Reviewed by Somer Anderson

The Consumer Price Index (CPI) is the most widely used metric for consumer inflation changes over time and utilizes data based on consumer buying habits from a broad sample set of the population. Published each month by the Bureau of Labor Statistics (BLS), the CPI provides analysts and consumers pertinent economic information directly related to inflation movement based on government statistics and price trends at the national and regional levels.

To understand data published on the CPI and the effect of inflation on the economy, it is necessary to understand how the statistics are adjusted and why.

Key Takeaways

• The Consumer Price Index (CPI) measures the change in the value of a basket of goods over periods of time due to inflation.
• The CPI is an important tool used by economists to understand inflation in the economy and how to manage and make adjustments to control inflation.
• Seasonal adjustments are made to the data used in calculating the CPI in order to remove the effects of seasonality on price information and to achieve a clearer picture of price movements without anomalies.
• Seasonally adjusted data is used as a baseline for the creation or revision of economic policy and high-level economic research.

Seasonally Adjusted Data

The price-change data used for the CPI is gathered and published each month as an economic time series. Because of the frequency of its analysis, certain adjustments must be made to the data so it can be analyzed accurately over longer periods of time.

The CPI, along with other broad measures of economic change, utilizes a process known as seasonal adjustment to factor out seasonal effects on the price data gathered each month to gauge increases or decreases to inflation. This provides users with a more accurate depiction of price movements void of anomalies that can occur during specific seasons.

For instance, price changes in CPI categories such as apparel or transportation may occur at an increased rate in the months leading up to a holiday due to greater consumer demand, although they may have little or no change throughout the rest of the year. Similarly, a reduction in housing prices may occur during colder months, which may not be the case during warmer months of the year.

Important

Though the CPI adjusts for seasonality, it does not adjust for substitutions—when consumers purchase cheaper substitutes when the price of the main good or service increases. This is a limitation of the CPI.

Some seasonal effects are so large that they hide other price data characteristics that provide a more accurate analysis of changes in consumer buying habits. As such, the adjustment of information for seasonal effects is done in an effort to enhance the presentation and ultimate use of data for the long term. To determine the adjustment, seasonal factors calculated by complex software programs are divided into the economic time series data for any given month.

Who Should Use Adjusted Data?

The CPI data published on a broader national level is always adjusted for seasonal effects and most commonly used by those who are interested in analyzing price change trends on a grand scale. Seasonally adjusted data is used as a baseline for the creation or revision of economic policy and high-level economic research.

Conversely, when CPI data is used for the purpose of escalation agreements, unadjusted data should be used instead of seasonally adjusted information. Unadjusted data allows an analyst to measure true price changes month-to-month and is used extensively in collective bargaining contracts and pension plan calculations.

What Is the Consumer Price Index (CPI)?

The Consumer Price Index (CPI) measures the monthly change in prices paid by U.S. consumers. The Bureau of Labor Statistics (BLS) calculates the CPI as a weighted average of prices for a basket of goods and services representative of aggregate U.S. consumer spending.

What Is the Bureau of Labor Statistics (BLS)?

The Bureau of Labor Statistics (BLS) is a federal agency that collects and disseminates various data about the U.S. economy and labor market. Its reports include the Consumer Price Index (CPI) and the Producer Price Index (PPI), both considered to be important measures of inflation. The BLS also produces the Import/Export Index (MXP), which tracks the price changes of goods bought and sold by the U.S.

What Is Seasonally Adjusted Data?

Seasonally adjusted data is economic data that has been statistically modified to remove the effects of predictable seasonal fluctuations, such as holiday shopping sprees or weather changes. This allows for a clearer analysis of underlying trends without the distortion of these recurring seasonal patterns.

The Bottom Line

The CPI is a tool that economists, analysts, and governments use to monitor the change in prices due to inflation or deflation. The information allows for the adjustment or revision of economic policy. To make sure that the most accurate data is used, the price information is seasonally adjusted to remove price drops or increases due to seasonal factors.

Even with seasonal adjustment applied, the CPI is not a perfect tool in determining shifts in consumer buying habits. It is, however, a valuable measure of broad changes in inflation that can affect long-term economic policy and consumer behavior.

Dos and Don’ts

Reviewed by Julius Mansa
Fact checked by Timothy Li

Is Investing in Rental Property a Good Idea?

Investing in rental property can bring you a steady source of income, an asset that appreciates, and some very attractive tax benefits. It also can get you a great deal of aggravation, from unexpected expenses to tenants who don’t pay their rent.

If you’re considering dipping into the rental property market, do some solid research in advance to turn it into a successful venture rather than a source of financial stress.

Key Takeaways

• Buying a second home as a rental property has substantial tax benefits including deductions for interest, insurance, and other expenses.
• Being a landlord takes time and energy, and carries the risk of unexpected expenses.
• To limit risks, do your research and run the numbers on potential properties.

Do Think About the Tax Advantages

If you own a residential rental property, you can deduct interest, taxes, insurance, and other expenses against the property’s income and usually deduct losses against your other income. You can also deduct depreciation from your taxes.

The deduction is an allowance for wear and tear that lasts throughout the active life of the rental property or until you have recovered the full costs that are deductible.

You can sell a rental property and roll the proceeds into other rental property without paying capital gains taxes.

Don’t Forget You’ll Be a Landlord

Your rental property is a business that requires time and energy as well as money. You are legally required to maintain a safe and habitable property for your tenants, and the rules vary from state to state.

A tenant paying top dollar has a right to expect a quick response to any problem, large or small. Renters who know they are paying a little under the market rate will tend to be a little less demanding. 

It helps if you can do minor repairs yourself. You also have to collect rents and deal with delinquent tenants.

If the prospect of managing your rentals is daunting, ask your real estate broker for a referral to a property manager or caretaker, or do an online search. Just be aware that hiring a property manager will eat into your returns. 

Do Your Real Estate Homework

Spend as much, if not more, time researching rental property as you would buying a place to live in. You must know the market specifics, zoning laws, and trends for both rentals and home sales in the location you are considering.

Local knowledge at the neighborhood level is key. Look at schools, transportation, recreational resources, shopping, and what tenants in the area expect in a rental.

You’ll want your property to be attractive to renters or a particular subset of renters, such as college students or young families. Look for a property with a waterfront or park or close to a college campus or a highly-regarded school. An older house in a stable community or one in a neighborhood being revitalized can be good options. 

If you buy an investment rental property on a new golf course beware of the “golf course syndrome.” If newer and fancier golf course housing is built in the same general area, your property could appear dated in a few years, which will depress the price.

Buying a foreclosure may be an option since the foreclosing bank typically wants to recover the mortgage balance and often will sell the property at less than market value.  

Don’t Neglect to Run the Numbers

Use a smartphone app or an online mortgage calculator to analyze your monthly housing costs.

A calculator will help you estimate the purchase price, down payment, taxes, insurance, and mortgage loan interest rate for specific properties you’re considering. The mortgage rates on rental properties are typically higher than the rates for a primary home.

Also factor in the cost of maintenance and repairs. A good rule of thumb is about 1% of the purchase price per year for property upkeep.

So a $300,000 property would cost roughly $3,000 per year to maintain. You may want to increase the percentage to 1.5% or 2% if the property is older. 

Another way to calculate repairs and maintenance is the “square foot rule,” which suggests homeowners budget $1 per square foot per year. If your rental home measures 1,800 square feet, for example, you are looking at $1,800 a year in repair and maintenance costs.

