government

Invest in I Bonds And Earn 9.62% Risk-Free

Freaking out over inflation? If you want a nearly risk-free way to grow your cash, Uncle Sam has an attractive offer for you. The U.S. government announced a new eye-popping 9.62% interest rate for Series I savings bonds now through October 2022 — the highest interest rate ever for these investments. Series I bonds — […]

This was originally published on The Penny Hoarder, which helps millions of readers worldwide earn and save money by sharing unique job opportunities, personal stories, freebies and more. The Inc. 5000 ranked The Penny Hoarder as the fastest-growing private media company in the U.S. in 2017.

Tax Changes and Key Amounts for the 2022 Tax Year

Now that this year’s tax filing season is over, it’s time to start thinking about next year’s return. After all, the more tax planning you do, the more money you may be able to save. But proper tax planning requires an awareness of what’s new and changed from last year — and there are plenty of tax law changes and updates for the 2022 tax year that savvy taxpayers need to know about.

Big tax breaks were enacted for the 2021 tax year by the American Rescue Plan Act, which was signed into law in March 2021. But most of those tax law changes expired at the end of 2021. As a result, the child tax credit, child and dependent care credit, earned income credit and other popular tax breaks are different for the 2022 tax year than they were for 2021. Other 2022 tweaks are the result of new rules or annual inflation adjustments. But no matter how, when or why the changes were made, they can hurt or help your bottom line — so you need to be ready for them. To help you out, we pulled together a list of the most important tax law changes and adjustments for 2022 (some related items are grouped together). Use this information now so you can hold on to more of your hard-earned cash next year when it’s time to file your 2022 return.

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Similarities and Differences Between Financial Aid vs Student Loans

Figuring out how to pay for school can be stressful, so it’s important to compare financial aid vs student loans so that you can reduce your financial burden as much as possible and find out what’s right for you. When college financial aid isn’t enough, people use federal or private student loans to help cover […]

The post Similarities and Differences Between Financial Aid vs Student Loans appeared first on SoFi.

An Urgent Need for Cybersecurity Stocks

In June 2017, Russian hackers launched a malware attack on Ukraine called NotPetya. The attack, which locked users out of their own files unless they paid a ransom in bitcoin, was just one more tactic in the conflict between the two nations that had begun three years earlier. But viruses don’t respect borders, and this one spread far beyond Ukraine. 

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It infected computers in Europe and the U.S., and even in Russia itself. Mondelez (MDLZ), the giant global food company headquartered in Chicago, was hit hard. NotPetya disrupted e-mail and logistics and caused $100 million in damage. The White House called it “the most destructive and costly cyber-attack in history.” Total international destruction: $10 billion. 

Nearly five years later, the Russians have invaded Ukraine and war is raging. Experts had been expecting more cyber devastation, but so far Russia has not knocked out Ukraine’s power grid or other important infrastructure.

“I think the biggest surprise to date has been the lack of success for Russia with cyberattacks against Ukraine,” Stephen Wertheim, a senior fellow at the Carnegie Endowment for International Peace, told Vox. 

It’s not from lack of trying. The U.S. government’s Cybersecurity & Infrastructure Security Agency issued an alert disclosing that leading up to its invasion, Russia “deployed destructive malware against organizations in Ukraine to destroy computer systems and render them inoperable.” 

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Also surprising is that Russia has not successfully launched cyberattacks against the U.S., the U.K., Germany or other NATO allies. One reason is that NotPetya – as well as the WannaCry attack instigated the same year by North Korea – taught businesses and governments key lessons about protecting themselves.

Another is that the Russians know that the U.S. uses a strategy of deterrence, akin to its policy on the use of nuclear weapons, as a primary defense against a major attack. If Russia shuts down our power grid, or large parts of it, the U.S. has indicated it will respond massively, throwing the Russians into the cold and dark themselves, or worse. 

Cybersecurity Sector Booms as Demand Grows

There’s no reason for us to be smug, though.

Don’t forget that Colonial Pipeline, the largest fuel network of its kind in the U.S., was breached last year, shutting off operations. It was caused by a single compromised password and could have been prevented by multifactor authentication, a basic cybersecurity tool that can involve simply sending the user a text with a code number. Colonial paid the Russian hackers a ransom of $4.4 million.

