The last time the yield on the 10-year Treasury note was above 1% was on 3/19/20 or 7 months ago today. The 10-year note yield closed at 0.74% last Friday 10/16/20 (source: Treasury Department).
Preferred Apartment Communities has paid a consistent 6% dividend since inception, Q1, 2012. For more information on How To Invest, Please call Frank.
No matter how often you prefer to monitor your stocks’ performance, there are certain items you should consider. Here are five things to review as you monitor your stocks’ performance:
Earnings — Pay attention to the company’s quarterly and annual earnings statements, which include comparisons with the recent past and often reviews of what management expects for the next quarter and year. Review the stock’s earnings trend and how the company performs compared to analysts’ estimates. Watch out for earnings surprises, which can cause rapid price changes up or down, and may indicate the start of a new stock price trend.
Price and dividends — Follow
the stock’s price compared to its
52-week highs and lows. Examine its trailing total returns year to date and over the last one-, three-, five-, and 10-year periods. Look for changes in the absolute dollar amount of dividends and the current yield (the annual dividend divided by the current price).
P/E and PEG ratios — Price to earnings (P/E) and price/earnings growth (PEG) ratios are often better indicators than the stock price as to how relatively expensive or cheap a stock is.
The P/E ratio is useful for comparison to other stocks and the market, while the PEG ratio is a strong indicator of whether the stock is overpriced or underpriced compared to its projected earnings growth rate over the next five years.
Insider transactions and stock
buybacks — A company buying
back its own stock or whose senior
executives and directors are accumulating more shares is a bullish sign.
On the other hand, when insiders are selling off major holdings of their own stock, it’s quite often an indication that the stock price has peaked.
Sudden and large price changes
on high volume — When a stock
makes a sudden, high-volume move
— particularly when it opens much
higher or lower than the previous day’s high or low — it can be the start of a new, long-term trend.
For help monitoring your stocks’ performance, or if you need to make a change to your investment portfolio, please call.
Dividend investing creates both an income stream from dividends as well as portfolio growth from asset appreciation.
The first thing dividend investors look for is safety, which is measured by the dividend coverage ratio. Typically, dividend investors
don’t want to see companies pay out more than 60% of their profits as dividends to investors to ensure the company has the resources for operations. Dividend investors look for companies that have good cash flow and stable income, because they can get a higher payout ratio and don’t have to worry about the company’s ability to pay the dividend.
When an investor follows the high dividend yield strategy, he/she is investing in companies with yields at the top of the range that will provide a predictable income stream. Investors who focus on a high dividend growth strategy are investing in companies whose dividend payments are significantly lower than average, but the company is growing at a very fast rate.
After a period of time, these fast-growing
companies can increase dividends to an equal or much higher level than what would have
been collected using the high dividend yield approach.
In a recent survey, 9% of non-retiree respondents said that they knew for certain what their Social Security benefits would be, 41% had a guess or estimate, and 49% had no idea how much their benefits would be (Source: AAII Journal, March 2020).
A recent study found that individuals with children have 10% less wealth by retirement age than individuals without children. However, individuals with children were
just as satisfied with retirement as those without children. One of the reasons for this
difference is that retirement saving goals differ in meaningful ways between the two groups. (Source: American Enterprise
Institute, December 2019).
Consumers worldwide put an average value of $35,000 on digital assets stored on their mobile devices, which includes photos and videos (Source: Journal of Financial Planning, April 2020).
About 81% of U.S. adults age 72 and older have a healthcare power of attorney, while only 41% of millennials have one (Source:
AARP, 2020).
Approximately 20% of baby boomers who receive an inheritance of $100,000 or more spend the entire inheritance. (Source:
Journal of Family and Economic Issues, 2020).
I f you are new to investing, there is no doubt that you will make some mistakes; it just goes with the territory. However, you should familiarize yourself with these common mistakes and take steps to avoid them.
No Investment Plan — Many investors just get started in the stock market without giving any thought as to what they are trying to accomplish. It is important to have a plan that will keep you on track and help you ride out turbulent markets. Your plan should include:
Goals — Define what you are
trying to accomplish so you
can measure your portfolio’s performance in meeting your goals. You will want to be as specific as possible,
such as accumulating $1 million for retirement by age 60 or $100,000 for your child’s education within 15 years.