Real World Example

Say you are renting a $300,000 home for $2,000 per month. The 20% down payment is $60,000, and the 30-year fixed interest rate on the $240,000 balance is 4%. Taxes, insurance, and a maintenance budget will bring the monthly cost to $1,764, yielding a nominal profit of $2,838 per year, or 4.73% of the down payment per year.

That’s much better than a savings account and better than most blue-chip stocks pay in dividends, although perhaps not as much as you could earn in the stock market in a good year.

Moreover, when you calculate the typical depreciation of 3.64%, the nominal gain of $2,838 becomes a loss of $6,252, which you can apply against other income.

Depending on your tax bracket, that could amount to several hundred dollars of tax savings, a positive cash flow, and the possibility that the home will appreciate in value over time.

What Kind of Rental Property Is the Best Choice?

Consider the factors that go into choosing your own residence. At the top of the list is the old “location, location, and location.” Easy access to community amenities and jobs is important. The local property tax rate is important because you’ll be paying it. The condition of the home is important because you’ll have to repair it, now or later.

Is It Tough to Get Financing for Rental Properties?

In general, banks have tougher standards for financing rental properties than they have for primary residences. You’ll need at least 20% down and a good credit score. The loan you’re offered will probably carry a higher interest rate than for a home mortgage.

How Can I Invest in Real Estate Without Becoming a Landlord?

You could hire a real estate management company and be a hands-off landlord. However, if you really don’t want to get involved in rental property ownership you still have options for investing in real estate.

You can invest in a mutual fund that focuses on residential real estate, commercial real estate, or a combination of both.

You also can invest through a real estate investment trust (REIT) a real estate investment group (REIG), or a real estate investment partnership (REIP).

The Bottom Line

Investing in real estate for income is not for everyone, but if you treat your investment as a business, have a tolerance for the inherent risks, and are handy with a hammer, the financial benefits can be substantial.

Reviewed by Amilcar Chavarria

As a decentralized, immutable ledger system, blockchain offers banks the potential to reduce transaction costs, improve security, streamline compliance processes, and enable near-instantaneous transaction settlement. Major financial institutions, from JPMorgan & Chase Co. (JPM) to Goldman Sachs (GS), have been developing blockchain services, particularly in areas like cross-border payments, know your customer (KYC) verification, and trade finance.

However, widespread adoption faces significant hurdles. Technical challenges around scalability, high energy consumption, and integration with legacy systems remain barriers. Regulatory uncertainty and concerns about privacy and data protection have also slowed implementation. In addition, blockchain’s potential to eliminate intermediaries poses existential questions for banks’ traditional role as the go-between in financial transactions.

Key Takeaways

• Blockchain technology could reduce transaction costs significantly by eliminating intermediaries, automating processes with smart contracts, and streamlining compliance tasks.
• Blockchain’s immutable ledger provides a tamper-proof system for recording transactions. This transparency might boost trust while reducing the risk of fraud and errors in the banking sector.
• Despite its promise, blockchain adoption faces significant hurdles, including scalability, regulatory uncertainty, and high energy consumption.

What Is Blockchain and What Does It Offer Banking?

Blockchain is a digital ledger technology where transactions are recorded across a decentralized network of computers. Unlike traditional systems, blockchain entries are immutable—once a transaction is verified and added to the chain, it can’t be altered or deleted. This creates a secure and transparent record that’s resistant to tampering or fraud.

What Blockchain Offers Banking

Proponents argue that blockchain technology offers the following:

Improved Efficiency

Blockchain could automate many processes, from transaction verification to compliance, significantly reducing manual errors and administrative tasks. This efficiency could cut costs for banks and enable faster transaction settlements.

Stronger Fraud Prevention

The tamper-proof nature of blockchain ensures transaction authenticity, making it nearly impossible for bad actors to manipulate data. This heightened security reduces fraud risk in payments, lending, and identity verification.

Cutting Costs

By eliminating intermediaries, blockchain lowers the costs of cross-border payments, clearing and settlement, and trade finance. These savings could be passed on to consumers through lower fees.

New Financial Products

Smart contracts, self-executing contracts with terms directly written into code, could allow for new financial services, such as programmable loans.

Problems Blockchain Hasn’t Solved

Despite being touted as a revolutionary technology, blockchain has faced significant barriers to mainstream adoption in banking. Translating its promise into reality has been fraught with technical, regulatory, and operational challenges.

Here’s a closer look at why blockchain adoption has been slower than anticipated, what has been attempted, and where it has fallen short.

Blockchain’s Trilemma

As Blockchain 3.0 —the generation related to expansive banking use—requires more network capacity, it’s essential to recognize the inherent trade-offs in blockchain design. These trade-offs revolve around three core elements:

• Decentralization: Distributing control and decision-making authority across the network.
• Security: Safeguarding data integrity and preventing unauthorized access.
• Scalability: The network’s ability to handle a growing number of transactions per second while maintaining its performance.

The trilemma arises from the inherent tension between enhancing one aspect and inevitably compromising another:

Decentralization vs. Scalability

Greater decentralization requires more nodes to validate each transaction. However, a larger number of validators slows down the network because of the consensus requirements. Faster networks often focus on speed by employing fewer validators, leading to increased centralization.

Security vs. Scalability

Robust security relies on comprehensive validation systems. These meticulous checks, while crucial, slow transactions. Faster systems may compromise security rigor to achieve higher speeds.

Decentralization vs. Security

Distributing control among many participants can improve security but hinders rapid threat response. Conversely, a more centralized system can react swiftly to attacks but concentrates control in fewer hands.

Integration with Legacy Systems

All banks have legacy IT systems, and transitioning to blockchain requires considerable time and resources. Compatibility and standardization issues further complicate integration, as the World Bank has found with its attempts at blockchain-based bonds.

Regulatory and Compliance Concerns

Regulatory uncertainty surrounding blockchain and cryptocurrencies creates risks for banks. Laws and regulations differ not just across nation-state borders but often within them.

Privacy Issues

While blockchain is secure, it is also transparent. Public blockchains expose transaction details to the network, which could conflict with banks’ need for privacy and data protection laws like GDPR in the EU.

Banking Blockchain Initiatives

Here are specific projects that are underway in the global banking sector:

JPMorgan Chase’s Kinexys

JPMorgan Chase initially launched Onyx, a private blockchain network for wholesale payments, but rebranded it as Kinexys in early 2025. Kinexys facilitates a variety of financial transactions, including cross-border payments, foreign exchange, and securities settlement. The platform has an average daily transaction volume exceeding $2 billion and serves clients across five continents, including major corporations, financial institutions, and fintech companies.

• Key player: JPMorgan Chase
• Challenges: Scalability, interoperability with the pre-existing financial infrastructure and other blockchain networks, navigating the evolving regulatory landscape, security and privacy measures to protect sensitive financial data.

Fnality International

Fnality International is a consortium of global banks—including Banco Santander S.A. (SAN), HSBC Holdings, plc (HSBC), Barclays plc (BCS), and UBS Group AG (UBS)—meant to streamline cross-border payments using blockchain technology. The project is focused on “utility settlement coins,” which are digital representations of fiat currencies backed by central bank reserves.

• Key Players: Santander, HSBC, Barclays, UBS
• Challenges: Regulatory approval and achieving widespread adoption.

