Tag: investors

Financial Planning is About Making Your Life Plan A Reality

Many folks who have just begun working with us are surprised by how our planning process starts. We don’t begin by talking about IRAs, 401(k)s, or how much you’re saving. Instead, we begin by talking about you, not your money.

Putting your life before your financial plan.

As Life-Centered Planners, our process begins with understanding your life plan. We start by asking you about your family, your work, your home, your goals, and the things that you value the most.

Our job is to build a financial plan that will help you make your life plan a reality.

Of course, building wealth that will provide for your family and keep you comfortable today and in retirement is a part of that plan. So is monitoring your investments and assets and doing what we can to maximize your return on investment.

But we believe maximizing your Return on Life is just as important, if not more so. People who view money as an end in and of itself never feel like they have enough money. People who learn to view money as a tool start to see a whole new world of possibilities open in front of them.

Feeling free.

One of the most important things your money can do for you is provide a sense of freedom. If you don’t feel locked into chasing after the next dollar, you’ll start exploring what more you can get out of life than just more money.

Feeling free to use your money in ways that fulfill you is going to become extremely important once you retire. Afterall, you’re going to have to do something with the 40 hours every week you used to spend working! But you’re also going to have to allow yourself to stop focusing on saving and start enjoying the life that your assets can provide.

Again, having money and building wealth is a part of the plan. But it’s not THE plan in and of itself.

The earlier you start thinking about how you can use your money to balance your vocation with vacation, your sense of personal and professional progress with recreation and pleasure, and the demands of supporting your family with achieving your individual goals, the freer you’re going to feel.

And achieving that kind of freedom with your money isn’t just going to help you sleep soundly at night – it’s going to make you feel excited to get out of bed the next morning.

What’s coming next?

So, when does the planning process end?

If you’re like most of the people we work with, never.

Life-Centered Planning isn’t about hitting some number with your savings, investments, and assets. And we’re much more concerned about how your life is going than how the markets are performing.

Instead, the kinds of adjustments we’re going to make throughout the life of your plan will be in response to major transitions in your life.

Some transitions we’ll be able to anticipate, like a child going to college, a big family vacation you’ve been planning for, and, for many of you, the actual date of your retirement. Other transitions, like a sudden illness or a big out-of-state move for work, we’ll help you adjust for as necessary.

In some cases, your life plan might change simply because you want something different out of life. You might start contemplating a career change. You might decide home doesn’t feel like home anymore and start looking for a new house. You might lose yourself in a new hobby and decide to invest some time and money in perfecting it. You might decide it’s time to be your own boss and start a brand new company.

Planning for and reacting to these moments where your life and your money intersect is what we do best. Come in and talk to us about how Life-Centered Planning can help you get the best life possible with the money you have.  Visit Our Website to learn more.

We also have some really great resources on our YouTube Channel, so head on over there to check it out.

Stocks Remain Bullish in 2nd Quarter!

Stocks Remain Bullish in 2nd Quarter

July 9, 2018

 

The Markets

 

What a rollercoaster of a quarter!

 

When it comes to the American Association of Individual Investors (AAII) Sentiment Survey, respondents tend to be more bullish than bearish about U.S. stock markets. The survey’s historical averages are:

 

  • 5 percent bullish
  • 0 percent neutral
  • 5 percent bearish

 

As the second quarter of 2018 began, investors were feeling less optimistic than usual. (About 36.6 percent were bearish and 31.9 percent bullish.) Their outlook was informed by a variety of factors, according to an early April article in The New York Times, which said:

 

“First there was the risk that the economy might be growing too fast, which could prompt central banks to hike interest rates sooner than expected. Then there was the risk of a trade war ignited by the White House imposing tariffs on certain products, an action that quickly prompted countries like China to erect trade barriers of their own. Next came the threat of a government crackdown on technology companies, after revelations of their misuse of customer data.”

 

As the quarter progressed, investor optimism increased on signs of economic strength. In early June, CNBC reported the economy appeared to be “operating close to full employment, with an unemployment rate at 3.8 percent, inflation still hovering at or below 2 percent, and business and consumer confidence strong.”

How did corporate earnings do this quarter?

Robust corporate earnings helped spur optimism, too. FactSet Insight wrote, “The S&P 500 reported earnings growth of 25 percent for the first quarter – the highest growth since Q3 2010.” In mid-June, the AAII survey showed 44.8 percent of respondents were feeling bullish, 21.7 percent were bearish, and 33.5 percent were neutral.