Risk Tolerance — Define how much risk you are comfortable with so you can determine an appropriate allocation for your assets. Stocks are riskier than bonds and will fluctuate more than other asset classes, so you want to figure out how much risk you are willing to assume. The younger you are, the more risk you can typically assume,
since you have more time to overcome any declines in your investments.
Asset Allocation — You will want to determine how to allocate your assets across different investments, such as stocks, bonds, etc.
Diversification — Once you determine your asset allocation, you will want to diversify within each individual asset class. For example, when investing in stocks, you will want to spread your funds across large-, mid-, and smallcap stocks.
Time Horizon — Don’t wait too long to start investing because time is your friend. If you
are saving for retirement, plan on 30 years of investing to meet your goals. If you don’t allocate enough time to meet a specific goal, you will need to adjust your asset allocation
to help you meet the goal within a shorter timeframe. For example, if you start saving for a child’s college education when he/she is a
freshman in high school, your assets will most likely need to be allocated more heavily to stocks in an attempt to meet that timeframe.
Stop the Noise — Be careful
with how much time you spend and
the credence you lend to the financial
media. Media noise can be hard
to turn off, but remember the best
advice is to stick to your plan.
Not Rebalancing — You will want to review your portfolio regularly and rebalance if it strays from your target asset allocation. When
you allow your portfolio to drift based on market returns, some asset classes will be overweighted at market peaks and underweighted at market lows, which may lead to poor performance. While it will sometimes feel counterintuitive to sell assets that are performing well for those that are not performing as well, your target asset allocation
will lead to a stronger performance in the long term.
Chasing Performance — Many investors are always trying to find the next big investment. They will rely on recent strong performance
as the single factor in purchasing an investment. If a certain stock has been doing extremely well for a number of years, you should probably have invested in it years ago,
since it may be nearing the end of its high performing cycle.
When an investment is doing extremely well, many people will not sell and take the profit because they are afraid that it will continue
to increase in value. But there is also the risk that it will go down in value.
You should also consider identifying a target value at which you will sell your stocks. This will help take the emotion out of your sell
decisions.
Becoming Too Emotional — It’s hard not to get emotional when the market encounters a severe correction, but the investors who have
the ability to remain calm during these times more consistently outperform the market. If you start selling off investments at the worst
possible time, you may then be out of the market when it starts to rebound.
While it is easier said than done, you have to build a resistance to those things that create emotional triggers so you don’t make bad
decisions. Thoughtfully consider new information, don’t just follow the crowd, and make decisions when you are calm based on your long-term plan.
It takes special care to create an estate plan that efficiently distributes your assets and meets your goals for every person and cause important to you. But no part of the process means more to most people than that which involves their children. After all, for most of us, our children are our most important legacy, and how your estate documents treat them will have an impact long after you’re gone.
To help organize this process, it is useful to think of children in three categories: minors, young adults, and fully grown adults with spouses and children of their own.
Children from infancy through high school have a different set of needs than children of other ages. One is simply to be able to rely on an income for daily needs in case you’re no longer there for them. Since the parents of young children usually don’t have large savings or net worth, the challenge is to provide an instant estate, for which life insurance is the best answer.
There are several rules of thumb for how much life insurance to buy — from four to 10 times your annual income. The right amount should be the result of a thorough needs analysis of your entire family, which can be accomplished by asking your spouse and yourself a series of probing questions, including:
How much do the two of you already have saved?
Will your spouse be able to work full- or part-time? If so, what will childcare cost?
Will your children go to public or private elementary and secondary schools?
How much will your children need in college funds by the time they’re ready to attend?
How much will your spousen eed for retirement, and how much of that will he/she be able to accumulate on his/her own?
After you determine how much life insurance to buy, you need to think about who will raise your children if you and your spouse both die before the children are adults. This calls for naming a guardian in both of your wills. If you don’t have a will, a state court will appoint a guardian for you, and it may not be someone you or your spouse would have wanted for this role. In addition, parents might also wish to designate a person to manage the children’s assets, known as a custodian or trustee. This can be the same person as the guardian, but designating an unrelated third party, like an attorney, banker, or trust company officer, who can be charged with thinking only of your children’s welfare, appeals to some people.
