Life Isn’t “Set it and Forget it”

“It’s the end of the world as we know it,” as the pop singer bellows out the first line of the chorus of a top song for their band.  What a profound statement when we think of the chaos of the past few years and the impact economic factors have made on your net worth.  For many Millennials and Gen-Z individuals it may appear as if their world has ceased to exist as they are accustomed to in their short lives.  We have been here before and we will return to this state of the economy again.

One constant in U.S. economy is the fact that it will continue to cycle.  The four phases of our economy have been recognized by financial experts for decades and with quite predictable accuracy – expansion, peak, contraction, and trough.  Difficulty lies in defining which one of the phases we currently find our country.

Economists analyze several factors to determine the current phase of our economy.  Gross Domestic Product, employment, interest rates and consumer spending are a few of the factors followed to determine trendlines within the four phases of the economy.  Gross Domestic Product (better known as “GDP”) is the total monetary or market value of all the finished goods and services produced within a country’s borders in a specific time period.  GDP can be computed on a nominal basis or a real basis.  When accounting for GDP on a real basis, the consideration of inflation plays a significant role in the computation.

In the United States, our real GDP rate is typically between 2% – 4% on an annual basis.  To compare this with other countries, consider China who reports a real GDP rate of 8.1% for 2021 according to  As the country’s GDP rate goes up the production for labor, exports and other areas of the United States is performing at efficient levels.  If other factors considered are increased over a previous period, the country may be in expansion or reaching its peak economically.

It is important to understand the cycle of our economy and use this information to your benefit.  The New York Stock Exchange, the American Stock Exchange and London Stock Exchange are auction markets.  It functions by a process that someone must sell a stock for someone to buy a stock.  This is known as the secondary market.

Another of the statistics focused on by investors is the labor participation rate.  The United States is currently experiencing one of the best unemployment rates in modern history due to the recall of millions of workers back to the workforce after the federal government shut down the businesses employing them.  If the unemployment rate rises, this will be a leading indicator to possible negative economic conditions occurring.  

There is not one magic number for purposes of determining the type of economy experienced in the United States.  To study these factors and guide your investment philosophy requires discipline and patience.  Many investors have been unable to fight the emotional battle of watching their savings plunge and staying the long-term course determined to be the most probable path to success.  As wealth advisors, our goal is to provide understanding and education to our clients so they can make intelligent decisions.  Emotions play no role in the process but can be intrusive to sound judgment.

Life changes on a daily basis. It is critical that you construct your affairs in a manner that allows for the disruptive periods of time to pass without substantial change to your long-term plans.  To attempt to time the markets would, in my opinion, give greater risk to reaching your long-term savings goals than to simply design a fully-diversified portfolio to weather the storm.  By consistently maintaining your acceptable level of risk in the portfolio through periodic rebalancing, your probabilities for reaching your goals are much higher.

If you’re concerned about the economic conditions or have questions pertaining to your investments providing for your future in the manner you desire, consider a complimentary consultation with a Certified Financial Planner™ professional.  When you have a vision for your future that helps you see your goals accomplished, it is much easier to live through the economic challenges of life.  See you on the jogging trail!

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Exercise Your Right; Discharge Your Duty

“This is your duty, son,” my father told me on my 18th birthday as he drove me to the county election board office to register to vote. As a teenager, I understood civics (thank you, Mr. Nunn) by learning from wonderful teachers who made the process fun. As students of civics, we studied the form, function, and limitations of our federal and state governments.

Why is this important in a column about investing? A valid question. The answer is also very appropriate – without a proper understanding of government and its role in our economy, one cannot understand our financial markets and other economic factors. By studying government and participating in the process of electing our leaders of such government, citizens are taking an active role in their nation’s functions. Our country was founded by individuals who desired for an opportunity to play a role in the functions of the government. The vote was a right originally given only to wealthy, male landowners. After the 19th amendment, passed on August 18, 1920, women were given the right to vote.

One of the outcomes of elections is that policy makers are identified, and their roles are defined. For example, the governor of a state is the chief executive officer of the state’s agencies and assets which are to be utilized for the benefit of the state’s citizens. How these assets are utilized, and the agencies functions are a direct relationship to the governor’s beliefs and style of management. Some leaders believe government is the solution to all the people’s problems. Other leaders believe the problems of the citizens are caused by the government.

