It isn't how much you make
. . .It's how much you keep!
Archive for Investments – Page 2
ANOTHER BEAR – When the S&P 500 closed at 3667 Thursday (6/16/22), the index was down 23.6% from its all-time closing high of 4797 set on 1/03/22, i.e., qualifying as a “bear” market decline of at least 20%. The drop was the index’s 11th “bear” since 1950 but its 2nd since the start of the global pandemic. The S&P 500 consists of 500 stocks chosen for market size, liquidity, and industry group representation. It is a market value weighted index with each stock’s weight in the index proportionate to its market value (source: BTN Research)
IT MAY TAKE AWHILE – After suffering 10 separate “bear” markets between 1950 and 2021, the S&P 500 recovered and eventually achieved a new all-time closing high each time. The average length of time it took to retrace its steps from a “bear” market low to a new closing high was 25 ½ months or more than 2 years. The quickest recovery for stocks took place over just 3 months (in 1982) while the longest recovery took 70 months or nearly 6 years (between 1974-1980) (source: BTN Research).
DO YOU KNOW SHOPRITE’S ‘CAN-CAN’ SALE? – When certain items are offered for a substantial discount. Like Progresso Soup- 10 cans for $10 which are usually $1.89 to $2.49 EACH. If you like the soup (and who doesn’t) why WOULDN’T you stock up and buy at LEAST 10 cans? They don’t go bad; they always taste good and at this price ya’ can’t go wrong! They represent a tremendous VALE!
SO, WHAT’S THE POINT? When the market is ‘down’ 20+% why wouldn’t you buy in and take advantage of low prices? Whether you invest in mutual funds or individual stocks you’re probably not going to see prices this low again for a real long time! Could they drop further? Sure, so don’t deploy ALL your money at once; buy in gradually say 10-15% of cash on hand every few weeks.
Happy Hunting,
Frank
ANOTHER BEAR – When the S&P 500 closed at 3667 Thursday (6/16/22), the index was down 23.6% from its all-time closing high of 4797 set on 1/03/22, i.e., qualifying as a “bear” market decline of at least 20%. The drop was the index’s 11th “bear” since 1950 but its 2nd since the start of the global pandemic. The S&P 500 consists of 500 stocks chosen for market size, liquidity, and industry group representation. It is a market value weighted index with each stock’s weight in the index proportionate to its market value (source: BTN Research)
IT MAY TAKE AWHILE – After suffering 10 separate “bear” markets between 1950 and 2021, the S&P 500 recovered and eventually achieved a new all-time closing high each time. The average length of time it took to retrace its steps from a “bear” market low to a new closing high was 25 ½ months or more than 2 years. The quickest recovery for stocks took place over just 3 months (in 1982) while the longest recovery took 70 months or nearly 6 years (between 1974-1980) (source: BTN Research).
DO YOU KNOW SHOPRITE’S ‘CAN-CAN’ SALE? – When certain items are offered for a substantial discount. Like Progresso Soup- 10 cans for $10 which are usually $1.89 to $2.49 EACH. If you like the soup (and who doesn’t) why WOULDN’T you stock up and buy at LEAST 10 cans? They don’t go bad; they always taste good and at this price ya’ can’t go wrong! They represent a tremendous VALE!
SO, WHAT’S THE POINT? When the market is ‘down’ 20+% why wouldn’t you buy in and take advantage of low prices? Whether you invest in mutual funds or individual stocks you’re probably not going to see prices this low again for a real long time! Could they drop further? Sure, so don’t deploy ALL your money at once; buy in gradually say 10-15% of cash on hand every few weeks.
Happy Hunting!
202206-FrankMcKinley-Newsletter
Retirement planning is a life-long process. Below are some of the key retirement-planning actions you need to be taking from your 20s through your 60s.
Your 20s
Start saving. The sooner you can start saving for retirement, the less you’ll have to save overall. If you start saving $5,000 per year at age 25, you’ll have just under $775,000 by age 65, assuming annual returns of 6%. Wait until age 35 to start saving and you’ll have about $395,000 — more than $300,000 less. Also, since you’re still decades away from your retirement date, don’t be afraid to take some risk with your investments. You’ll have to stomach some ups and downs, but earning higher returns from equity (or stock) in-vestments now means more money (and less to save) as you get older. Other steps to take when you’re young: start budgeting, avoid debt, and save for other goals, like buying a house. Even if you’re not earning a lot right now, adopting healthy money habits today will pay big dividends later in life.
Your 30s
As you enter your 30s, your in-come is probably heading upward and your life is beginning to stabilize. You may find that you can contribute more to your retirement savings accounts than you could in your 20s. As your income increases, consider increasing your retirement contributions by the amount of your annual raise so you don’t fall behind on saving. Reassess your savings rate and consider meeting with a financial advisor to make sure you’re saving as much as you can — and investing it well.
Your 40s
You’re at the halfway point to retirement. If you’ve been saving for the past 10 or 20 years, you should have a nice nest egg by now. If you
haven’t gotten serious about saving, now is the time to do so. You’ll have to be fairly aggressive, but you still have some time to build a respectable financial cushion. Whether you’re an accomplished saver or just getting started, you may also want to consider meeting with a financial advisor to help you make sure you’re saving enough to meet your goals and investing in the best way possible.
A special note: people in their late 40s and early 50s are often looking at steep college tuition bills for their children. Don’t make the mistake of sacrificing your retirement goals to pay for your children’s college educations. Stay focused and on track so your children don’t have to jeopardize their financial future to support you as you get older.
