Our 5 Minimalist Investing Tips for 2021

Welcome to StockUp, the investing newsletter that's proud of its unimpeachable integrity. -------------------------------------------------------------------------------------------------- [View this email in your browser]( Welcome to StockUp, the investing newsletter that’s proud of its unimpeachable integrity. This week, add a little Zen to your investing with handy ideas for how to streamline your financial life. Plus, why striking down a social media giant could make it more powerful than you could possibly imagine, and five always-good reasons to invest in a certain heavy, shiny metal. — Nathan Alderman, StockUp Editor MARIE KONDO + WARREN BUFFETT Our 5 Minimalist Investing Ideas for 2021 and Beyond --------------------------------------------------------------- The more complicated any system gets, the more chances arise for something to go wrong. Sometimes, the simplest approach works best. Fool Sam Swenson -- a CFA and a CPA -- has five compelling ways that you can go all [Henry David Thoreau]( on your investments to reduce portfolio clutter and your own financial worries. - Bigger isn’t always better. Evidence suggests you may reap better results with a relative handful of broad-market index funds than a lengthy list of specific sectors and stocks. - Trade less. Try to avoid obsessively checking your holdings every day, one finger poised upon the buy or sell button. Look over your account a few times a year to make sure your money’s still roughly allocated the way you want it. Otherwise, try to leave it alone unless you absolutely need cash, fast. - Consider investing on autopilot. Socking away the same amount month after month can help you smooth out the market’s inevitable ups and downs -- and keep you from making a panicky mistake at the worst possible time. - Pick a broker and stick with it. Rather than spreading your funds across multiple services, try to find one brokerage company you like and trust, and consolidate your holdings there. You’ll be able to see your whole portfolio at a glance, and you may be eligible for bonus services if and when your account gets hefty enough. - Put down the phone. If you have a computer, you have everything you need to keep up with your money. Calling into your broker wastes time, weakens security, and raises the risk that you’ll make an impulsive and ill-advised trade. For more ideas on how you can potentially make more money with less effort, [read the rest](. --------------------------------------------------------------- Already subscribed to a premium service? [Click here]( to view your subscriptions. Not a member yet? [Click here]( to sign up! --------------------------------------------------------------- JARGON DECODER Mind the GAAP They don’t call it “Wall Street” for nothing; the big banks there build bigger barriers of baffling terminology to keep regular Fools like you intimidated, underconfident, and ready to fork over your cash to a broker. Each week, Jargon Decoder translates one of those worrisome words or phrases into plain English, helping you get a leg up on the Wall Street Wise. This week’s term: GAAP, short for generally accepted accounting principles. Publicly traded companies and their accountants follow these standardized rules to ensure that the way they report their earnings remains on the up-and-up. Since 1939, accounting industry groups have worked with the U.S. Securities and Exchange Commission (SEC) to come up with a standard set of rules for how publicly traded companies should account for the money they make and spend. The rules attempt to ensure that every company reports a clear, fair, accurate picture of its financial performance, so that investors can make well-informed decisions. If you feel like you’ve heard a lot more about “GAAP earnings” since the 2008 financial crisis, that’s no coincidence. That year, the Financial Accounting Standards Board -- a private, nonprofit industry group -- gathered thousands of individual rules that had been established over the decades into a single volume of formal codifications. But wait, you say -- what about those non-GAAP earnings I’ve seen lurking around the bottom of various company-issued earnings reports? Can I trust them? Well, yes and no. In the official forms a company files with the SEC, you’ll only see GAAP earnings. But when a company releases its own earnings directly to investors and the public, it will sometimes include non-GAAP figures -- often referred to as “adjusted” earnings -- as well. It’s not necessarily trying to pull a fast one on unsuspecting investors. Sometimes the unbending rules of GAAP require companies to factor in unusual or one-time events -- a huge cash payout from a legal settlement, for instance, or a sudden and unexpected expense resulting from a natural disaster -- that make their performance look better or worse than it actually was. In that case, the company might release non-GAAP earnings to show investors what its real, underlying performance looked like without the short-term distortion. We’re not here to throw stones at all non-GAAP earnings. Heck, one of our favorite Foolish metrics -- free cash flow, which measures how much cold, hard cash a company has to reinvest in itself or pay out to investors after it covers all its necessary operating costs -- falls strictly on the non-GAAP side of the tracks. But we do suggest that you keep an eye on how