If I may reminisce for a moment, my grandfather was always quote at election time, “If you don’t vote, you can’t complain!”  Not certain that is a valid comment about one’s ability to refrain from speaking about perceived or actual ills of the government, but he did state it in that manner.

Tuesday, November 8, 2022, is a national election day in the United States of America. It is incumbent on each of us to discharge our duty as citizens by voting. Research your candidates and confirm in your own mind the person’s platform for running for office is the slate of actions you wish to see the person perform while in office.

Planning for your retirement is critical to achieve your desired goals. It is imperative that you participate in creating the future you wish by being informed and involved in the electoral process of our government. As Abraham Lincoln so eloquently stated, and I paraphrase, “To predict your future, you must simply create it in the manner you wish.”   Contact a CERTIFIED FINANCIAL PLANNERprofessional to assist you in creating a plan that helps you achieve the lifestyle you desire. Go vote for the candidates of your choice. Next, go for a walk and dream about a bigger future for your family and you.

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Why and When to Re-balance Your Portfolio

The world has become disruptive in the past couple of years. Rampant inflation in the economy and rising interest rates are causing many Americans to wonder if retirement is in their future.

​One rule I live by is “never make lifetime decisions based on short-term factors.”  Let us assume you are 60 years of age and wanting to retire at age 67. Your career is going well and your savings for retirement has been maximized for the past 30 years. Based on these simple facts, you surmise that retirement would be sustainable for the remainder of your life. Then the pandemic strikes! The economy contracts! You are now feeling less confident in your plans.

​A market correction is defined as a 10% or more decline in major market indexes. Based on that definition, the U.S. experiences a correction approximately every two years (consider recently the Covid Correction). There have been twenty-eight corrections in the S&P 500 since World War II.  The average market decline during this period was 14%. One of the most important key facts to remember is that the index recovered and returned to new all-time highs within a few months to a few years. 

Typically, emotional investors create their own problems by over-correcting their portfolios. Wayne Gretsky, the Hall of Fame Hockey Player, remarked to a sports reporter asking his secret to holding the title in the National Hockey League for the most points in a season, “I skate to where the puck is going to be, not where it has been.”  In a similar approach, you should not become so emotional during market corrections that you leave the market and realize losses when patience may return your investment positions to a greater value than when the negative market change occurred.

One method of removing the emotion from your investment portfolio management is to rebalance to maintain the appropriate risk balance you desire. There are two methods of rebalancing: time and threshold. Based on our research, either method will provide comparable results which is keeping your desired risk at a certain range or level.

Rebalancing using a time approach is simply setting a periodic date to rebalance your portfolio by selling the necessary asset classes to maintain the appropriate mix for your risk tolerance. For example, on the first business day of every fourth month you will rebalance your portfolio. Simple to remember and takes a little trading to sell and buy the various securities.

Alternatively, you can rebalance using the threshold method. When a portfolio is designed based on your time horizon, risk tolerance, and cash flow objectives, you may arrive at a portfolio with 50% in equities and 50% in fixed income investments. Over time the portfolio will experience changes based on market conditions. Should the equities allocation increase to 60%, the impact will be a reduction in fixed income investments to a 40% allocation. To maintain your proper risk level in the portfolio, you might wish to sell some of your equity investments and buy fixed income investments until you arrive at the desired 50/50 allocation.

During market turmoil, it is critical to your long-term success to manage risk. If you want a portfolio analysis of your retirement assets, contact a CERTIFIED FINANCIAL PLANNERTM professional. It is always better to know where you will land before jumping!

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Work to Live, Not Live to Work

According to NC State University, the Gen Z motto is “Work to live, not live to work”. As we get older, we are taught that your job should be your number one responsibility, but why? If you work a full-time job, you work around 40 hours a week and 8 to 10 hours per day. Only giving you 16 to 14 hours to commute to work, eat balanced meals, take care of yourself, complete household chores, enjoy family time, and sleep. Most of those who work have a “second shift” when they get home. Some are even trying to complete higher education, so adding in the time it takes to work on those projects takes away a few more hours. 

