Importance of Market Valuations

There is a lot of talk today about a global slow down and possible recession in the relatively near future.  Markets are still near all-time highs, and are close to setting some records in terms of longevity (how long we've had a bull market).  Market valuations are a key concern in this type of environment.  I'm not making any predictions in this post, but I would like to provide some thoughts about new investments in this type of environment.  Check out this piece for more info, but my take is below.

Let's say you are changing jobs and are looking to rollover your current 401k.  If your new plan allows it, you may decide to roll it into a new plan, or you may want other options and look for a simple IRA.  Let's say you go with the IRA.  So now you have this chunk of cash to reinvest, since you can't rollover the investments directly.  Do you invest all the cash at once in an array of investments, or do you do so over time?  I believe the best approach is to do so over time (maybe in as little as monthly for a year).  This is because we never truly know what the market is going to do in the future, regardless of our own assessments of market valuations or conditions.  You may think stocks are cheap, but sometimes that happens for a reason.  And as the flyer points out, investing at the wrong valuations doesn't necessary mean you will lose, but it could take much longer to come out ahead and seriously dent returns.

My point is this:  Never rush into an investment because you have a chunk of cash.  Assess the market and the opportunities out there, and ask your advisor for their advice.  Be skeptical if they want to throw it all in at once.  You worked hard for that money, it's not wise to invest it all at once without some homework and reasonable expectations.

Two Investing Questions to Ask Yourself

Whether you're just starting investing or have been for many years, if you haven't set any goals or plans for your invested funds, you may be doing yourself a disservice.  Establishing goals and plans gives you a framework from which to monitor performance and risk tolerance, among others.  Check out this flyer with great questions to ask regarding your investments.  

Contact me today for help with these questions, or if you simply want to get started or want a review of your investments.

The U.S. and China Battle for the Top Spot

As we await results from the U.S. and China trade negotiations, it's important to remember the contributions each have to today's  world economy.  The U.S. is still far bigger, but the China is growing more quickly.  This piece gives more information, but I'd like to point out something towards the end of it.  

Because Apple is such a widely held stock, your allocation to that stock or funds that perhaps hold a lot of the company could have had a larger weight, or influence, on your portfolio performance.  This is why diversification is not only important, but knowing what you own and why you own it (something Peter Lynch of Fidelity used to say).  Essentially, if you aren't getting the results you want, you may need to look at what you own.

If You Were Furloughed, Do You Have Cash?

The current government shutdown is no secret, nor is the difficulties those furloughed are going through financially.  This should be a lesson to the rest of us, though.  Ask yourself this:  What would happen to me if I lost my job and didn't have an income for a period of time?  This, of course, is where an emergency fund comes in and is extremely important.  This piece provides some good, basic advice on an emergency fund, but I'd like to add my own twist.

For one, the basic and classic amounts of 3-6 months or up to a year of living expenses is a good starting place.  But I also think individual comfort and mindset should have a place in determining that amount as well.  For instance, if you have an uneven income, you may feel more comfortable having a larger emergency fund.  The opposite could be true if you have a relatively safe job with a history of not being laid off or slow periods.

Second, I've read online advice that says to put your emergency fund into a low cost index fund so that it grows and keeps up with inflation over time.  I can't stress how terrible I think this idea is.  For one, no one knows what the market will do at any particular time, we just know that it goes through booms and busts and tends to rise over long periods of time.  Why would you want your emergency fund in a vehicle that could drop drastically in value right when you possibly need it?  It's a terrible idea.  Two, although cash currently pays next to nothing, in a pinch, cash is king.  Invested, you need to sell, wait for settlement of the sale, then wait for the funds to hit your bank bank account after transfer.  If the cash is already in a savings account, a simply transfer normally suffices.  It's really as simple as that.

I think a better solution is to adjust your emergency fund over time as your situation changes.  And guess what?  A great time to do this is when your evaluating your plan and making any necessary changes.  It's funny how things can fit together, right?

Advice from Bogle

Investors lost possibly their biggest advocate last week with the death of John Bogle.  I encourage everyone to read the books he's written or what interviews he's given.  He certainly had a knack for making complex issues easier to understand and was right on the money when it came to common sense.  Here's a short piece with some of his advice.  It's simple, which is usually the best kind.

2018 Recap

Looking back at 2018, a lot happened.  The markets set record highs then had the worst performance since the Great Recession.  Oil rallied then tanked.  International markets had a tough time.  Much more occurred, but I'll let this flyer do the talking on that.

Things happen every year, good and bad.  With your investments, it pays to stay diversified and keep your goals in mind.

I'm here to help.  Contact me today.

Beware Scams at Tax Time

Since tax season is upon us, I thought I'd share this flyer with great tips to protect yourself from scams and identity theft.  Although the IRS will normally send a letter to first establish a communication, this isn't always the case.  If some claims to be from the IRS, always ask for I.D.

I believe it's always best to be proactive when protecting yourself and your identity, and that starts with knowing what to look out for.  It's much easier and less costly than finding out after the fact.

New Year's Financial Checklist

My last post talked about making your money your New Year's Resolution.  In helping you do so, here's a checklist with more ideas to keep an eye on your money.  For example, whether you plan to borrow money or not it's a good idea to keep an eye on your credit score.  You never know, there could be an incorrect record tarnishing your score that can make borrowing more costly and complicated.

Happy New Year!

My Thoughts on Market Volatility

Are you worried about market volatility?  Are you worried about the possibility of a recession?  If so, you aren't alone.  We've seen extraordinarily good markets over the past several years, so it can be unsettling to see wild markets return.  But, it is the nature of the capital markets and the business cycle.  So what can you do to calm your fears?

First, I'd suggest to create a plan if you don't already have one.  This includes not only what your future goals and expectations are, but also planning your investments accordingly.  If you already have a plan, great.  Revisit that plan and ensure nothing should change.  

Second, as a general rule, if you don't need money for a specific purpose over the next 1-3 years, then I wouldn't worry too much about the market.  This depends of course on your future needs and how you are invested (you could be taking far too much risk).  However, if do need money for something in the next 1-3 years, and all your money is tied up in the market, you should probably consider freeing up some cash as to not risk losing it.  No one knows what the market will do over any period of time, so why risk the cash if you know you will need it for some expense in the near-term?

Third, seek help if you're just not sure.  There is a lot of information and considerations to make when developing a plan and how to properly invest your money to reach your goals.  This includes keeping enough cash for known near-term expenses and an emergency fund for things you don't know will hit until they do.  

I'm here to help you figure it out.  It just takes a phone call or email.  Why wait?