A vulnerability called Log4j in free software has led to attacks from hackers in Russia, China, Iran and other antagonists of the U.S. The Wall Street Journal reports “10 million attempts to exploit the Log4j vulnerability per hour in the U.S.” The CISA’s website carries a gigantic banner at the top that says “SHIELDS UP,” a warning that times are perilous. 

In the cyber world, hackers always have the upper hand, but defenders are catching up. The companies that deploy the software, hardware, intelligence and training to thwart attacks have gotten better at what they do. Businesses know that they have to invest in cybersecurity or risk huge losses or outright failure.

As a result, the cybersecurity sector is booming. Gartner, the research firm, pegged global revenues at $150 billion in 2021, a 12% increase over 2020 and roughly double sales in 2017. Even before the Russian invasion, Fortune Business Insights was predicting spending would rise to $376 billion by 2029, an annual growth rate of 13%. 

Nearly all of the internet giants, including Alphabet (GOOGL) and Microsoft (MSFT), offer cyber protection programs. Microsoft’s security revenues last year were $15 billion – more than any other freestanding company’s. 

Pure Plays Among Cybersecurity Stocks

Among more focused opportunities, turn first to the largest such stock, Palo Alto Networks (PANW), with a market capitalization (shares outstanding times price) of $60 billion. Since NotPetya, revenues have tripled, and the company’s share price has more than quadrupled.

Palo Alto is known for its firewalls, which inspect internet traffic and protect against viruses, spyware and data leakage – as well as identify vulnerabilities. Like many cybersecurity stocks, Palo Alto is still unprofitable. But you’re buying a future in which what the company sells is an absolute necessity. (Stocks I like are in bold; data are as of April 8.)

Another larger cybersecurity company, Fortinet (FTNT), offers a wide range of tools, including intrusion-prevention and anti-malware software. Fortinet’s sales spiked 29% last year, and it made a small profit. Shares have risen nearly 20% since the war in Ukraine began, and the stock’s price-earnings ratio is 68, based on analysts’ forecasts for earnings for the year ahead. 

Also among the larger companies is CrowdStrike (CRWD), which is especially adept at protecting endpoints – that is, devices such as smartphones and workstations that communicate with broader corporate networks. CrowdStrike’s revenue, nearly all of it from recurring subscriptions, soared 66% for the fiscal year ending January 2022. The stock has risen accordingly, but it is still worth a close look. 

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A recent update of the cybersecurity industry by securities firm Needham & Co. identifies Tenable Holdings (TENB) as the best way to play the convergence of information technology and operational technology.

For many firms, information technology, housed in the firm’s own computer systems or in the cloud, drives operational technology, or the functioning of its machines and other physical assets. This convergence is great for business, but it also leaves a company open to catastrophic attack. Tenable is unprofitable, and its market cap is more than 10 times its sales. But I view the risk as worth taking.

Tenable is also a potential takeover candidate in a sector that is consolidating. NortonLifeLock (NLOK), a powerhouse on the consumer side of cybersecurity, is awaiting regulatory approvals to complete its merger with Avast, a firm based in the Czech Republic that focuses on protecting small businesses. Norton has a solid franchise and provides good balance to faster-growing, more-expensive companies in the sector. Norton trades at a P/E of just 14. 

Other companies I like (all have a market cap between $4 billion and $6 billion) include KnowBe4 (KNBE), whose shares are still about one-third below their all-time high; SailPoint Technologies Holdings (SAIL), which specializes in identity security; and Qualys (QLYS), with sales up nearly 50% over the past three years. 

Among exchange-traded funds, consider Global X Cybersecurity (BUG), with an expense ratio of 0.5%. In 2020, its first full year, it returned 70.8%, and it gained another 13% in 2021. It’s breaking even so far in 2022. Palo Alto, Fortinet, CrowdStrike, Tenable, NortonLifeLock and Qualys are holdings, so the ETF provides a handy way to buy some of my favorites.