 

As talk of tariffs and trade wars resumed, investor optimism plummeted. By the end of June, just 27.9 percent of respondents were bullish and more than 39 percent reported they were feeling bearish. AAII explained:

 

“Many – but not all – individual investors anticipate continued volatility and/or think that the current political backdrop could have a further impact on the stock market. Trade policy is influencing some individual investors’ sentiment as well. While many approve of the Federal Reserve’s plan to continue gradually raising interest rates, some AAII members are concerned about the impact that rising rates will have. Also influencing sentiment are valuations, tax cuts, earnings growth, and economic growth.”

 

Despite a downturn in bullishness, major U.S. stock indices moved higher last week.

 

Data as of 7/6/18 1-Week Y-T-D 1-Year 3-Year 5-Year 10-Year
Standard & Poor’s 500 (Domestic Stocks) 1.5% 3.2% 14.5% 10.1% 11.0% 8.2%
Dow Jones Global ex-U.S. 0.0 -4.9 5.6 3.5 4.0 0.8
10-year Treasury Note (Yield Only) 2.8 NA 2.4 2.3 2.6 3.9
Gold (per ounce) 0.4 -3.2 2.5 2.5 0.3 3.2
Bloomberg Commodity Index -1.4 -2.2 4.6 -4.5 -7.5 -9.4
DJ Equity All REIT Total Return Index 1.9 3.2 9.0 9.2 9.3 8.9

S&P 500, Dow Jones Global ex-US, Gold, Bloomberg Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; the DJ Equity All REIT Total Return Index does include reinvested dividends and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods.

Sources: Yahoo! Finance, Barron’s, djindexes.com, London Bullion Market Association.

Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not applicable.

 

there’s a carbon dioxide (CO2) shortage. really, it’s true.

Many people agree the world has too much CO2. It’s the reason representatives from countries around the world signed the Paris Climate Agreement. They committed to “adopt green energy sources, cut down on climate change emissions, and limit the rise of global temperatures,” reported National Public Radio.

 

The effort has been less successful than many had hoped, according to the International Energy Association (IEA). After several years without increases, energy-related emission rose by 1.4 percent in 2017. That’s the rough equivalent of putting 170 million more cars on the road, reported Scientific American.

 

Emissions rose primarily in Asia, although the European Union (EU) saw increases, too. The biggest decline was in the United States. There’s a certain irony there, since President Trump announced he would withdraw from the agreement in June 2017, reported The Washington Post.

 

Despite realizing a 1.5 percent increase in ­­­­­ emissions, the EU is experiencing a shortage of food-grade CO2. The Economist reported:

 

“Food-grade CO2 is a vital ingredient: it puts the fizz in carbonated drinks and beer, knocks out animals before slaughter and, as one of the gases inside packaging, delays meat and salad from going off. A shortage of the stuff has therefore created havoc in food makers’ supply chains.”

 

The EU’s food-grade CO2 is a harvested by-product of processes for making ammonia and other chemicals, reported The Economist. Three of Britain’s five ammonia plants have been closed because farmers are using less fertilizer, and CO2 does not deliver enough revenue to keep the plants running.

 

Let’s hope the shortage of CO2 doesn’t affect the supply of beverages available to World Cup fans.

 

Weekly Focus – Think About It

 

“My garden is an honest place. Every tree and every vine are incapable of concealment, and tell after two or three months exactly what sort of treatment they have had. The sower may mistake and sow his peas crookedly; the peas make no mistake, but come up and show his line.”

–Ralph Waldo Emerson

Overlooked Keys to Being a Successful Investor

Three Overlooked Keys to Being a Successful Investor

Mike Desepoli, Heritage

Does investing strike “fear” in you? We once heard somebody say the word “fear” stands for “False Evidence Appearing Real.” That seems to apply to investing. Here’s why.

The stock market makes some people nervous. This can be especially true for young people who grew up during the Great Recession. Not only did these folks see market volatility at its worst, but they also came away with negative impressions about the financial markets in general.

The truth is that the market is neither a one-way ticket to instant riches nor a dangerous game for insiders only. There is risk involved in any kind of investment, but if you understand how the market operates in the long run, then the rewards can be significant.

By understanding the following three important facts about the market, you might be able to turn “fear” into “False Evidence Appearing Real” and not get scared out of letting your money work hard for you in the market.

  1. The market tends to move in long cycles.

The amount of info we have at our fingertips makes it tempting to check in on our investments weekly, daily, or even hourly. As a financial professional, though, we take a much wider view of the markets. And while past performance is no guarantee of future returns, the history of the market continues to trend upwards.

Consider the S&P 500 Index. If we go back and look at all the bull (upwards) and bear (downwards) markets from 1926 to 2017, the average bear lasted 1.4 years and resulted in a 41% loss on average. However, the average bull lasted 9 years, and gave investors a 480% gain on average, according to First Trust.