JPMorgan’s Liink

JPMorgan Chase’s Liink network is a permissioned blockchain platform designed to improve interbank communication. By enabling faster and more secure information exchange, Liink aims to streamline processes like account verification and payment dispute resolution. Over 400 financial institutions have joined the network.

• Key player: JPMorgan Chase
• Challenges: Scalability, interoperability with other blockchains, and broader adoption

Project Agora

Led by the Bank for International Settlements, Project Agora seeks to improve efficiency and transparency in the trade finance sector. Built on the R3 Corda platform, it creates a shared digital ledger for real-time tracking of trade transactions. By tokenizing trade assets like invoices and letters of credit, Project Agora aims to improve cash flow for businesses and cut fraud.

• Key players: HSBC, BNP Paribas
• Challenges: Regulatory uncertainty, interoperability, and broader adoption

Canton Network

The Canton Network, spearheaded by SIX, Deutsche Börse, and Goldman Sachs, aims to create a unified infrastructure for financial markets. The Canton Network is essentially a privacy-enabled, interoperable blockchain network designed for institutional assets. It’s built on the digital asset modeling language (DAML), which can be used to create smart contracts with strong privacy controls. However, maintaining confidentiality while ensuring transparency and auditability remains a challenge.

• Key players: HSBC, BNP Paribas
• Challenges: Regulatory uncertainty, interoperability, and broader adoption

Versana Platform

Backed by major banks like JPMorgan Chase, Bank of America Corp. (BAC), and Citigroup Inc. (C), the Versana Platform targets the syndicated loan market. It offers a centralized platform for real-time data access, reducing manual errors and delays in loan servicing. Built on the DAML smart contract language, Versana seeks to improve efficiency and transparency in this multi-trillion-dollar market. However, its success relies on overcoming the inherent complexities of the syndicated loan market and achieving widespread adoption among various stakeholders.

• Major players: JPMorgan Chase, Bank of America, Citigroup, Credit Suisse, Barclays, Morgan Stanley, Deutsche Bank AG (DB), Wells Fargo & Co. (WFC), and U.S. Bancorp (USB)
• Challenges: Regulatory uncertainty and interoperability

How Would Central Bank Digital Currencies (CBDCs) Affect the Relationship Between Commercial Banks and Central Banks?

In a blockchain-based CBDC system, central banks could interact directly with consumers, potentially bypassing commercial banks for certain transactions. This could reduce commercial banks’ role in money creation and deposit-taking. However, commercial banks would likely remain crucial for credit, customer service, and other money matters.

If Blockchain Ends Up Enabling More Peer-To-Peer Financial Services, What Role Would Banks Still Have?

A future where most peer-to-peer services are done through the blockchain appear, in the mid-2020s, unlikely anytime soon. Nevertheless, should that happen, banks could become “trust anchors” in blockchain networks, offering services based on their expertise in regulatory compliance, security, and risk management. Banks could provide value-added services like digital identity verification, custody services for digital assets, and services integrating traditional and blockchain-based financial systems.

What Other Sectors Are Implementing Blockchain-Based Services?

Some sectors doing so include supply chain management, with companies like Walmart Inc. (WMT) using blockchain to track products from source to shelf, ensuring authenticity and rapid response to recalls. In healthcare, organizations are implementing blockchain for secure patient record management and pharmaceutical supply chain verification. Some parts of the real estate sector are using blockchain for property records and automated smart contracts for property transactions.

The Bottom Line

While cryptocurrencies initially brought blockchain into the spotlight, advocates say its true potential lies in its ability to transform core banking operations. From reducing settlement times and costs in cross-border payments to streamlining KYC processes and enabling smart contracts, blockchain could solve longstanding banking inefficiencies.

However, success will depend on how banks navigate key challenges, including regulatory compliance, scalability issues, and integration with existing systems. Most financial institutions are pursuing hybrid approaches—combining blockchain’s advantages with traditional banking expertise rather than viewing it as a complete replacement for existing systems.

Fact checked by Suzanne Kvilhaug
Reviewed by Doretha Clemon

Advocates say blockchain technology, with its core attributes of decentralization, security, transparency, and immutability, could address some pressing challenges facing the U.S. healthcare system.

While the technology was initially developed for cryptocurrency transactions, blockchain’s ability to securely manage and share data across distributed networks makes it promising for an industry plagued by fragmented information systems, data security concerns, and inefficient payment processes.

Key Takeaways

• Healthcare data interoperability and security remain major challenges in the U.S. healthcare system, with patient information scattered across disconnected systems.
• Blockchain technology can provide a secure, decentralized infrastructure for managing healthcare data while maintaining HIPAA compliance and patient privacy.
• For blockchain to succeed in healthcare, key stakeholders including providers, insurers, and technology vendors must collaborate on implementing standardized protocols and data governance frameworks.
• Nevertheless, uses of blockchain remain largely theoretical when not limited to specific uses and pilot programs.

Healthcare Issues in the U.S.

Many issues plague the U.S. healthcare sector, but patient data and information are the most important, besides the astronomical costs of care and insurance. Patient data is often scattered across different facilities, sometimes in separate counties or states. This usually makes it difficult for doctors to provide continuity of care because critical medical information can’t be accessed at crucial times.

Data Fragmentation and Interoperability

Patient data is siloed across different healthcare providers, facilities, and electronic health record systems. When a patient visits multiple providers, their medical history may be incomplete or inaccessible at critical moments. A recent World Economic Forum report indicates that a single hospital generates about 50 petabytes of healthcare data annually, yet much of this data remains isolated within individual systems.

Blockchain could create a secure, unified ledger where authorized providers can access complete patient histories while maintaining strict privacy controls.

Security and Privacy Compliance

Healthcare organizations must balance data accessibility with strict HIPAA compliance requirements and cybersecurity concerns. Patient records contain highly sensitive personal information that, if breached, can lead to identity theft and insurance fraud.

Blockchain’s cryptographic security features and immutable audit trails could help organizations maintain regulatory compliance while protecting patient privacy. Smart contracts could automate access controls and keep detailed records of who accesses patient data.

Payment Processing and Claims Management

Healthcare payment systems involve multiple intermediaries, which leads to slow processing times and high administrative costs. Payment delays and coding errors create added stress for patients with health problems.

Blockchain-based smart contracts could automate claims processing and payment verification, reducing administrative overhead and accelerating reimbursements.

Data Quality and Care Coordination

Without standardized record-keeping across providers, patient histories can become fragmented or contain errors. This can lead to misdiagnosis, duplicate testing, or inappropriate treatments.

A blockchain-based health information exchange could ensure that all providers work from the same verified patient record, improving care coordination and reducing medical errors.

How Could Blockchain Help Healthcare?

Blockchain propopents say it could improve healthcare data management in several key ways:

Secure Health Information Exchanges

• Blockchain could create a unified, secure network where medical records are accessible to authorized providers in real time.
• Each medical event would be recorded as a transaction in the chain, creating an immutable audit trail.
• Smart contracts could automate access controls and maintain HIPAA compliance.
• Patients could be given control over who accesses their records through private keys.

Claims Processing and Payment Systems

• Smart contracts could automate insurance claims verification and processing.
• Payment transactions could be executed automatically when predefined conditions are met.
• Reduced administrative overhead could lower healthcare costs.
• Real-time claim status tracking would improve transparency for patients and providers.