Among the other major decisions you have to make is whether and how to split your assets among your surviving spouse and your children, and if you leave some assets directly to your children, how to determine the split among them.
Often, it can make sense to leave all or most of your assets to your spouse and to divide assets you bequeath to your children evenly. But this might overlook such considerations as children with special medical needs or special abilities.
Once children reach the age of majority — 18 in most states — a new set of considerations enters the picture. By this age, your children no longer require a guardian and are legally capable of spending their money in any way they want — and therein lies a potential problem. What if you leave $250,000 for college, and instead, your children decide to waste the money and skip college?
One way to control how the inheritance is spent is to establish a trust with a schedule for distributions. One option is to delay a full distribution until they reach a certain age, like 25 or 30. another choice is to give them a series of partial distributions over many years. Another increasingly popular strategy is the incentive trust. This vehicle makes payouts contingent on your child’s achievement of specific accomplishments — like maintaining a certain grade point average; graduating from college, graduate, or professional school; marrying; or buying a home.
Many of the same kinds of considerations that apply to minors and young adults can also influence your decisions regarding your adult
children. Do they, their spouses, or their children have special medical
needs? Have your adult children fallen on hard times or are they irresponsible with money? How many children do they have and how
much help will they need to finance their education?
Another consideration has as much to with your own objectives for minimizing estate taxes. If your estate is much larger than you and
your spouse’s combined estate tax exemptions (currently $11.58 million
for each spouse in 2020), you might want to shrink it with an aggressive campaign of gifts to your children and grandchildren. On the other hand, any funds you leave to your children might encumber them with estates equally as large as yours or larger, with the same tax challenges. In this case, you might want to transfer some of your assets to a generation-skipping trust, which bypasses your children and names your grandchildren as the beneficiaries.
Don’t go it alone when mulling over these decisions. Most importantly,
you need to reach a meeting of the minds with your spouse and even your children, especially if they are adults. One thing you don’t want to do is to create bad feelings after you’re gone, either toward you or among your survivors.
“It is not the strongest species that survive, nor the most intelligent, but the most responsive to change.” – Charles Darwin
“Men, it has been well said, think in herds; it will be seen that they go mad in herds, while they only recover their senses slowly,
one by one.” – Charles MacKay
“Nothing sedates rationality like large doses of effortless
money.”– Warren Buffett
With markets bouncing around all-time highs recently, pending
elections and political unrest creating additional emotion and drama, one can only speculate where the indexes may be going. Yet when the market is high, so is risk. Will you accept more risk and ‘ride the tiger’, or consider a more rational approach toward fixed income or even guaranteed income accounts*?
*All guarantees and protections are subject to the claims-paying ability of the issuing company.
Politics and investing have always been spoken about in the same breath. Commentators and candidates alike often frame the performance of the stock market as a sort of “barometer” of a president’s policies. But the data don’t support this link. Over the past 120 years, the long-term performance of the market has shown almost no correlation with government policies.
So what’s the real story when it comes to politics and investing?
Consider these historical truths:
Neither party can lay claim to superior economic or financial market performance. The S&P 500 Index delivered an average annual return of approximately 11% over the past 75 years, through both Democratic and Republican administrations. The US economy also expanded around 3.0% during that period.1
Presidential term stock market return vs. economic growth (1957-present)
From the inauguration of President Kennedy through the current administration of President Trump, some of the best returns in the stock market have come when the president’s approval rating was between 36% and 50% — in other words, when at least half the country disapproved of the job performance of the sitting president.2
Gallup poll presidential approval ratings and the growth of $100,000
Predictions about the ultimate impact of legislation are often far removed from the actual results. For instance, it was predicted that President Obama’s Patient Protection and Affordable Care Act of 2010 would destroy small-business hiring. But since it was implemented, 8.6 million jobs have been added in this sector.3 Similarly, President Trump’s Tax Cut and Jobs Act of 2017 was intended to unlock capital expenditures, but it has thus far failed to bring an acceleration in business investment as issues such as trade uncertainty and, most recently, Coronavirus have impacted confidence.
Example 1: Patient Protection and Affordable Care Act
Employers with 50 or more full-time employees are considered “large business” and therefore required to offer employee health coverage or pay a penalty.
