1st connections on LinkedIn). Then, try your second-degree network (people you don’t yet know but could get an introduction to because you have at least one mutual friend). Only when you’ve exhausted both of those options should you go to the third-degree network option — the cold call.
Look up companies on LinkedIn and click “employees” to call up a list of people who work there and then filter the list for first- or second-degree contacts and so on. After that, you can clear the filter and look at everyone at the company, focusing on people who work in the department you are applying to as well as the leadership team — people with chief, director or vice president in their title. You can also go to a company’s “team” or “leadership” page.

“You are looking for people who satisfy four [the following four] criteria,” Ng said.

They have something in common with you.
They are senior enough that they can make hiring decisions.
They are at an organization that is growing — and therefore hiring.
There is some indication they are invested in young people (community service work, etc.)

“The idea is to find people who can see you as a younger version of themselves — same school, same major, same extracurriculars, same hometown, same upbringing, same identity (e.g, first-generation college student), same prior work experiences,” Ng said.
So when you find their LinkedIn page, you’re looking for “anything in their history that you can relate to,” Ng said. “The more commonalities, the better.”
Beyond searching via LinkedIn or Google, Ng says you can also dig up spreadsheet of club or sport members or even browse the alumni directory at your school.
Now that’s casting a wide net!

4. Learn how to sell yourself

In a tight job market like this, you may need to work on your interviewing game to land that first job.
Career coach Natalie Fisher, who has helped hundreds of people land six-figure jobs, said you have to go beyond statements like “I’m a great communicator” or “I have great organizational skills” and instead offer specific examples of how you are those things.
Here are three things job seekers shouldn’t say, and what to communicate instead to help you get hired:

Don’t say: “I’m an excellent communicator.”Instead, show them how you were able to achieve X result thanks to your Y skill.
Don’t say: “I have strong organizational skills.”Instead, be very specific about what past managers and leaders have said they were impressed about in your work.
Don’t say: “I have great networking skills.”Instead, explain how you have a few close friends who you have stayed in touch with — whether it was in your major, an internship or whatever — and explain how you have always tried to make them feel valued and seen. Then, explain how you will use those skills to build lasting relationships with clients, your team, etc. in this role.

So, while it’s a tough job market out there for the class of 2023, there are job opportunities. There are things you can do to be smart over the summer to find companies that are hiring college grads, build your skills, network and hone your talking points to impress the hiring manager at your next job interview.
And, a tough job market is like New York, New York, as Frank Sinatra described it: If you can make it here, you can make it anywhere! More

Preferred stocks can be a great source of portfolio income. Yet a current dip in prices presents significant potential for capital appreciation, as well.
Risk-reward characteristics for this small investment universe have improved markedly since March, when fear stemming from the failure of Silicon Valley Bank and Signature Bank pushed overall preferred prices down to rarely seen levels.

Vgajic | E+ | Getty Images

Seldom does an investment possess the combined virtues of manageable risk, rock-bottom prices and good prospects for growth, all with high dividend yields.
These are the current characteristics of preferred stocks, a kind of bond-stock hybrid investment that trades like stocks but pays interest like bonds — only much more of it. About two-thirds of preferred shares are issued by the banking sector, so most investments in preferred stock funds are in those in banks, primarily large ones.

related investing news

Preferred stocks are a great source of portfolio income. Yet a current dip in prices presents significant potential for capital appreciation, as well.
Risk-reward characteristics for this small investment universe (totaling less than $1 trillion) have improved markedly since March, when fear stemming from the failure of two regional banks, Silicon Valley Bank and Signature Bank, pushed overall preferred prices down to rarely seen levels.
More from Personal Finance:This is the ‘best defense’ against inflation, says financial advisorYou may face a ‘stealth tax’ on Social Security benefitsThis strategy could shave thousands off the cost of college
What many investors feared would be a national banking crisis hasn’t materialized and probably won’t because regulators have intervened to restore stability in regional banks. And contrary to early fears, large banks haven’t materially been affected. Yet preferred prices generally remain depressed, creating opportunity for investors who don’t mind wading in when the water is still a bit muddy.
Peering into the swirl of market conditions, investors capable of seeing clear discounts instead of faux risk can position for potential growth while getting yields far superior to those of bonds — in many cases, 7% to 8% from preferred shares and 6% to 7% from funds. Dividends are fairly reliable because corporate boards are loathe to cut them, for fear of discouraging investment.