Clinical Research and Drug Supply Chain

• Blockchain could ensure the integrity of clinical trial data.
• Smart contracts could automate protocol compliance.
• Drug supply chain tracking could reduce the number of counterfeit medications.
• Patient consent management could be streamlined through blockchain.

Blockchain Applications Already in Healthcare

Like other sectors’ adoption of blockchain technology, healthcare organizations are moving from theoretical use cases to practical implementations. Two of these initiatives provide examples for how blockchain’s core features—decentralization, immutability, and transparency—can be leveraged to address healthcare’s most pressing challenges.

Securing Patient Records

Medrec:M operates a transparent peer-to-peer ledger that allows providers to track files and information.

Key facts:

• Developed by MIT Media Lab
• Creates a decentralized record management system
• Enables patients to control access to their medical data
• Uses smart contracts for automated consent management
• Being tested in multiple healthcare networks
• Focuses on maintaining HIPAA compliance while improving data accessibility

Pharmaceutical Supply Chain Issues

International Business Machines Corp. (IBM) and Walmart Corp.’s (WMT) blockchain initiative tracks pharmaceuticals from end to end.

Key facts:

• Provides end-to-end tracking of pharmaceutical products
• Ensures drug authenticity and proper handling
• Creates immutable record of temperature controls during transport
• Reduces counterfeit medications in the supply chain
• Enables rapid response to quality issues or recalls

Why Blockchain Adoption Remains Limited

The lag in a broad uptake of blockchain uses in healthcare stems from several interconnected challenges that are particularly acute in the sector.

Legacy Systems

The most significant barrier is the deeply entrenched nature of existing healthcare IT infrastructure. Unlike many financial institutions that could build blockchain systems from scratch, healthcare organizations have invested billions in electronic health-record systems over the past two decades. These systems, while often criticized for their limitations, represent massive institutional investments and are deeply integrated into clinical workflows.

Replacing or significantly modifying them would create both financial and operational risks that many healthcare organizations are reluctant to take.

HIPAA Compliance

Healthcare’s complex regulatory environment presents another major hurdle. While blockchain can theoretically improve HIPAA compliance through better security and audit trails, implementing these systems would require careful navigation of privacy laws that weren’t written with distributed ledger technology in mind.

Organizations must ensure that blockchain implementations not only improve data sharing but also maintain strict compliance with evolving privacy regulations.

Healthcare Is Not a System

The fragmented nature of the U.S. healthcare system itself poses unique challenges. Unlike countries with centralized healthcare systems, the U.S. has thousands of independent healthcare providers, insurers, and technology vendors.

Each has its own priorities, systems, and data standards. Creating a blockchain network that serves all these stakeholders requires unprecedented cooperation and standardization, which has been historically difficult to achieve in American healthcare.

Costs vs. Value

Cost considerations also play a crucial role. While blockchain might cut expenses in the long term—this is still theoretical—the initial investment required for implementation is substantial.

Healthcare organizations, particularly smaller providers operating on thin margins, often struggle to justify such investments, especially when the return on investment isn’t immediate or certain.

These challenges aren’t insurmountable, but they help explain why blockchain adoption in healthcare is going to be, at best, evolutionary, not revolutionary. Success will require not just technological shifts, but also industry-wide collaboration and regulatory clarity.

What Exactly Is Blockchain in Simple Terms?

Blockchain is essentially a secure digital ledger that’s shared across a network of computers. Each block contains a set of records or transactions, and once information is added to a block, it can’t be changed without leaving a clear trace. Every computer (or “node”) in the network has a copy of this entire chain, and they all work together to verify new information before it’s added.

In healthcare, these blocks might contain things like medical records, prescription information, or insurance claims. Data in the blockchain is decentralized, transparent, secure, and permanent. This is quite different from traditional databases where information is stored in one place and controlled by a single organization, like a hospital or insurance company.

How Could Blockchain Ensure Patient Privacy While Still Enabling Data Sharing Between Healthcare Providers?

Blockchain accomplishes this through the use of private and public keys, like a highly secure email system. When patient data is added to the blockchain, it’s encrypted with the patient’s public key. Only those with the corresponding private keys—controlled by the patient and authorized providers—can access the data. This means data can be shared widely across the network while remaining inaccessible to unauthorized users.

What Do Proponents Say Makes Blockchain More Secure than the Current Electronic Health-Record Systems?

Traditional systems store data in centralized databases, creating a single point that hackers can target. Blockchain distributes data across many nodes in the network, making it very difficult to compromise the entire system. In addition, the blockchain’s immutable ledger means that any attempted changes to medical records are permanently logged and must be verified by multiple parties. This creates an audit trail that makes unauthorized modifications or access immediately apparent.

The Bottom Line

Blockchain technology advocates offer compelling solutions to healthcare’s most pressing challenges, particularly data security, interoperability, and administrative efficiency. However, its adoption in healthcare remains limited to pilot programs and narrow use cases rather than system-wide deployments.

Healthcare presents unique challenges because of regulations, complex stakeholder relationships, and deeply entrenched legacy systems. Success will require not just technological changes but also industry-wide collaboration on standards, significant investment in infrastructure, and careful navigation of privacy regulations.

Fact checked by Kirsten Rohrs Schmitt
Reviewed by Thomas J. Catalano

What Are 5 Recession Resistant Industries?

When a recession or an economic slowdown occurs, the stock market overall declines. Unemployment increases painfully and consumer sentiment falls. Consumers tighten their belts, and so do businesses. But, while many industries are very susceptible to economic downturns, others perform well regardless of what’s happening with the economy.

That makes it a good strategy to add companies in some of these industries to your portfolio when a recession hits, or ideally when one appears on the horizon.

Key Takeaways

• Consumer staples tend to enjoy steady demand regardless of the economy.
• The retailers who sell consumer staples tend to thrive.
• Alcoholic beverage consumption stays steady even in hard times.
• Don’t disregard “the lipstick effect.”
• Funerals are inescapable facts of life.

1. Consumer Staples

No matter what happens in the economy, people need certain household items on a regular basis. Toothpaste, soap, shampoo, laundry detergent, dish soap, toilet paper, and paper towels. Since these products are always in demand, they’re labeled consumer staples. 

Major companies in this sector include Colgate-Palmolive Company (CL), Proctor & Gamble Co (PG), and Unilever N.V. (UN).

You can spot all of these companies on the labels of many of the products in your home. Each of them owns dozens of major brands that are sold throughout the world.

2. Grocery Stores and Discount Retailers

Consumer staples have to be purchased somewhere, and many of those purchases happen at grocery stores or large retail chains with locations around the world.

WalMart Stores, Inc. (WMT), Costco Wholesale Corporation (COST), and The Kroger Company (KR), are among the largest retailers in the world. These powerhouse retail giants collectively bring in hundreds of billions of dollars in revenue.

But the number two company on the list of the top retailers is the online giant Amazon.com, Inc., second only to WalMart Stores in worldwide sales as of 2024.

Important

No one can guarantee an industry won’t tank during a financial crisis, but the grocery and consumer goods industry usually holds up well throughout times of crisis.

3. Alcoholic Beverage Manufacturing

Beer, wine, and distilled beverages are high-margin products that are in demand in good years and bad.

A global study of 50 years of alcohol consumption showed little change in the sheer volume of alcohol consumption in bad times. Habits changed. For instance, people tended to save money by drinking more often at home and less often in bars and restaurants. But overall, they put away just as much beer and spirits.