Non-farm private medium payroll employment (50-499)
Example 2: Tax Cuts and Jobs Act of 2017
Section 179 allows taxpayers to deduct the cost of certain property (such as machinery and equipment purchased for use in trade or business) as an expense when property is placed in service.
US capital goods new orders (nondefense ex-aircraft and parts)
These are just some of the essential truths about elections and investing. Click here to see a brochure which clearly and simply illustrates these three, plus seven more:
1. Haver, Invesco, 6/30/20. Note: President Trump stock market performance data from 1/20/17-6/30/20., real GDP data from 12/31/2016 to 3/31/2020 as GDP is reported with a lag. Stock market performance is defined by the total return of the S&P 500 Index.
2. Bloomberg, L.P., 6/30/20. An investment cannot be made in an index.
3. Bloomberg, L.P., FRED, 3/31/20. Most recent data available.
See Index definitions on page 13 of the brochure.
Past performance does not guarantee future results
Below are four simple suggestions that can help you increase your financial confidence.
1. Get organized. Not too long ago, it didn’t take much work to organize your finances. Unless you were very wealthy, money matters were fairly
straightforward. You could easily store all your financial information in a single accordion file. Today, things are more complicated. Credit cards, home equity lines of credit, student loans,
401(k)s and IRAs, 529 plans for college
expenses — the list of information to keep track of seems endless. There are numerous strategies for getting organized. Some people stick with that old-fashioned accordion file. Others go completely digital. Whatever solution you choose, you need to know all the details of your finances.
2. Get educated. Simply taking the time to learn more about finances and managing your money can do wonders for how you feel about your life. Basic financial literary isn’t really covered in
most school curricula, so many otherwise savvy adults are clueless in this area. Many community colleges, churches, and nonprofit groups offer classes, or you can sign up for a class online. If you don’t want to go back to school, consider
watching videos or reading articles that review financial concepts.
3. Get a financial plan. Setting goals and making meaningful progress toward those goals will do wonders for your financial self-esteem. In fact, people who engage in financial planning are more
likely to report they live comfortably and are on track to meet their financial goals. A financial plan brings together all the threads of your financial life. Having a solid plan in place that covers everything from preparing for emergencies to planning for retirement is key to boosting your financial confidence.
4. Get help. Getting reliable advice from an outside expert can do wonders for your financial confidence. Just like a doctor supports and guides you in making decisions about your health, a financial advisor is there to make sure you’re
sticking to your financial plan. There are many decisions that are difficult to make on your own, from deciding how much to save for retirement to choosing investments for your portfolio. If you’re
unsure about what to do next, please call.
Bonds can be purchased with maturity dates ranging from several weeks to several decades. Before deciding on a maturity date, review how that date affects investment risk and your ability to pursue your goals.
Interest rates and bond prices move in opposite directions. A bond’s price rises when interest rates fall and declines when interest rates rise. The existing bond’s price must change to provide the same yield to maturity as an equivalent, newly issued bond with prevailing interest rates.
Bonds with longer maturities are more significantly affected by interest rate changes. Since long-term bonds have a longer stream of interest payments that don’t match current interest rates, the bond’s price must change more to compensate for the rate change. Although you can’t control interest rate changes, you can limit the effects of those changes by selecting bonds with maturity dates close to when you need your principal.
In many cases, you may not know exactly when that will be, but you should at least know whether
you are investing for the short, intermediate, or long term.
About 69% of Americans say they are concerned about cybersecurity in the wider adoption of technology. Yet, 78% of Americans agree that the widespread adoption of technology within financial services is a positive development (Source: Personal Capital, 2019).
Approximately 80% of adults over age 50 want to remain in their current home as they age, but only 50% expect that they will be able to do so (Source: Barron’s, June 3, 2019).
About 40% of families believe they are paying the right price for college costs (Source: Sallie Mae, 2019).
About 51% of Americans expect to inherit money from older family members. Of that group, 25% believe the inheritance will largely or entirely fund their retirements (Source: WealthManagement.com, June 2019).
About 20% of baby boomers, 36% of gen-xers, 32% of millennials, and 63% of generation z (ages 18 to 22) expect an inheritance from older family members
(Source: WealthManagement.com, June 2019).
Almost 92% of United States taxpayers e-filed their returns in 2019 (Source: eFile.com, 2019).