The recent dip in preferred share values can be seen in the price of iShares Preferred and Income Securities (PFF), a passively managed exchange traded fund yoked to the ICE Exchange-Listed Preferred & Hybrid Securities Index. Typically, this fund trades between about $40 a share and the mid-$30s. At the peak of the equity market in January 2022, it was trading at $39. In the ensuing weeks, as the Federal Reserve got into its rate hike cycle, PFF dipped to $34.
Then in March, headline-driven fears tamped this ETF down to about $30 a share for only the third time since banks started issuing preferred shares in the early 1980s. As April 19, shares of PFF still hadn’t bobbed up much, hovering a bit over $31.

Prices are likely to rise as fears abate, and longer-term prospects are historically sanguine, given the likelihood of overall equity market growth by next year. Data from preferred-fund manager Cohen & Steers, shows that preferred stocks have risen an average of 29.7% over the six-month periods after market troughs since 2009.
But for now, preferred shares languish in doldrums sustained by lingering fear that resists countervailing information. The problems at the failed banks weren’t the result of any systemic risk present in the broader industry, but simply of poor financial management.
Moreover, the federal government isn’t likely to let banks fail, and least of all in the year before a presidential election year. In the case of the two regional banks, a strengthened federal safety net came into play, with broadened guarantees on deposits and a new Federal Reserve program that lets banks borrow against bond holdings at par.
The current pricing window not only increases prospects for capital gains as fears abate, but also reduces risk, sustaining dividends. Preferred shares are such a reliable source of yield that many institutional investors hold them perennially for income alone as a higher-yielding alternative to bonds. And dividends on many preferred issues are the tax-friendly qualified variety.

Though preferred shares have bond-like characteristics, they’re not a true form of corporate debt. Banks like to issue them because unlike bonds, they don’t count as debt toward required capital ratios. They don’t appreciate as much as common shares, and their owners rank behind bondholders (but ahead of common stockholders) for claims on assets if an issuer goes belly-up.
Here are some points for investors to keep in mind:

Stick with funds when possible. Assessing duration risk, credit risk and the specific dynamics of preferred share issues can be quite complicated and often requires information largely inaccessible to most retail investors. So, most individuals are better off avoiding direct investment and sticking with funds.
Those who do choose to invest directly should spend the time to learn about these investments and choose carefully. A common pitfall is to focus on yield alone and overlook duration risk — shares’ sensitivity to interest rates, which affects how long it takes investors to be reimbursed for their purchases. Duration is critical to real returns.
Minimize the call risk common in passively managed funds. Actively managed funds are usually preferable, as managers can avoid or trade out of callable shares trading at a negative yield-to-call that populate indexes. Callable status contractually gives issuers the option to call or buy back shares for the original issue price (uniformly $25 for retail shares), regardless of whether current holders paid more on the open market. If these investors haven’t owned shares long enough to collect sufficient yield, a status known as negative yield to call, they could be in for a close haircut if shares are called. With passively managed funds — those that track indexes — investors can’t avoid exposure to callable shares trading at a negative yield-to-call, and this hamstrings fund performance. The higher fees of active management are less relevant because yields are after fees; some of these funds have dividend yields over 8%.
Go pro. Investors can reduce risk by owning funds that hold less-volatile institutional preferred shares. Even some funds that are wholly institutional are accessible to individual investors. These are harder to find, but they’re around. ETF and mutual fund examples include Principal Spectrum Preferred Securities Active ETF (PREF), First Trust Preferred Securities and Income ETF (FPE), PIMCO Preferred and Capital Securities Fund Institutional Class (PFINX) and Cohen & Steers Preferred Securities and Income Fund, Inc. Class I (CPXIX).

Owning common stocks is about waiting for shares to rise, and buying bonds is a guarantee of low (and probably soon-declining) yield. By contrast, while the current pricing window remains open, investing in preferred stocks is about collecting substantial income while positioning for likely price appreciation in the coming months.
—   By Dave Sheaff Gilreath, chief investment officer and co-founder, and Edward “JR” Humphreys II, senior portfolio manager, Sheaff Brock Investment Advisors and its institutional arm, Innovative Portfolios More