In recent years, a small group of companies has acquired many of the most popular beer and spirit brands around the globe. The big players in this sector include Anheuser Busch InBev SA (BUD), Heineken N.V. (HEINY), and Diageo plc (DEO).

Anheuser-Busch InBev owns brands including Budweiser, Corona, Stella Artois, Beck’s, Leffe, and Hoegaarden. In addition to its namesake brand, Heineken N.V. owns Amstel, Sol, and Tiger. U.K.-based Diageo controls brands including Smirnoff, Johnnie Walker, and Tanqueray. If you keep a stocked liquor cabinet at home, you’re most likely a customer of these companies.

4. Cosmetics

The ability of the cosmetics industry to withstand a downturn is so well established that the phenomenon is known as the lipstick effect. The theory is that during economic downturns, consumers trade in big splurges for smaller luxuries.

The largest cosmetics companies include Estee Lauder Companies Inc. (EL), L’Oréal S.A. (LRLCY), and Coty Inc. (COTY), a major licensed brand manufacturer. Procter & Gamble and Unilever are also major players in the beauty industry.

These companies have luxury brands but their products also include moderately priced products that many consumers might switch to when times are tough. The French-owned L’Oréal, for example, has luxury lines and designer brands like Yves St. Laurent and Georgio Armani, but it also owns drugstore brands Garnier, CeraVe, and Maybelline.

5. Death and Funeral Services

As the popular saying goes, the only two things that are certain in life are death and taxes. While no one can buy stock in the Internal Revenue Service, investors can purchase shares in companies that profit from death-related services. 

Carriage Services, Inc. (CSV), Service Corporation International (SCI), and Matthews International Corp. (MATW) are three companies that make their revenues from life’s inevitable end. These companies provide caskets and funeral-related services, whereby their revenue tends to be recession-resistant.

Which Industries Perform Badly During a Recession?

One major sector that can be hurt by an economic downturn is consumer discretionary. This is “wants” versus “needs.” Tesla (TSLA), NIKE (NKE), and even McDonald’s (MCD) show up on some lists of companies that can suffer when consumers cut back on non-essentials. Even Amazon (AMZN) might make the list, although it can fall back on its strong sales of consumer staples, which are the “needs.”

In any case, the “wants” versus “needs” sector is a wide category, including travel, appliances, and furniture, among many other products.

What Are ‘Cyclicals’ Vs. ‘Non-Cyclicals’?

Cyclical stocks are highly responsive to the ups and downs of the economy, while non-cyclical stocks are relatively impervious to those cycles. This is at the heart of the issue of recession resistance. Manufacturers of airplanes and builders of new homes do well in a booming economy and less well in a downturn, but Coca-Cola still sells.

Which Stocks Did Well During the Pandemic Recession?

The list of stocks that did well during the pandemic recession offers some evidence that consumer staples do well during a recession. Then again, some discretionary brands did very well indeed.

In 2020, the top-performing stocks in the S&P 500 included the Clorox Company (CLX) and Amazon. Peloton Interactive, Inc. (PTON) and Zoom Video Communications, Inc. (ZM) morphed into consumer staples for the stay-at-home crowd. But Tesla, Inc. (TSLA) did spectacularly well, despite being no one’s idea of a staple product.

The Bottom Line

Although a company can never guarantee that it will generate investment gains, in good times or bad, some companies and industries tend to thrive in a recession. These companies could help make a well-balanced portfolio more recession (and pandemic) resistant.

The comments, opinions, and analyses expressed on Investopedia are for informational purposes online. Read our warranty and liability disclaimer for more info.

If you’re trying to make every dollar count, finding new ways to save while shopping can be a game-changer. With so many choices and prices out there, a few smart strategies can help you keep more money in your wallet—without any special skills. Whether you’re shopping for essentials or treating yourself on a budget, becoming a savvy shopper is a simple way to stretch your finances a little further. Here are five easy tips to help you get started.

Key Takeaways

• End-of-season sales and special sale dates, like Black Friday, offer big savings to consumers.
• It may be worth buying in bulk to save money, but don’t overlook the risks of owning too many of one item, especially perishables, that can expire. 
• Bartering for goods and services may be unusual for many consumers, but it doesn’t hurt to ask. 
• Buying used items and fixing them up on your own is often significantly cheaper than buying brand-new products.
• Saving money on consumer goods takes time and effort, but it’s possible to save hundreds of dollars per year with planning and research.

Tip 1: Find What You Need for Free or Borrow It Before Buying

Most people’s default response is to go to a store anytime they need something, but that’s not the only way to obtain a needed item. Ask yourself the questions below about the desired item.

Can I Find the Item for Free?

If you don’t need something right away, and you usually don’t, it’s worth searching on community ad sites like Craigslist or Kijiji. Another idea? Sign up some local Freecycle groups, and ask around to see if anyone you know is getting rid of whatever you want.

Can I Borrow It?

Many home improvement stores even have tools you can rent. Likewise, instead of spending money on the latest bestseller novel that you will probably only read once, head down to your local library and see if you can borrow the book.

This tactic can be a great money-saver for any item that you use infrequently or will only need to use once. For example, if you only need to use a drill once a year when you change apartments and have to reinstall your curtain rods, you can simply borrow a drill from someone else.

Tip 2: Try Negotiating for a Lower Price

Ask About Discounts

Some prices are set in stone, and it’s a waste of time trying to negotiate with someone who won’t budge. However, when you think there’s some wiggle room, consider the strategies below.

While you probably can’t negotiate the price on many items, there are plenty of situations where you can negotiate, even in a retail store. For example, if an item is cosmetically damaged, a store may be willing to offer a small discount because that blemished item tends to be more challenging to sell.

Important

If a salesperson wants you to buy a bunch of extras with a new computer or phone plan, ask for a discount.

If you’re buying an item from a private party that is used, you can always negotiate. This is because negotiation is standard practice on these types of purchases, and the sticker price is generally higher than the amount the seller will accept.

Barter for It

Bartering can be complicated because many people are not accustomed to doing it, and it may be hard to find someone who wants the service or goods you have to offer in exchange for what another person is selling.

If you have some valuable products or services to offer, however, and you’re purchasing from a private party, it’s worth asking. Even if the other party isn’t willing to barter for the entire item, they may be agreeable to at least reducing the price in exchange for an hour of your expertise.

Tip 3: Time Your Purchase by Waiting for a Sale or Buying in the Offseason

If you wait to purchase something until you need it, you’re likely to pay the sticker price, but with a little advanced planning, you can save big bucks. For example, ask yourself the questions below.

Will This Item Go on Sale?

If you want a new electronic device, like an iPhone, you may have to wait for a lower price. Usually, once a newer model comes out, the regular price will usually drop as supply increases and demand drops.

As new items become more popular, even if they don’t officially go on sale, you may be able to get a good deal on Amazon or eBay. Black Friday sales are usually a good time to score expensive or popular items, as well.

Certain everyday items, like groceries, toiletries, and cosmetics, will always go on sale sooner or later, providing an opportunity for you to stock up when your favorite brands are priced at a discount.

For anyone who doesn’t carefully follow the latest fashion trends, clothes are best purchased during end-of-season sales, even if it means you don’t get much use out of them until the following year.

Is There a Coupon?