When volatility strikes, patience is usually a good course of action. Your financial plan is designed to provide for the rest of your life, not for one bull or bear cycle. Instead of panicking when the market dips, try to think of volatility as a tax that investors pay on the wealth that the market can create.

And if you do find yourself checking in on your investments as regularly as you check your email, maybe think about uninstalling that app—or calling us.

  1. Make consistent contributions to your portfolio.

Besides struggling to accept volatility, many people are skittish about the markets because they feel powerless. Money goes in, and decades later, who knows what’s going to come out. They feel that politicians, corporations, and geopolitical tumult will have the final say in how big their retirement nest egg grows.

However, often times the biggest factor that determines the success of your investments is simply contributing new money on a consistent basis. As discussed above, the market will most likely trend upwards in the long run. The more of your money that’s along for the ride, the bigger those eventual gains will be.

For example, suppose that you decide to invest $10,000 every year for 10 years into your portfolio. In a flat market returning 0%, that $10,000 would account for 100% of your portfolio’s gains. In a modest market returning 6% per annum, that $10,000 would account for 73% of your portfolio’s gains. And even in a bull market, charging ahead at a rate of 12%, your $10,000 would STILL account for more than half of your portfolio’s gains, according to Invesco.

  1. Focus on what you can control.

To be sure, part of investing involves accepting things you can’t control. A hurricane on the other side of the world might rattle the markets for a couple days. A large company might become embroiled in an accounting scandal. The Federal Reserve might make an unexpected interest rate move. Market corrections might follow.

But if you understand volatility and continue to focus on the big picture, you’ll start paying more attention to the things you can control, like a monthly budget that allows for automatic contributions to your investment and retirement accounts.

Better yet, think about setting a goal to ramp up the size of those contributions. Many people try to save or invest 10% of their income. Can you shoot for 15%? 20%? The bigger the contributions, the bigger the payoff when you retire. And if retirement isn’t on your radar, that big investment cushion will go a long way toward giving you a feeling of freedom.

If you’re still unsure about investing in the markets, make an appointment to talk to us. We can help clear away any misconceptions you might have about investing and craft a plan that makes you comfortable about how your money is working for you.

 

 

The BIGGEST Blunder Investors Are Making

The Biggest Blunder Investors are Making Right Now

Mike Desepoli, Heritage

 

It’s not all their fault, though, as information is often dumbed down in the interest of simplicity. As Einstein said: “Everything should be made as simple as possible but not simpler.”

Unfortunately, often the information provided to average investors has been simplified below the bare minimum. To avoid the blunder, average investors need a bit of sophistication.

To fully understand how to avoid the blunder, let us first illustrate the point. Read on for the blunder and how to avoid it.

The dirty little secret

Many average investors believe the myth that bonds are safe. There is some truth to the understanding that bonds are safer than stocks, but average investors miss an important nuance. If you buy an individual Treasury bond or a bond of a company with a solid balance sheet and hold it to maturity, you will get your principal back. However, this is not the case when you buy mutual funds or ETFs.

Asset Allocation? What asset allocation

Many average do it yourselfers are advised to start with 60% in stocks and 40% in bonds. Of course, adjustments are made based on age and objectives. Investors are told that stocks are for growth and bonds are for safety and income. Many average investors do not understand that they can lose a lot of money in bonds.

All good things come to an end

Bonds have been in a 30-year bull market. For this reason, the bad advice given to investors has not hurt them so far. However, average investors need to know that the bull market has ended.

The big blunder

As stock market volatility has risen, many average investors who want safety are moving out of stocks into bonds. They are doing so because they do not understand the following:

  • They can lose money in bonds.
  • Interest rates are rising.
  • Bonds move inverse to interest rates. In plain English, when interest rates go higher, bonds go lower.
  • Stocks are experiencing volatility because of rising interest rates.

What to do now

First and foremost, do not buy bond funds or ETFs.

Second, it helps to understand that most funds and popular ETFs are concentrated in a handful of stocks that have run up and now pose a high risk.

Third, if you don’t know what you’re doing always consult with a professional.

Fourth, check out Episode 60 of The #AskTheAdvisor Show by clicking here.

 

 

Trump Agenda in Doubt?

Trump Agenda in Doubt After Healthcare Fail?

By Mike Desepoli, Heritage Financial Advisory Group

It was supposed to the first step in the Trump administrations plan to make America great again. While nothing on the Hill comes easy, with a congressional majority a victory was expected. After 7 years of publically campaigning for a shot to fix healthcare, the republicans failed spectacularly to do just that. Unable to gather the necessary votes for a full repeal and replace of Obamacare, they opted to scrap the vote and move on. It leaves you to wonder how they had 7 years to come up with a comprehensive replacement plan and failed.

Future plans in doubt?

