We are looking forward with optimism to 2022 and we hope you are too. While each year brings with it both new challenges and residual struggles from the years before, it also offers opportunities for growth and understanding. We know now more than we ever did about so many things, and we’ll learn even more in the coming months. Our vocabularies have increased, like they do every year, as we’ve researched and discussed global events. We’ve all learned more about how things like supply chain issues and labor shortages can affect the economy; interest rates and the way the federal reserve can manipulate them; novel viruses and how they mutate; how resilient corporate profits can be. We know, because we’ve seen it before, that we should expect some level of volatility in the markets. We also know, because we’ve done so many times, how to combat that volatility with patience and diversification. We know that the U.S. stock market has been enjoying a historic run over the past three years. We also know that returns like that are not sustainable and that we should adjust our expectations moving forward. We have not seen double-digit inflation numbers since 1981 and we don’t expect to see them that high this coming year, but we do see consumer prices ticking up and anticipate factoring those inflated costs into our family budgets and investment plans. We know this now, so we can deal with it as it happens. Maya Angelou once said, “When you know better, you do better.” That’s the attitude we’re bringing into this fresh, new year. We’ll move forward armed with the knowledge we’ve acquired during these last challenging years, and with our resolve to put that knowledge to work for you. Happy New Year from all of us at Winch Financial. We wish you peace, good health, happiness and prosperity in the coming year.
In honor of Black History Month, we are honoring key members of the African American community who have made a lasting impact on the financial industry. History loves rule-changers, game-changers and world-changers, and Alonzo Franklin Herndon elegantly achieved all three. Born into slavery in 1858, Herndon rose to become Georgia’s first black millionaire and he built an industry along the way. Recognizing a need for low-to-moderate income earners to have access to life insurance, Herndon founded Atlanta Life Insurance Company with a $140 investment. Today, that company spans 17 states and remains the only African-American owned and privately held stock company in the country with a financial services platform that includes asset management and insurance. Emancipated as a small boy following the Civil War, Herndon and his family began their free life in abject poverty. They all worked as sharecroppers and young Alonzo also helped out by peddling goods and working odd jobs. Due to these financial constraints, he managed just one year of formal education in his entire life. He reportedly left his hometown with just $11, which he used to begin learning how to become a barber. A quick learner with a natural business mind, he eventually owned three highly successful barber shops in and around Atlanta. The flagship shop, called the Crystal Palace, featured gold fixtures, marble floors and crystal chandeliers, and catered to the city’s elite white businessmen. In a painful irony, Herndon could not enter the front door of his own business due to Jim Crowe Laws. Still, he saw his customer base as opportunities to learn, he enjoyed picking their brains while he cut their hair and he used this knowledge to build an astonishing legacy. He began purchasing real estate and eventually owned 100 properties, including a stately mansion he helped design that became his family’s home. Today, you can tour that home and appreciate its fine details. In 1908 Herndon bought a… | Read More »
In light of a short-term though very real cash shortage you might be feeling due to pandemic-related shutdowns or furloughs, you may be tempted to dip into your retirement accounts. On its face, this may seem like an easy fix. It is likely the largest pool of money you have and it may seem harmless to loan yourself some money from it to tide yourself over until this financial crisis passes. We urge you to consider ramifications of this move carefully. Every dollar you remove from your investment account decreases the potential earning power of that account. So, if you withdraw $50,000 from your 401(k), you not only reduce that account by that amount, you also lose the potential that $50,000 might yield (another $2,500 in a 5% market). That lost interest compounds year-over-year making your single withdrawal even more expensive over the long run. It is true that you can avoid paying an early withdrawal fee temporarily because the Secure Act allows you to take as much as $100,000 from your retirement accounts without penalty, and to avoid paying taxes on the withdrawal if the money is put back in the account within three years. But, this is a temporary window and you can’t be sure you will have the means to replace the money in three years. Also, if you are furloughed, laid off or otherwise unemployed, you are probably not contributing to your 401(k) or other employer sponsored retirement plan anymore and this is already reducing your future earning potential. It is far better to review your personal budget and to cut back on spending temporarily. You can also negotiate with creditors, including your landlord, sell an item or two you are no longer using, or pick up a side gig you can do safely until you are called back to your full time job. If you’ve trimmed all the excess and still find yourself short of… | Read More »
Of all the post-Thanksgiving hashtagged holidays, #GivingTuesday is our favorite. We like the idea of a day focused on charitable giving, although we do urge caution at this time as well. Before you donate to any charity, we encourage you to look into its status. Is it registered with the IRS as a 501(c) (3)? What percentage of the funds raised go to overhead like salaries and marketing and what percentage funnels directly to the charity’s intent? Have you read the charity’s mission statement to be sure its goals align with yours? Because so many companies, including PayPal and Facebook, offer matching funds, Giving Tuesday offers great incentives to make a financial contribution today. But, we also urge you to pay wisely, especially for online donations. Make sure the address includes the “S” to indicate it is secure as in https:// rather than http://. Don’t donate from a public computer or using an unsecure Wi-Fi connection. If money is tight this year, there are plenty of other ways to participate. You can volunteer your time – sort food for a local pantry, ring bells for the Salvation Army, sign up for a charitable fun run, etc. You could also donate things you already have, which is often a win/win for you and the charity. Take clothes to Goodwill and slightly used coats, hats and mittens to Coats for Kids or check with your local schools or jails to see if they need donated clothing items. Food banks accept unexpired and unopened pantry items. Libraries, the Salvation Army and Goodwill all accept donations of gently used books. Even if you don’t have time today to vet a charity, or collect donations, or ring a bell you can still participate by just being kind. Wave a car into traffic, visit a lonely neighbor, compliment a worker, or call a friend.
While it’s the oldest and most familiar index, the Dow Jones Industrial Average is not the largest and, due to the way it weights its companies and to the limited amount of companies it represents, it may not provide the best representation for how the U.S. stock markets are faring. With only 30 stocks, all of them blue chip industrials, the DJIA includes familiar companies like Johnson & Johnson, Coca-Cola and McDonald’s. By contrast, the S&P includes 500 companies with a market cap of $5.3 billion or more. Historically, the Dow and the S&P have been almost perfectly correlated, meaning they move in the same direction on virtually every trading day. Recently, though, the two indices have been tracking differently, with the S&P 500 YTD returns around 7.41% relative to the Dow at 4.28%, according to Factset. The two indices weight their companies differently, with the S&P weighting by market cap, meaning that bigger companies make up more of its value, and the Dow weighting by price, meaning that a change in the price of one stock has the same impact to the Dow as a change in the price of another. The prices are equally weighted on the Dow. A third index we track closely is the Nasdaq Composite, which includes more than 3,000 stocks that are weighted by market capitalization. More than half of the companies listed on the Nasdaq are tech stocks, and, unlike the Dow and the S&P, the Nasdaq includes some foreign-based companies. All three indices have enjoyed unprecedented success in recent years. According to MarketWatch, since March 9, 2009, which marked the low of the financial crisis and which many consider the birth date of the current bull market, the S&P has advanced 320%, the DJIA has risen 290% and the Nasdaq is up has soared 520%.