Combine sales with coupons, and you’ll save even more. eBay can be a great source of coupons, such as ten buy-one-get-one-free coupons of your favorite deodorant. The coupons might cost you $2.50 total, including postage, but if you use all 10 of them, your net savings on a $3 stick of deodorant will be at least $27.50 plus tax.

If you have time to look through a few pages of content, then sites that offer free printable coupons, like Coupons.com, could be a good option for you too. 

When shopping online, search for the store’s name plus “coupon code” before making a purchase. Many sites will advertise coupon codes to help give consumers a break.

Sometimes you’ll enter coupon codes to no avail, but sometimes you’ll get lucky and get some savings like $5 off shipping fees or 20% off your entire purchase. It’s always worth taking a few minutes to look.

Finally, apps like Rakuten and Ibotta offer cashback on items ranging from groceries to clothing to hotels and much more.

Can I Find It Cheaper Somewhere Else?

It’s usually a bad idea to buy an item in the first place you see it because it’s very likely it is cheaper somewhere else. For expensive purchases where you have a lot to gain by comparing prices, and for situations, like online shopping, where it’s straightforward to compare prices, the savings you’ll achieve are worth the extra time and effort.

However, don’t bother if you won’t save much or are likely to waste a lot of time, gas, and money by shopping around. If you’re pressed for time, you can avoid shopping around altogether by making a habit of doing all of your shopping at stores that regularly offer bargain prices, and you’ll be confident that you’re already getting a good deal.

Tip 4: Research Substitutes or Find Alternatives

If the item you want to buy doesn’t quite fit into your budget, think about similar but less expensive alternatives. Figuring out the real reason behind a pending purchase can help you brainstorm ways to achieve the same result more affordably.

Similar But Less Expensive

For example, if you’re worried about being bored during a long flight, you may want to buy a spare battery for your laptop so you can get some work done. In this case, your primary concern isn’t getting more work done but rather finding a way to occupy your time.

Instead of buying that extra battery, you could use your laptop in the most energy-efficient setting until the battery runs out and then spend the rest of the flight reading a library book.

Make a Wish List

Wish lists can go a long way toward preventing impulse buying. By keeping a never-ending wish list, a person is less likely to buy items that have not been contemplated for at least a month, which provides sufficient time to decide whether the item is a necessity or just a want.

It’s not worth signing up for store credit cards just to get the discount that is offered. Store credit cards usually come with high APRs and misleading terms that can cost you a lot down the road unless you are vigilant about paying your bill on time.

If the mere prospect of saving money isn’t enough incentive, consider the opportunity cost of buying an item. Maybe that new suit or purse isn’t worth it when you could use the money toward going on a vacation.

Tip 5: Expand Your Shopping Universe

If you usually head straight to your favorite website, specialty store, or the mall when you need to buy something, consider these other shopping options that can save you a great deal of money.

Alternative Venues

Garage sales, moving sales, and estate sales tend to offer all types of merchandise at much lower prices than retail stores. You are most likely to benefit from this type of shopping experience for items that are not necessarily needed right away, such as goods like canning jars, dishes, or a jewelry organizer.

This can also apply to more practical products as well. Don’t expect to find everything at these sales, but do check them out from time to time to add value to your shopping budget.

Buying in Bulk

Consider big-box discounters as a source for the same products you usually buy at more expensive, specialized stores.

You may not have ever thought of the drugstore as a specialty store, but when you start comparing their regular prices to those of discount stores like Costco, Sam’s Club, and BJ’s Wholesale, you might change your mind. Even on inexpensive items like shampoo and toothpaste, drugstore prices can be significantly higher.

As a bonus, you can knock out several visits to smaller stores with one visit to a big box store, saving you time. But keep in mind that it doesn’t always make sense to buy in bulk.

Costco, Sam’s Club, and BJ’s all charge annual membership fees that can easily offset your annual savings, and many people can’t use up an extra-large container of pretzels before they get stale.

The Bottom Line

The ideas presented in this article might seem excessively frugal to some, but when you cut costs in lots of little ways, you can achieve significant savings without making big sacrifices.

Even thinking about how to save money on relatively minor purchases, like cans of soda or packs of gum, can result in significant savings when you buy these items habitually. It doesn’t take much time or energy to get into the habit of considering your purchases more carefully.

You may not always make the choice that will save you the most money and instead opt for convenience, but at least you will have made a conscious and well-informed decision.

Reviewed by Thomas J. Catalano

What Is High-Frequency Trading (HFT)?

High-frequency trading (HFT) software uses complex algorithms to analyze markets and execute large volumes of trades in microseconds. It requires advanced trading infrastructure, such as powerful computers with high-end hardware and low-latency networks.

Key Takeaways

• High-frequency trading software (HFT) accounts for about half of the U.S. stock market trading volume.
• HFT has been accused of manipulating the market and creating an unfair trading environment.
• Regulators in some jurisdictions have stepped in with efforts to reduce the trading activity.
• There are a few alternatives to high-frequency trading being considered.

Why High-Frequency Trading Is an Issue

The world of HFT also includes ultra-high-frequency trading, with participants of both types paying for access to exchanges that show price quotes earlier than the rest of the market receives them. This extra time advantage is believed to force other market participants to operate at a disadvantage, leading to claims of unfair practices and growing opposition to HFT.

The HFT marketplace has also become very crowded. Individuals and professionals have pitted their best algorithms against each other. Participants even deploy HFT algorithms to detect and outbid other algorithms. The net result is high-speed programs fighting against each other, squeezing wafer-thin profits even more, creating a trading environment in which regular traders cannot compete.

Additionally, the Securities and Exchange Commission believes HFT is an issue. In February 2024, the commission adopted rules that required firms acting like dealers to register as dealers (if they handle assets valued at more than $50 million). HFT firms act as dealers because they take both sides of trades and trade at “…a high enough frequency to play a significant role in price discovery and provision of market liquidity…”

Due to the above-mentioned factors and increased regulations, high-frequency traders and firms may consider alternative trading strategies.

Alternatives to High-Frequency Trading

Some firms are moving toward operationally efficient, lower-cost trading strategies that do not trigger greater regulation. 

Momentum Trading

The age-old technical analysis indicator based on momentum identification is one of the popular alternatives to HFT. Momentum trading involves sensing the direction of price moves that are expected to continue for some time (anywhere from a few minutes to a few months).

Once the computer algorithm senses a direction, the traders place one or more staggered trades with large orders. Due to the large number of orders, even small differential price moves result in handsome profits over time. Since positions based on momentum trading need to be held for some time, rapid trading within milliseconds or microseconds is not necessary, which saves enormously on infrastructure costs.

Automated News-Based Trading

News drives the market. Exchanges, news agencies, and data vendors make a lot of money selling dedicated news feeds to traders. Automated trades based on automatic analysis of news items have been gaining momentum. Computer programs can now read news items and take instant trading actions in response.

This news-based strategy can work better than HFTs as those orders are to be sent in a split second, mostly on open market price quotes, and may get executed at unfavorable prices. Beyond dividends, news-based automated trading is programmed for project bidding results, company quarterly results, and other corporate actions like stock splits and changes in forex rates for companies having high foreign exposure.

Social Media Feed-Based Trading

Scanning real-time social media feeds from known sources and trusted market participants is another emerging trend in automated trading. It involves predictive analysis of social media content to make trading decisions and place trade orders. 

Combining social media feed analysis with other inputs like news analysis and quarterly results can lead to a complex but reliable way to sense the mood of the market on a particular stock’s movement. Such predictive analysis is very popular for short-term intraday trading.