More importantly, what does it mean for the future of the Trump agenda and their grandiose plans? In terms of the financial markets, the focus immediately turns to tax reform. A large part of the recent run up in stocks has been attributed to the expectation of tax cuts. It has been viewed as a near certainty that with a congressional majority that the republicans could easily and swiftly pass a tax reform bill. However, when you take into consideration their lack of unity on the issue of healthcare suddenly tax reform is no sure thing.

It is worth noting that President Trump has indicated that they will move on from healthcare and deal with taxes. I think the initial thought in the wake of the healthcare defeat was that they would keep trying their luck there before moving on to item two of the agenda. That prospect has investors worried that tax reform may not be coming any time in the near future.

In the markets..

There is likely to be a lot of volatility in the weeks and months ahead as the market grapples with the new reality that even the Republican party appears divided. There is no doubt the administration expects resistance from the Democrats.  But I don’t think anyone expected this type of division in their first shot to pass a major bill. Whether or not they will be prepared to regroup and move on undeterred remains to be seen. Make no mistake, investors around the world will be waiting anxiously.

The 1 Question Investors Should Ask

The 1 Question Investors Should Ask: Is My Financial Advisor a Fiduciary?

By Mike Desepoli AIF®, Vice President of Heritage Financial Advisory Group

Financial advisors will have a new regulation to deal with starting in April, and it’s the biggest change the financial advice industry has seen since the great recession. It’s called the “Fiduciary Rule”, and it will have a significant impact on how financial advice is delivered. It is important that investors understand what this change is, and why its’s important.

Introduced by the previous administration, the fiduciary rule will require financial advisors to put the client’s needs before their own. Yes, you read that right. Until the rule officially goes into effect, your financial advisor may not have your best interest in mind.

What is the current law?

As the law currently stands, there are two standards that advisors are held to, the suitability standard and the fiduciary standard. The suitability standard gives advisers the most wiggle room. It simply requires that recommendations must fit clients’ investing objectives, time horizon and experience. You can satisfy the suitability standard by recommending the least suitable of the options, as long as it falls within the general suitability test of that client. The suitability standard invites conflicts of interest pertaining to compensation, which can vary greatly from one product to another.

It also doesn’t require advisors to disclose conflicts of interest. So what that means is often the products that are being recommended are best for the broker, and have higher costs for the investor. It is estimated that non fiduciary advice costs Americans approximately $17 billion each year.

The other standard of care, the fiduciary standard, tasks advisors with putting their clients’ best interest ahead of their own. For instance, faced with two identical products but with different fees, an adviser under the fiduciary standard would be compelled to recommend the lower cost option to the client, even if it meant fewer dollars in his or her own pocket.

Unfortunately many investors can’t distinguish among advisors who is a fiduciary, and who isn’t. Studies have shown that individual investors don’t know who is a fiduciary or what a fiduciary actually is. So here are a few questions to help you sort through the rubble:

How often do you monitor my investments?

Investors don’t ask this question often, because most investors assume the advisor keeps a close eye on their portfolio. A common reason for using an advisor is insufficient time to self-manage. Hopefully, you are not paying an annual fee for an advisor to put your money into passive index funds and not monitor their performance. If your advisor is not analyzing your portfolio at least quarterly, you may want to discuss the services offered for the annual fee you pay.

 

What is your investment philosophy?

Paying careful attention to the advisor’s answer can offer insight into the business model. Although there is no one-size-fits-all approach, all advisors should have a disciplined and repeatable investment approach. Markets fluctuate, and strategies that may have been in favor last year might perform terribly the next year. An advisor who chases performance and lacks an underlying process often generates poor returns. If they are pitching a new “hot” fund every time you meet, they may not have your best interest in mind.

 

How much am I really paying?

Disclosure requirements have improved since the financial crisis, but “hidden” fees remain for the average investor. Often, when selecting a financial advisor, clients base their decision on the advertised fee. In some cases, there may be no fee referenced at all. Is the advisor working for free? If the fee seems too low, that may also be concerning. The advisor may be receiving ongoing service fees from the investment they are recommending.

This undisclosed compensation is a big conflict of interest. Beware, as these fees can become a significant cost over time, compared to the explicit fees of a fiduciary advisor. A typical fee-based advisor has a tiered structure based on account size that is disclosed to a client up front. Selecting an advisor with a reasonable fee is important, but what you get for that fee is equally relevant. If one advisor is a fiduciary and the other is only held to the suitability standard, the difference in fees may not paint the full picture. Investing in an advisor who has your best interests at heart could pay handsomely over time.

When it comes to choosing a financial advisor, take nothing for granted. Know what you are paying for, and what services you are entitled to. Remember, a misguided broker focused on his or her next commission could cause you financial ruin.