March, 2020 | Live a Life By Design

Perspective is the Key

Posted on March 27, 2020April 9, 2020 by Jimmy J. Williams, CPA/PFS, CFP®

These truly are challenging times for everyone! One of the most important actions you can take as you consider the current impact on your life is to remain calm. Sure. You have heard everyone tell you to be calm but it is one of the most important foundations of thinking clearly about situations in which you have not control to change.

On February 19, 2020, our economy began a slow down that quickly picked up speed causing a (18.21%) return year-to-date through March 26, 2020. To many of us this precipitous drop in the broad index was felt like an earthquake to our retirement accounts! This is where investors, particular those retiring in the next two years, must find a place of perspective.

Lets painfully look back to the market turbulence of the last major correction and reflect on the perspective gained from that period compared to today. In 2008, the S&P 500 fell (37.00%) within a period of ten weeks. Comparing the two periods of negative returns in the index gives us a moment of relief.

When advising our clients to take certain actions to protect their retirement assets, we believe simple steps can be implemented that will yield significant results. The first step is your mindset about investing. Many investors believed the long bull run markets could provide significant returns on their investments but got caught with too much exposure in their portfolios. You should act on those activities you can control – diversification, quality of the investments, timing for retirement election and establishing a level of risk that allows you to sleep at night.

One of the most important steps of our proprietary process for guiding clients through retirement is to assess their true feelings about risk. The second step is to determine what their ultimate objectives for their investments will be. With these two factors we can develop a portfolio of long-term perspective that considers market contractions and expansions without compromising the investor’s time of retirement.

I have visited with individuals who were surprised by the recent market contraction and will now postpone their retirement plans. This is not the way they wanted to start their next phase of life. Take steps today to seek out the opinion of a specialist in retirement planning to give you confidence that your plan can weather any financial storm you may face. Perspective is the key to success! Are you sleeping well?

Here is the secret formula to sleeping well tonight: This too will pass. If you are age 50 and above, this is not your first experience with market contractions. Through some miracle, you have survived many market contractions dating back to the 70’s and 80’s. The difference among these markets is that you most likely have more invested at this stage of life than you did in your teens and twenties. More at risk, the more you are concerned about risk. Tomorrow is a new day. Live your life abundantly for today.

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The Millennial Perspective: Starting Late, Retiring Fearless

Posted on March 13, 2020March 13, 2020 by Ashley Stieb

According to Pew Research Center, Millennials are individuals born between 1981 and 1996. We grew up in a time before the internet was a part of everyday life and playing outside or playing video games were the best options to keep us occupied. We grew up in the rapidly changing age of technology and social media. We also, unfortunately, grew up and are still facing the ramifications of the Great Recession of 2008. This has brought on a number of financial concerns among Millennials and has caused delay for many milestone events, such as buying a home and starting a family. The average Millennial makes $35,592 a year and has a net worth of less than $8,000 according to Business Insider. The average Millennial also has a student loan balance of roughly $30,000 for four years of college. The lower income and high cost of student loan debt on top of the cost of living makes it hard to start a life and save for the future.

As any Millennial would do, I took to social media to gather the opinions of my fellow Millennials about what concerns they faced regarding their financial future. Much to my surprise, several people joined in the conversation. Some said that their biggest concern was paying off student loans, others said buying a home, saving for their children’s futures, or starting a family in general. We will touch more on those subjects later, but one of the most popular answers I received was saving for retirement. Many of us are told to start saving for retirement as early as possible and many of us fear about the future of Social Security. However, when it comes time to set up our 401(k), 403(b), or whatever kind of retirement plans are available, if any, from our employers we find that the suggested amount to invest in the plan is far more than we can afford and still have a comfortable lifestyle. I remember when it came time to sign up for the retirement plan at one of my jobs which I thought paid fairly well for someone my age. The suggested investment each month was a third of my total gross pay, or in other words, the pay before any taxes or deductions. This would have left me with just enough money to pay my rent, my car note, and utilities each month. I, unfortunately, opted out of saving for retirement at that time.