Firmware Development Model

Speed is essential for success in high-frequency trading. Speed depends on the available network and computer configuration (hardware) and on the processing power of applications (software). One concept is to integrate the hardware and software to form firmware, which reduces the processing and decision-making speed of algorithms drastically.

Such customized firmware is integrated into the hardware and is programmed for rapid trading based on identified signals. This solves the problem of time delays and dependency when a computer system must run many different applications. Such slowdowns have become a bottleneck in traditional high-frequency trading.

Is High -Frequency Trading Still Possible?

Yes, there are still trading firms trading at high frequencies using software.

Why Is High-Frequency Trading Illegal?

High-frequency trading is not necessarily illegal in many jurisdictions but is becoming more regulated. Some practices used by traders are illegal, such as spoofing, layering, and front-running, but these are not limited only to HFTs.

Do Brokers Allow HFT?

It depends on the broker—some allow it, and some don’t. If you’re interested in HFT, check with your broker to learn if it allows it.

The Bottom Line

Too many developments by many participants lead to an overcrowded marketplace and regulatory scrutiny. Traders are looking for alternatives to HFT by reverting to traditional trading concepts and low-frequency trading applications, and others are searching for new financial analysis tools and technology.

If your house is paid off, you may have plenty of equity to borrow against.

Fact checked by Vikki Velasquez
Reviewed by Doretha Clemon

You’ve paid off your mortgage, congratulations! But now you have a massive home repair project and not enough ready cash to cover it. Fortunately, you can still take out a home equity loan on your paid-off home, and if you use the funds to improve your home, the interest will be tax deductible. That said, a home equity line of credit might be a better option if you’re unsure how much money you need.

Key Takeaways

• Yes, you can take out a home equity loan on a home with no mortgage.
• Not having a mortgage only increases the amount you can borrow with a home equity loan.
• Borrowing against your home carries risks that you’ll want to consider.
• If you’re uncertain how much money you need to borrow, a home equity line of credit (HELOC) might be a better option.
• If the amount you are borrowing is sufficiently large, a cash-out refinance could cost you less in interest and fees than a home equity loan. 

How a Home Equity Loan Works When You Have No Mortgage

A home equity loan allows you to borrow against the equity you’ve accumulated in your home. You receive a one-time lump sum from the lender and immediately start paying it back with fixed monthly payments over an agreed-upon time period, such as 10 or 20 years. Because it is secured by your home, a home equity loan will have a lower interest rate than unsecured debt, such as a credit card or a personal loan. The downside is that your home will be at risk if you can’t pay it back.

However, a home equity loan may be somewhat less risky if you aren’t also carrying a regular mortgage because you will have less debt overall. You’ll also be at less risk of finding yourself underwater—a situation in which falling home prices leave you owing more than your home is worth. Being underwater can make it impossible to sell your home unless you are able to come up with enough money from other sources to fully pay off your loans.

Having a paid-off mortgage also makes it easier for lenders to calculate how much equity you have in your home and how large a loan they might be willing to offer you. Your equity is whatever you could sell the property for today.

Home Equity Loan vs. HELOC When Your Home Is Paid Off

A home equity loan isn’t the only way to draw on your equity. Another is a home equity line of credit (HELOC).

With a HELOC, you get a line of credit from the lender that you can draw on as needed, rather than a single lump sum at the outset, as is the case with a home equity loan. If you don’t actually need money now but want future access to credit at a lower interest rate than a traditional credit card, a HELOC may be a better option for you. One downside is that HELOCs usually have a variable interest rate, so when interest rates are rising, your payments can increase significantly.

If you know the exact amount you need to borrow and aren’t comfortable with the uncertainty of a variable interest rate, a home equity loan is probably a better choice for you. 

Home Equity Loan vs. Cash-Out Refinance When Your Home Is Paid Off

Yet another option is cash-out refinancing. In a typical cash-out refinance, the homeowner takes out a new mortgage for more money than they owe on their current one. After they’ve paid off the old mortgage, the extra cash is theirs to spend. They will still have to pay it back, of course, and interest will be racking up in the meantime.

If your home is paid off, however, you don’t have a mortgage to repay, so the full amount of the loan becomes yours to do with as you please.

Deciding between a home equity loan versus a cash-out refinance on a paid-off home is relatively easy. If you know the exact amount of cash you need, get estimates from lenders for both. Then, compare their annual percentage rates (APRs).

Plugging your numbers into our mortgage calculator below will show you which option saves you the most money over the life of each loan.

What Are the Lending Requirements for a Home Equity Loan?

A home equity loan has many of the same lending requirements as other loan products—a verifiable income history, a good debt-to-income ratio, and decent credit. In addition to these requirements, you’ll need a combined loan-to-value (CLTV) ratio of 85% or less in your home. That means the total balance of all the loans on your home divided by the current value of your home is 85% or less. For people without a mortgage, you have a 0% CLTV, which means you definitely meet the CLTV requirement for a home equity loan.

What Are the Alternatives to a Home Equity Loan?

The best alternative to a home equity loan is either a fully funded emergency fund or saving in advance for whatever you’re considering taking out a home equity loan for. If that’s not possible in your particular situation, a 0% APR credit card or personal loan are two options that don’t risk your home if you can’t afford to pay them back. 

Can You Lose Your Home if You Don’t Pay Back Your Home Equity Loan?

Yes, you can lose your home to foreclosure if you don’t pay back your lender and default on the loan.

The Bottom Line

Taking out a home equity loan when you don’t have a mortgage is very similar to taking one out when you do have a mortgage. Before you do, however, compare the alternatives, such as a home equity line of credit or cash-out refinance. You’ll also want to make sure you understand the risks involved and that you’re taking out a home equity loan for sound financial reasons.

You’re likely familiar with the usual money-saving tips: cutting cable, clipping coupons, splitting rent, or picking up a side hustle, but if you still want to find creative ways to save more, there are more options to consider.

If you’re already working hard and balancing a busy schedule, adding more to your plate isn’t exactly appealing. You still want to save more, whether it’s to pay down debt, build an emergency fund, contribute to your IRA, or reach another important goal. So let’s skip the basics and explore some creative, unexpected ways to keep more cash in your pocket without overcomplicating things.

Key Takeaways

• Think outside the box with creative strategies, such as switching to prepaid services, trying a no-spend challenge, or exploring DIY fixes.
• Focus on recurring expenses, like cell phone plans or subscription services, to free up more cash every month without sacrificing too much.
• Prioritize your well-being by not skipping essential expenses like insurance. Allowing yourself small indulgences, within reason, helps you stay motivated and avoids burnout.

1. Monitor and Adjust Your Electricity Use

Your electric company may offer free tools for assessing your home energy use and suggest ways to lower your consumption or lower your bill. For example, if you’re not on a time-of-use plan, and it’s an option where you live, switching to one could save you money. If you are, changing when you use energy-intensive appliances such as clothes dryers, clothes washers, and dishwashers could lower your bill.

2. Investigate Your Eligibility for Low-Income Utility Programs

The federal Low Income Home Energy Assistance Program works with states to help people stay warm in winter and cool in summer. Qualifications and levels of assistance vary by state to provide assistance with heating and cooling bills. Some programs will even replace a broken furnace or boiler or help weatherize your home to reduce energy bills.