James K. Glassman chairs Glassman Advisory, A public-affairs consulting firm. He does not write about his clients. His most recent book is Safety Net: The Strategy for De-Risking Your Investments in a Time of Turbulence. Of the stocks mentioned, he owns Microsoft. reach him at [email protected].

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Now You Can Own Bitcoin in 401(k)s. Should You?

Fidelity Investments just made a major splash by announcing they will allow trading in Bitcoin in the 401(k) plans they administer starting midyear.

This makes Fidelity the first major plan provider – though almost certainly not the last – to allow trading in Bitcoin. News was scant as to whether other major cryptocurrencies such as Ethereum would eventually be allowed in Fidelity 401(k) accounts. For now, the focus is on Bitcoin.

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Fidelity is the largest player in 401(k) plans by a country mile, with more than $2.4 trillion in plan assets. So, the introduction of Bitcoin into a 401(k) is a big deal and opens vast new pools of liquidity to investment in the blue-chip cryptocurrency.

But before you start licking your chops, there are a couple questions to consider.

Will Bitcoin Be Available in My 401(k)?

A 401(k) plan might look like a brokerage account, but they are managed, administered and regulated very differently. Remember: 401(k) plans are the primary savings vehicle for millions of Americans, and as such, the government regulates them not all that differently than it does traditional pension plans.

The Employee Retirement Income Security Act of 1974 (ERISA) sets the rules here, and it requires that the plan have a sponsor, an administrator and a fiduciary. The sponsor creates the plan, the administrator handles the day-to-day management, and the fiduciary ensures that the plan is being run in the best interests of the participants. (Often your employer or a related party will fulfill one or all of these roles).

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None of these are generally Fidelity’s job. Fidelity role is that of a plan provider and custodian. They control the basic infrastructure that makes a 401(k) plan possible. They create accounts for plan participants and handle the buying and selling of investments.

But importantly, Fidelity doesn’t choose what investments are available in your company’s plan. That’s the fiduciary’s job. Fidelity can make Bitcoin available on its platform, but it’s up to your plan fiduciary to decide whether having cryptocurrency in your 401(k) is in the best interest of you and other participants, or whether to offer you other nontraditional investments, for that matter.

Plan fiduciaries tend to be stodgy and conservative. It’s their job to be a sober voice of reason. So, not every fiduciary is going to be in a hurry to make Bitcoin available as part of their 401(k) plans.

Especially not when the government is giving it a leery eye.

“The Department of Labor says it expects to open an investigation of plans that offer participants investments in cryptocurrencies,” says Joy Taylor, Editor of the Kiplinger Tax Letter. “It will ask fiduciaries to demonstrate how they met their required duties of prudence and loyalty when choosing a cryptocurrency investment option for plan participants.”

Indeed, days following the announcement, a Labor Department official sounded the alarm.

“We have grave concerns with what Fidelity has done,” Ali Khawar, acting assistant secretary of the Employee Benefits Security Administration, told The Wall Street Journal.

In short: If your employer’s plan is held at Fidelity and you want to buy Bitcoin within your 401(k), you might have to give your HR department a little nudge.

And if your employer’s plan is held anywhere other than Fidelity … well, for right now, you’re still out of luck.

Should You Buy Bitcoin in a 401(k)?

“Can” and “should” are two very different things.

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Your tax-deferred retirement dollars are precious. Given their ability to compound tax-free over time, a dollar in your 401(k) plan is more valuable than a dollar in a taxable account. You don’t want to be reckless with that particular pool of money. 

That said, let’s say that you believe in cryptocurrencies and that you consider Bitcoin an important long-term piece of your asset allocation. Holding that Bitcoin allocation in your 401(k) isn’t a bad idea.

The tax regime surrounding cryptocurrency is still very much a work in progress, and if you’ve ever had to report crypto gains or losses on your tax return, you’re no doubt well aware of how burdensome the recordkeeping can be. If you’re committed to owning Bitcoin, then owning it in a tax-deferred account certainly makes your life easier come tax filing season.

Even then, basic common sense should apply here. Don’t buy more Bitcoin than you should simply because you can. You don’t want to put your retirement at risk in what is still very much a new asset class.

But if you’ve determined a prudent amount to own, then holding Bitcoin within your 401(k) can be a smart way to do it.

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