So, how do we start to save for our futures when we can hardly afford the present? Balance. It is important to find a good balance between what you need to live, what you can save for the future, and still have some funds left over to pay yourself, even if that means setting aside more savings. How do you find this balance? Planning. Sit down and look at how much you are making and how much you are spending, and create a budget that works for you and stick to that plan. Even if you are not investing in a retirement plan with your employer, you can start to save for your future. It doesn’t have to be much to start, but we have to start somewhere. Talk to a Certified Financial Planner™, get a second opinion if you have to, do whatever you need to do to feel comfortable when making these kinds of decisions and ensure that you are making the right choices to plan for your future. Retirement doesn’t have to be a lost cause or a fantasy for Millennials. As Jonas Salk said, “Hope lies in dreams, in imagination, and in the courage of those who dare to make dreams into reality.”

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Fear Is Not An Investing Strategy!

Posted on March 6, 2020March 6, 2020 by Jimmy J. Williams, CPA/PFS, CFP®

In recent days, the airwaves have been inundated with all things COVID-19! At the time of writing this article, the infectious disease had not been reported as a pandemic but may be on its way. It is often the mistake of many individual investors to attempt to know the movements of the stock market. When a disruptive force gives the markets an opportunity to correct, investors not only help the market correct but substantially contribute to the degree of correction. One method of assistance is the overwhelming and uncanny ability humans possess for allowing fear to grip their lives so dramatically that bad decisions are turned into horrific decisions.

At the turn of the new year, the coronavirus began its assault on the people of China. We can debate whether the communication and unified efforts of the Ministry of Health of the People’s Republic of China and the World Health Organization (WHO) may have stifled the transmission of the disease. The fact is that this strain of coronavirus has spread rather quickly from one hemisphere to the next arriving in our nation on the west coast.

What does this information have to do with investing, you ask? Fundamentally, the same companies that achieved record profits in 2019 are the same ones that investor are now selling because of potential supply line delays or collapse. China provides a significant amount of goods to the Unites States. However, the companies that purchase their primary inventories from China for further manufacturing their products in the U.S. continue to hold substantial cash positions on their balance sheets, enjoy full employment of their workforce and, as mentioned earlier, know how to make a profit.

So, what is all of the concern about COVID-19? First, the ability to cope with unknown environmental infirmity by individual investors is almost nonexistent. Two emotions drive most of the market purchases and sells – fear and greed. One of the most often quoted statements of wisdom about these emotions was coined by one of the greatest investors of our lifetime, Warren Buffett. He said, “It is wise to be fearful when others are greedy and greedy when others are fearful.” The markets’ precipitous drop, as reported by the S&P500 and DJIA, for the period of February 19 through 28 can only be explained with fear. Stocks that were successful and reported good growth in 2019 were now being liquidated so quickly the indices reported an 11% drop meeting the definition of a correction.

Understanding that people are concerned about their overall investment portfolios, I recommend they revisit their purposes for accumulating the investments. If you have a change in your long-term need, your physical well-being has improved or declined dramatically, your family has received an unexpected windfall of assets – these are valid reasons to rebalance your portfolio to reduce risk or increase opportunity. To attempt to time the market by simply selling out after the decline of the market only converts your unrealized loss to a realized one. In country terms of my father’s remarking, “that is about as wise as shutting the barn door after the horse has left the barn.”

The better approach to protecting your family’s long-term investment savings is to make decisions out of unbiased research and analysis. Study the fundamentals of the markets and set a level of expected risk that will trigger the time of rebalancing instead of allowing fear to drive your decisions and possibly cost your family the security you desired in the first place.

If you feel that you can’t make the decisions necessary to stay the course of your original investment approach, seek out a Certified Financial Planner™ professional and ask for a complimentary consultation and stress-test of your portfolio. You may sleep better at night.