3. Trying Doing it Yourself Before Paying a Pro

Some tasks are too dangerous to DIY. Other times, you might make a problem worse and more expensive to fix if you try to do the work yourself. But some tasks we might hire people to do are surprisingly cheap and easy to handle ourselves after we’ve watched someone else do them. From changing your car’s air filter to replacing your oven’s heating element, the next time you have a problem you’d normally pay a professional to fix, do some video research first. 

4. Consider a Prepaid Cellphone Plan

Most of us think about the big three—T-Mobile, Verizon, and AT&T—when we think about cellphone providers. But their recurring monthly plans are expensive and may provide more data, faster speeds, and newer phone technology than you need. 

If you switch to one of their prepaid plans, you may be able to cut your monthly bill in half. Moving to a smaller provider such as Ting or Mint Mobile can also lower your bill. So can paying up front for at least three months of service. Plans get super cheap if you ditch cellular data altogether and stick to talking, texting, and WiFi.

5. Cut Back on Subscriptions

Newspapers. Television. Movies. Music. Cloud storage. Photo editing. Word processing. Exercise classes. Sometimes it seems like every company uses a subscription business model these days. Getting someone to sign up for a service and pay for it forever is a great way to make money. That means you need to do the opposite if you want to save money. 

Out of all your subscriptions, which one do you use most? Allow yourself that indulgence, and cut the rest. Many have free alternatives. Also, you don’t have to pick one subscription and stick with it all year. For anything that’s month to month, you can switch it up: Hulu this month, Netflix next month, Spotify the month after that.

6. Starting Using a Bidet

If the pandemic-induced toilet paper shortage didn’t already convince you to try a bidet in 2020, now’s the time to think about one. It doesn’t sound like a budgeting idea, but entry-level models that attach to the side of your toilet seat cost just $30 to $40 on Amazon and will quickly pay for themselves in toilet paper and wet-wipe savings. Bidets are efficient, so they won’t run up your water bill. The low-end models don’t use electricity. And cutting back on your use of disposable products is good for the environment.

7. Try Out a No-Spend Challenge

You might believe that forcing yourself to not spend any money for a week or a month would just create a lot of pent-up demand. If you don’t buy groceries now, won’t you just buy more later? Maybe. But you also might find yourself reevaluating those purchases you postponed. 

If you survived for a week drinking ice water with dinner because you ran out of Coke Zero, maybe you can kick your can-a-day habit, or at least cut it in half. You won’t make any impulse buys of unnecessary items. And you might find a free way to hang out with a friend. Whether you try it for a day, a week, or a month, a no-spend challenge can kick your account balance up a notch.  

8. Accept Help When You’re Able to

There’s so much wealth and generosity in the United States that we should all feel comfortable accepting help when we need it. We’re talking food banks, pet pantries, free farmers markets, community gardens, school-supply giveaways, healthcare clinics, sliding-scale mental health services, Medicaid, hospital charity programs, and more. 

Granted, these resources are more abundant in some areas than others. But whatever you have access to, take advantage of it. When your circumstances improve, you can always return the generosity of the organizations that served you by donating your time or money.

9. Utilize Insurance to Save Money

It’s so tempting to raise your deductible or decrease your coverage to lower your insurance premiums. But remember why insurance is there. If your car gets totaled, a pipe bursts in the upstairs apartment and floods you out, or a windstorm pulls off the roof of your house, good insurance coverage will get your life back to normal much faster without messing up your finances. 

And if you’re a pet parent, spend the $20 to $50 a month on pet insurance for your furry best friend. When they need emergency surgery, you’ll thank yourself.

10. Give Yourself an Allowance

It’s miserable putting every penny of your income toward necessities and saving. You’ll stretch your willpower too thin and risk setting yourself back with a spending splurge. Instead, make a conscious choice at the beginning of every week, month, or pay period about how much money you’ll allow yourself to spend on fun things—within your overall budget, of course.  

Then, enjoy those treats guilt-free. And if you want to save up for something bigger, roll over your allowance from one period to the next. A cash envelope or dedicated savings account can help you manage your fun money and keep it separate from your essential spending.

The Bottom Line

Some expenses are almost impossible to eliminate. But that doesn’t mean you can’t reduce them. In particular, lowering your recurring expenses can be a big help because it will give you savings every month, not just one time. 

Also, don’t forget that saving money is a long-term goal. Don’t make short-sighted decisions like slashing or forgoing insurance coverage that might cost you big in the long run and undo all the progress you’ve made. At the same time, many small savings choices can pay off big in the long run.

Reviewed by Charles Potters
Fact checked by Yarilet Perez

Investors rely on absolute return to define how an asset or portfolio performed over a certain period. Relative return is the difference between the absolute return and the performance of the market. Traders commonly use a benchmark, like an index, to accurately measure their investment’s return when compared to the market.

Key Takeaways

• Absolute return is what an asset or fund returned over a certain period.
• Relative return is the return an asset or fund achieved over time compared to a benchmark.
• Absolute return fund managers are focused on shorter-term results, whereas relative return fund managers are geared toward market performance.

Absolute Return

Fund managers who measure their performance in terms of an absolute return develop a portfolio diversified across asset classes, geography, and economic cycles. Such managers pay attention to the correlation between the components of their portfolios.

An absolute return fund is positioned to earn positive returns by employing techniques that are different from a traditional mutual fund. Absolute return fund managers use short selling, futures, options, derivatives, arbitrage, leverage, and unconventional assets.

Absolute return managers have a short time horizon. Most of these managers will not rely on long-lasting market trends. Rather they’ll look to trade the short-term price swings, both from the long as well as the short side.

Relative Return

Relative return is a way to measure the performance of actively managed funds, which should earn a return greater than the market as compared to a benchmark, or index, such as the S&P 500. The relative return is a way to gauge a fund manager’s performance. For example, an investor can always buy an index fund that has a low management expense ratio (MER) and receive the market return.

Many fund managers who measure their performance by relative returns lean on proven market trends to achieve their returns. They’ll perform a global and detailed economic analysis on specific companies to determine the direction of a particular stock or commodity for a timeline that typically stretches out for a year or longer.

Important

Relative return is also called alpha, one of five popular technical investment risk ratios. 

Example

One way to look at absolute return versus relative return is in the context of a market cycle, such as bull versus bear. In a bull market, 2% would be seen as a horrible return. But in a bear market, when many investors could be down as much as 20%, just preserving capital is a triumph. In that case, a 2% return doesn’t look so bad. The value of the return changes based on the context.

In this scenario, the 2% would be the absolute return. Relative return is the reason why a 2% return is bad in a bull market and good in a bear market. What matters in this context is not the amount of the return itself, but rather what the return is relative to.

What Is a Fund Manager?

A fund manager helps investors define the holdings within their portfolios. Knowing whether a fund manager is doing a good job can be a challenge for some investors and commonly depends on how the rest of the market has been performing.

What Does Alpha Mean to Investors?

Alpha (α) is a term used in investing to describe an investment strategy’s ability to beat the market.

Why Is the S&P 500 a Popular Benchmark?

The S&P 500 Index includes approximately 500 leading U.S. publicly traded companies that focus on market capitalization. The index is considered one of the best gauges of large U.S. stocks.

The Bottom Line

Financial managers or advisors aim to earn absolute returns and generate positive returns annually without regard to an index or benchmark. Fund managers, such as retirement or mutual fund managers, seek relative returns that aim to beat an index like the S&P 500.