regularly companies lean on non-GAAP or adjusted earnings. If a company keeps posting earnings altered by “one-time events” over and over and over, maybe those events aren’t as isolated as they seem -- and maybe the non-GAAP numbers aren’t quite as trustworthy as you’d hope. --------------------------------------------------------------- IN ANTITRUST WE TRUST Why Breaking Up Could Be Good for Facebook's Stock The U.S. government, to put it mildly, is not pleased with Facebook (NASDAQ: FB). Uncle Sam and the Federal Trade Commission have filed suit against the social media giant, alleging that it’s attempted to exert illegal monopoly power over the market by buying up potential rivals like Instagram and WhatsApp before they could grow enough to challenge Facebook’s industry dominance. Regulators want to split Facebook, Instagram, and WhatsApp into separate companies, free to compete with one another. That change in the company’s relationship status might seem catastrophic, but Fool Luis Sanchez argues that it could actually benefit investors in the long run. Why? Despite Facebook’s size, market power, and profitability, it seems to trade at lower multiples than other social media companies. When you compare its enterprise value -- its total market cap, plus its total cash hoard, minus the total debt it owes -- to its sales, Facebook’s valued well below Twitter, Snap, and Pinterest. And even when you compare its enterprise value to its profits, it lags far behind Twitter. (The other two aren’t profitable right now.) Breaking Facebook up could make this currently complex company easier to value; free its faster-growing components from the more sluggish ones; and attract investors currently put off by its mammoth market cap. All of those advantages could translate into significant share price growth for current investors, even if the gains get divided among three separate holdings. For more comments worth liking about the potential upside of a Facebook breakup, [read the rest](. --------------------------------------------------------------- ALEXA, ARE "UNITY" AND "IMPUNITY" SYNONYMS? [Smart Speaker] Not sure what to ask your smart speaker? Keep up with what's happening in the market by asking your Amazon Alexa or Google Home to "Play Motley Fool podcasts." --------------------------------------------------------------- EXTREME "GRIZZLED OLD PROSPECTOR" VOICE 5 Good Reasons to Invest in Gold No Matter What the Stock Market Is Doing When the market gets scared, it flees toward gold, says Fool Robin Hartill, CFP. In the panic-plagued (and, you know, actual plagued) year of 2020, gold outperformed the stock market even after you factor in the latter’s meteoric recovery from its spring lows. But why wait until times are tough to turn to the shiny stuff for a sturdy backstop? Robin’s found five reasons why gold might make a great all-weather component of a Foolishly diversified portfolio. We’ve got the first three to get you started. - Gold’s been valuable throughout human civilization. Empires and nations all over the world have prized and hoarded it, suggesting an enduring value that won’t simply vanish. - Supply remains scarce. We still have to dig the stuff out of the ground, remember? Doing so is incredibly difficult -- only 0.1% of prospective gold mines actually get mined. All the gold we’ve ever mined in all of human history would fit into only 3.7 Olympic-sized swimming pools. [Scrooge McDuck’s example to the contrary]( we won’t be taking laps in the stuff anytime soon. - It’s less volatile than other commodities. Gold prices have their ups and downs, tending to rise the most when inflation is highest. But steady demand for jewelry and other uses means that gold prices fluctuate a lot less than most other commodities do. And since it’s tough to mine gold (see above), its supply tends to remain fairly even, too. For more on how a scattering of gold might give your portfolio just a bit of the Midas touch, [read the rest](. --------------------------------------------------------------- YOU'RE THE WORST FEATURED PODCAST [Rule Breaker Investing]( David Gardner's Biggest Mistakes If you want to let your winners win, you also have to let your losers lose. Sit back and enjoy the schadenfreude as we look at the Fool co-founder's worst stock picks from the last three years. [Subscribe on iTunes]( --------------------------------------------------------------- INVESTING WHILE BROKE Quick Reads - [No cash? No worries:]( financially sound strategies to start investing even if you’re short on funds. - [Houston, we have a problem:]( wouldn’t touch this space IPO with a 62-mile pole. - [Beware the bitcoin bite:]( you traded cryptocurrency this year, remember that Uncle Sam wants his cut. --------------------------------------------------------------- ¿ POR QUÉ NO LOS TODOS? Social Media Post of the Week [The best companies take care of customers, employees, shareholders, and their community with equal passion.]( [See all our Tweets!]( Join the 1,300,000+ people who follow us! [Facebook]( [Twitter]( [Instagram]( [YouTube]( [LinkedIn]( We work fervently, fastidiously, and Foolishly to make sure all the facts and figures we publish in our emails are 100% accurate and up to date. Returns as of January 12, 2021. Have a question or topic you'd like to see covered in a future edition of Stock Up? Email us at stockup@fool.com. 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