Here are three of the week’s top pieces of financial insight, gathered from around the web:
Don’t overlook traditional mutual funds
Some of the year’s best-performing mutual funds are still losing customers at a record pace, said Michael McDonald and Annie Massa at Bloomberg. “Will Danoff’s $134 billion Fidelity Contrafund returned 32 percent last year, nearly 15 percentage points better than the S&P 500.” But investors yanked a net $23.4 billion out of the fund this year. By contrast, more than $200 billion poured into exchange-traded funds that are now “on course to permanently supplant human decision-makers.” Active managers with stellar records are struggling to attract new money over the cheaper alternatives. Fidelity charges 85 cents per $100 invested in Contrafund, while passive investment in an ETF that tracks the S&P 500 “can cost as little as 3 cents per $100.”
Buying a car without the dealer hassle
“It took a pandemic to drag the car-buying process into the 21st century,” said Joann Muller at Axios. For years, purchasing an automobile had remained “stubbornly low-tech,” thanks to car dealerships protected by state franchise laws and worried about missing opportunities to upsell customers. But after the COVID-19 outbreak, “dealers had little choice but to embrace” a new model. Many have added software that allows customers to “browse inventory, apply for credit, and choose a payment schedule.” Others even offer “virtual test drives” to show off in-car technology, and “touchless” vehicle deliveries to shoppers at home. Surprisingly, dealerships have been “more profitable than ever.” Online customers “know exactly what they want,” and the typical three-hour showroom visit has been reduced to “a 15-minute online purchase.”
The ongoing Bitcoin frenzy
Bitcoin continued its record surge in the first week of the new year, said Arjun Kharpal and Ryan Browne at CNBC. The digital coin hit $40,000 last week to “lift the entire cryptocurrency market above $1 trillion for the first time,” as more investors fear missing out “on opportunities to make a quick, easy gain from the bull run.” Bitcoin’s value surged 40 percent in the past 12 months. Investors have tapped Bitcoin as a “safe-haven asset” and hedge against inflation concerns “as governments around the world embark on large-scale fiscal stimulus programs.” A recent research note from JPMorgan said “Bitcoin could hit $146,000 in the long term as it competes with gold as an ‘alternative’ currency.”
This article was first published in the latest issue of The Week magazine. If you want to read more like it, you can try six risk-free issues of the magazine here.