July 4th is one of my favorite days of the year. I celebrate the day with fervor. After a large slice of apple pie for breakfast, I don my American flag emblazoned hat, shirt, bathing suit, and flip flops and head to the beach. In the afternoon, I go to mincha, listen to the daf, and sip an American beer as I BBQ for dinner and eagerly wait to watch the fireworks. This celebratory spirit is not only because it’s my brother’s birthday (Yom huledet sameyach, Dovi!), it’s because I am proud to be an American.
The blessing of living in this country has been instilled in me since I was young. I remember my grandparents telling me how much they loved the United States. My European grandparents arrived from war-torn Europe, where most of their family members had perished, and were grateful for a place where they could openly express their Jewishness and raise a family with Torah values. My American-born grandparents, whose immigrant parents fled pogroms in Russia, grew up with little money and few material possessions. With hard work and perseverance, they built a business, gave generously to Jewish causes, and took unbelievable pride in their very American rags to riches story.
The blessing of living in the U.S. comes in many different forms, one of which is the privilege of being an American based investor. On this July 4th, I thought it would be fitting to highlight just a few reasons why it is so wonderful to be an investor based in the United States.
Banking: There are literally thousands of banks in the United States. This competition promotes good service, low fees, and various innovative products. Opening an account is effortless. The last time I opened a checking account, I did it in five minutes from the couch while watching Netflix in my pjs. If you don’t appreciate the seamlessness of our banking system, just try opening a checking account in Israel.
Investments: There are a myriad of investment options available to investors. You can easily buy individual stocks, bonds, mutual funds, ETFs, and closed end funds. Even more exotic and esoteric investments can also be purchased with relative ease.
Optionality: Investors have options for how they want to handle their investment business. There are platforms catered to “Do-It-Yourself” investors and there are many wealth management firms for those who prefer to work with a financial advisor. There are also options for how one prefers to work with an advisor. Investors can choose someone who charges an hourly rate for a quick consultation, pay a project-based rate for consulting on a specific area of financial planning, or opt for white glove service including ongoing personal advice and plan implementation from an advisor who charges a percentage of assets under management. The only model investors should avoid are those where the “advisor” gets compensated on commission by exclusively selling proprietary products from the firm which employs them. However, if an investor wants to go down that route, in the U.S. you have the freedom to choose that business model as well.
Democratized investment landscape: One of the beauties of the investment landscape in the United States is that both the rich and poor can access the best investments options with ease. A company’s janitor and CEO can both invest in the same 401(k) plan with all the same investment options. Over years of disciplined investing even a modest amount of funds can grow to be a substantial nest egg.
Low costs: The fees to buy and sell investments are negligible. Some brokerage firms will waive these transaction costs altogether. Furthermore, fees on mutual funds and ETFs are also miniscule if utilizing passive investment strategies.
Global exposure: Out of the comfort of your home you have the flexibility to choose from a whole host of investment products. You are not limited to a specific firm, product type, or investment strategy and can even easily, and cost effectively, access investments globally. If you want to invest in Japanese and South African stocks or Latin American bonds, all this can be done with ease from your laptop.
Liquidity: Unlike many markets around the world, the U.S. stock market is incredibly liquid. I can buy a stock in the morning and track its exact value throughout the day. I can also sell a stock and have my cash back in my checking account within a few business days. Many markets around the world are far less liquid and this process is far more cumbersome.
Transparency: The U.S. stock market is the most transparent market in the world. Companies are required to disclose their financial information to the public and follow a set of accounting principles. When investing in foreign countries, like China, the same transparency does not exist and it’s difficult for investors to get factual data upon which they can rely.
Regulation: Many financiers have a love-hate relationship with regulators. However, most financiers would agree that some level of regulation is imperative to the strength of our financial system. Regulation protects consumers and investors, ensures that the financial system remains stable and continues to make funding available for investments that support the economy. Having just enough regulation helps investors sleep at night knowing their money is in a solvent system.
Tax efficient ways to save and invest: There are countless ways for Americans to save and invest their hard-earned money tax efficiently. When it comes to retirement savings, some options include IRAs, 401(k), 403b, 457(b), profit sharing plans, and cash balance plans. Additionally, folks can choose when they want to be taxed by utilizing either pre-tax or post-tax options (i.e. Traditional vs. Roth). There are also tax efficient ways to save for college (529 College Savings Account) and medical costs (triple tax-free Health Savings Account or HSA). People like to complain about how retirement is unattainable, and college is outrageously expensive. There are merits to those complaints. However, a benefit of living in America is, with some effort and forethought, there are many wonderful planning opportunities that can help families get ahead financially. Most countries don’t have the same optionality and flexibility.
I share the biography of Haym Salomon on my social media account annually on July 4th. Salomon was a Polish-born Jew who lived in Philadelphia and played a major role as financier of the Continental Army during the Revolutionary War. The urban legend is that in honor of his pivotal contributions the 13 stars, representing the colonies, on the back of the dollar bill were arranged in the shape of the Star of David. Whether that is true or not, it is a fact that Jews played a major role in this country from its birth until today. That is true across industries, not only in the field of finance. It is also true that throughout its history the United States has been a land of both refuge and opportunity for people fleeing persecution and hardship in their country of origin.
Every year on July 4th it is important to recognize how lucky we are to live in a country that offers its citizens so much privilege and opportunity!