Your 50s
Once you turn 50, you have the option to make catch-up contributions to retirement savings accounts like 401(k)s and IRAs. You can save an additional $6,500 a year in your 401(k) plan and $1,000 a year in your IRA in 2021. That’s great news if you’re already maxing out your savings in those accounts. Your fifth decade is also the time to start thinking seriously about what’s going to happen when you retire — when exactly you’re going to stop working, where you want to
live, whether you plan to work in retirement, and other lifestyle is-sues. It’s also the time to take stock of your overall financial situation. You’ll still want to keep saving as much as you can, but you may also want to make an extra effort to be debt-free at retirement by paying special attention to paying off your mortgage, car loans, credit card debt, and any remaining student loans.
Your 60s
Retirement is just a few years away. If you haven’t already, you’ll want to dial down the risk in your portfolio so you don’t take a large loss on the eve of your retirement. You’ll also want to start thinking about a firm retirement date and estimating your expected expenses and income in retirement. If your calculations show that you’re falling short, it’s better to know before you stop working. You can make up a shortfall in a number of ways — reducing living expenses, working a bit longer, and even delaying Social Security payments so you get a larger check. Whatever your age, the key to retirement is having a plan and consistently executing that plan. Not sure how to get started? Please call so we can discuss this in more detail.
Your asset allocation strategy represents your personal decisions about how much of your portfolio to allocate to various investment categories, such as stocks, bonds, cash, and others. Some of the advantages of an asset allocation strategy include:
Providing a disciplined approach to diversification. An asset allocation strategy is another name for diversification, an important strategy for reducing portfolio risk. Since different investments are affected differently by economic events and market factors, owning various types of investments helps reduce the chance that your portfolio will be adversely affected by a particular risk type.
Encouraging long-term investing. An asset allocation strategy is designed to control your portfolio’s long-term makeup.
Eliminating the need to time investment decisions. Not only do investment professionals have a difficult time accurately predicting the market’s movements, but waiting for the perfect time to invest keeps many investors on the sidelines. With an asset allocation strategy, you don’t have to worry about timing the market.
Reducing the risk in your portfolio. Investments with higher returns typically have high-er risk and more volatility in year-to-year returns. Asset allocation combines more aggressive investments with less aggressive ones. This combination can help reduce your portfolio’s overall risk.
Adjusting your portfolio’s risk over time. Your portfolio’s risk can be adjusted by changing allocations for the different investments you hold. By anticipating changes in your personal situation, you can make those changes gradually.
Focusing on the big picture.Staying focused on your asset allocation strategy will help prevent you from investing in assets that won’t help accomplish your goals.
Your asset allocation strategy will depend on a variety of factors unique to your situation, including your risk tolerance, return expectations, investment period, and investment preferences. Please call if you’d like to discuss asset allocation in more detail.
Periodically, you should thoroughly review your portfolio to ensure it is still helping you work toward your investment goals. Follow these steps:
Review your current portfolio mix. List the current value of all your investments. Determine what percentage of your portfolio is held in stocks, bonds, cash, and other investments. Take a closer look at where the stock portion of your portfolio is invested.
Break out your stock investments by market capitalization (small-, mid-, and large-cap), by style (growth and value), by area (domestic and international), and by sector (technology, financial, utilities, energy, etc.).
Analyze each investment. Determine whether it still makes sense to own each investment. Don’t let emotions get in the way. Review why you purchased each investment and whether those reasons are still valid.
Emotionally, it is difficult to sell an investment at a loss, but holding on until you get back to breakeven
may not be the best strategy. It may never get back to that price or may take an excessively long time to do so. You may want to sell the investment and reinvest in another with better prospects. Instead of worrying about what you paid for the investment, decide whether you would buy it today at its current
price.
Determine if changes are needed to your current allocation. If we’ve learned anything over the past few years, it’s that your portfolio should not be highly concentrated in one area or sector. Instead, look to broadly diversify your portfolio.
Some points to consider include:
Decide how much to allocate to stocks and bonds. Your stock and bond mix is a major factor in determining your expected portfolio return and how much your portfolio will fluctuate with market movements. However, be careful not to let recent events cause you to allocate too much to bonds just to avoid stock market fluctuations. Make this decision based on your financial goals, risk tolerance, and time horizon for investing. If you are investing for the long term — say, 10 years or more — you probably still want a major portion of your investments allocated to stocks.
Reassess your stock allocation. Is your stock portfolio too heavily weighted in technology stocks or blue chip stocks? Have you selected only growth stocks, ignoring value stocks? Do you prefer large-cap stocks, ignoring smaller stocks? The stock market moves in cycles, with different sectors outperforming other sectors at different times. Since no one can predict when one sector will outperform, it is typically best to broadly diversify your stocks over all areas.
Move your allocation closer to your desired allocation. When making changes, first consider the tax ramifications of the transactions. If you can make changes without incurring tax liabilities, you may want to make the changes immediately.
If substantial tax liabilities will be incurred, look for other ways to get your portfolio closer to your desired allocation. For instance, any new investments should be made in under-weighted areas of your portfolio. Or you may be able to reallocate in your tax-deferred
accounts, such as individual retirement
accounts and 401(k) plans, where you typically won’t incur tax liabilities.
However, if you can’t get your allocation in line within a year using these approaches, you might want to sell some of the poor performers and reinvest the proceeds.
If you’d like help reevaluating your portfolio, please call.
