After 2018’s roller coaster ride through the financial markets, the New Year presents an excellent opportunity to take stock of your retirement plan and maybe reallocate a resource or two. Portfolio managers commonly reallocate accounts by shifting investments based on both technical and fundamental indicators and retirement timelines. They do this throughout the year in an effort to find a prudent balance of safety and growth. But, a fresh year also offers inspiration to analyze your emotional resources and distribute them appropriately as well. If you haven’t taken a risk tolerance test in a while, now would be a good time to do that. Any investor’s ability to withstand market volatility can be affected by many variables including age, income level, budget, retirement timeline, personality and family situation. A person confident in his or her ability to absorb risk might view a steep market decline as a buying opportunity and a necessary correction of a healthy market, while another person might look at the exact same numbers and want to flee the equity market entirely in favor of cash and/or treasuries. The financial conundrum we all face is that both reactions could be correct. The age old admonishment to sell down to your sleeping point means a different alarm clock for every investor. Nervous investors with a strict retirement timetable tend to choose the slickest clock with the loudest alarm, while those who have a looser timeline and a mellower attitude might even sleep in. The point is, you have to ask yourself what type of investor you are. If volatility keeps you up at night and you’re willing to forego growth opportunities to lessen the likelihood of losing money, you may want to stick to cash or bonds. (Of course, with that choice you face another kind of risk, inflation, in which you could end up losing value in your accounts because they aren’t earning enough to keep up… | Read More »
The statistics have become more alarming with each passing year loan. Currently, more than 70% of all college graduates carry student loan debt into the next phase of their lives. Americans now have more than $1.4 trillion in unpaid education debt, according to the Federal Reserve. Trillion. That’s 1,400,000,000,000. Students graduating today can expect to spend the next two decades of their lives paying down their collegiate debt. In fact, according to a study from the OneWisconsin Institute, it takes graduates of Wisconsin universities 19.7 years to pay off a bachelor’s degree and 23 years to pay off a graduate degree. Fortunately, there are things a graduate can do almost as soon as he or she tosses their mortar board into the air to help mitigate student loan debt. First, consider putting that graduation gift money to good use by investing it in a Roth IRA. Even $500 accrues handsomely if you invest it early enough in your career. You also can use your graduation gift money to begin making payments on your loan. Most loans allow a grace period after graduation, but that doesn’t mean you have to use it. Interest accrues during grace periods and it’s much better to start knocking down your debt as quickly as possible. Second, choose your next step with care. Consider the options for housing and transportation when you weigh job offers. Also, look at the overall cost of living and how that might affect your social life. The average monthly payment on a student loan in 2017 (for borrowers aged 20 to 30 years) was $351. That’s a sizable chunk to factor into a monthly budget. Third, if it fits with your long-term employment plans, consider a job (like Teach for America) that offers some form of loan forgiveness. It is important to note, however, that you may have to pay income taxes on forgiven loans. Fourth, take advantage of available apps… | Read More »
When it comes to investing, high risk and high returns usually go hand in hand. Riskier, more volatile investments — those that tend to bounce up and down in value — will generally earn greater profits over the long haul than investments that slowly, but steadily, gain in value. If you’re saving well before you actually need the money, you can take advantage of this rule by investing in more volatile assets (typically stocks) and getting a higher return on your money. If you are in your forties, or even fifties, you probably won’t actually need the money for decades, so it won’t matter if your portfolio loses value this year, it’ll likely rebound in the next. That can lead to some pretty heart-palpitating moments as your investments see-saw up and down, but just grit your teeth and remind yourself that it doesn’t matter how much those stocks are worth today, what matters is how much they’ll be worth when you need them. The fact is, since the first American stock market opened in Philadelphia in 1817, the stock market has always gone up more than it has gone down. Think about it. There has never been a time when the stock market went down and just stayed there. It has always recovered – always. And here we are, in 2017, after the crash of 1929, after the crash of 1987, after the dot.com crash of 2000-2001, after the crash of 2008, and the stock market has posted a string of new record highs. Yes, you can lose money in the stock market, but those losses are always only temporary. After a time, the market recovers and your investment gains return. We tend to overlook these facts because of something psychologists call “loss aversion.” Consider again the age-old investing axiom, “The greater the risk, the greater the reward.” When we hear this we are likely to fixate on the risk… | Read More »
We applaud the Department of Labor’s fiduciary rule, which demands all advisers act in their clients’ best interest. That this ruling, which takes effect today, has been so hotly debated speaks volumes about how far the industry still has to go to achieve real transparency. The ruling charges advisors with the task of giving advice in their clients’ best interest. Previous, advisors who did not fall under the fiduciary standard, those selling commissionable products under a broker/dealer, only had to adhere to a suitability standard. They had to offer advice that was suitable for their clients, but could be in the advisor’s best interest. Specifically, if two suitable products were suitable for a client, but one resulted in a higher commission for the advisor, the advisor was under no legal obligation to offer the lower commissioned product. Today, according to the DOL ruling, all advisors must act with prudence and loyalty. “Prudence” means the advice must meet the professional standard of care as defined by the Employee Retirement Income Security Act (ERISA). “Loyalty” means advice must be “based on the interests of the customer, rather than the competing financial interest of the adviser or firm.” Additionally, advisors must charge no more than reasonable compensation. They are also prohibited from making misleading statements about investment transactions, compensation, and conflicts of interest. This includes material omissions as well as material misstatements. We spell these terms out because we believe in them. We value our fiduciary relationship with our clients. We enjoy sitting on the same side of the table with them, and we look forward to doing so for many years to come. If you have any questions regarding the DOL ruling, which will require a little more paperwork for us and our clients but no change in our valued relationship with them, please don’t hesitate to ask.
I can blink and remember so clearly the sweet, red-headed little boy who spread his Lego sets all over my living room floor, and scored Brewer games with the diligence of a professional statistician. I look up (way up) at him now, but still see the little guy who wrote me a poem more than a dozen years ago, “I have a best friend and she is my Grandma.” The poem hangs on my kitchen wall and I’m never taking it down. I’ve built my business by preparing people for transitional times like these. We plan, invest, analyze, save and plan some more to make each season of life as comfortable and enjoyable as possible. In this way, I know Caleb and his family are ready for the next step. His parents, teachers and coaches also have prepared him well for college and I know he’ll make the most of his time there. So, I’m not worried about him, I’m just a little sad for the rest of us. Caleb is heading off into an exciting new world where innovations I can’t even imagine will become part of his everyday life. These are exiting times for high school graduates, and I’m thrilled by their possibilities. But, I’m also going to miss my friend. Congratulations to Caleb and the Class of 2017! May God bless you tonight and always.