The ideal work week became a law in the United Stated in 1938. This created a 40-hour, five-day work week with overtime pay for any hours worked beyond that. During this time, it was the norm for one person in a family, usually the woman, to stay home and look after the household chores and children. Since there was someone doing all the household work, it was not that big of a deal for the other person to work so many hours. Now that both parties of the household usually work full-time, this no longer makes sense. 

Although the work week hours have been reconsidered many times, the reality of work during COVID-19 showed that reduced work hours not only benefits the employees, but also the employer. Iceland conducted a trial from 2015-2019 and found some not so surprising results. Having a four-day work week increased the employees productivity and well-being, improved the balance between work, health, and home life, and reduced burn out. Being at work 8 hours each day, does not mean you are working at your best for those 8 hours. Shortening the work week may lose work hours but increases the amount of productivity. Working less hours means less burnout. When you have time off to look forward to, you are more likely to get your work done so that you can enjoy your weekend. 

How does the work week successfully get shortened? The work culture will have to be changed as a whole. Overworking is glamorized and the employee who works the most is the one that stands out, but that is not how it should be. Being a good worker is not about proving yourself individually but making sure that you are playing your role in your team. To make this clear, each employer should have ground rules on employee work hours to prevent the overwork culture. 

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Balance In All Things Is Success

You may have heard that life is a marathon and not a sprint. That statement is particularly true when it comes to saving for your future. Many people have found themselves ensnared in debt and living beyond their means to the point it requires them to continue their career longer than desired.

Like any good track coach would advise an elite runner, the focus should be straight ahead and the pace consistent. When approaching the finish line (retirement) kick it in to finish strong! One of the most effective methods of saving for retirement is to maximize the amount of time you have available in your life. Starting early allows you to save smaller amounts each year while compound interest does the heavy lifting.

To illustrate the previous point, let me introduce you to Ronald Read. His story is so inspiring. Mr. Read didn’t earn a significant amount of money in salary as a janitor but was disciplined in his spending. His lifestyle is not for everyone but serves as an excellent example to those who earn far more in annual income and can’t accumulate the level of wealth of this WWII veteran.

Mr. Read was frugal beyond anyone’s expectation. His life of austerity is not for everyone. He drove a second-hand car, used safety pins to hold his coat together and cut his own firewood well into his 90s. The catalyst to his success was that he was a knowledgeable investor and exhibited emotional control to hold his stocks during market contractions. Most of his individual securities were held for decades as discovered at his death.

No one suspected the lowly janitor to amass a fortune by the time of his death. His generosity benefited his local hospital and public library. The total amount of wealth contributed to these two organizations was $6,000,000! 

How did this happen? By remaining calm during tumultuous market corrections and retaining his investments for the long-term, Mr. Read benefitted from years of growth on blue chip companies that paid good dividends. This approach combined with a lifestyle in which he seldom incurred debt and always “paid himself first”, created a multimillionaire on a very limited income.

This is the American Dream for many of us. Work hard, save money, make sound decisions and you may experience a similar story for your family to regale in the community. It is very admirable to leave a nice bequest to charity. However, I believe it is balance in your life that truly brings you happiness for a lifetime. By living within your means and saving for your future, you can enjoy family vacations, nice things and send your children to college. Balance is the ultimate key to a lifetime of cash flow and enjoyment.

If your family wishes to create its future in a manner that is balanced, contact a CERTIFIED FINANCIAL PLANNERTM professional. The key is to start early, keep a consistent pace and focus your eyes on the future ahead of you, it will be here before you know it. See you on the jogging trail!

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Be Confident In Your Retirement Years

For most investors, including retirees, it is critical that they understand the philosophy of investing. If you utilize the services of a professional to assist with the implementation of your retirement goals, the logical approach to reaching your goals should be understood by all parties. One of the greatest causes of worry and concern, during retirement, is the lack of clearly communicating the needs, risk tolerance and definition of success between the client and advisor.

Recently, we discovered several individuals that had cash flow needs but had placed all of their retirement funds in a long-term investment that would penalize them to withdraw money from the investment. Many of these investments have a period of time that you are required to keep your money invested within the product and you are paid a “bonus” of interest for doing so. This type of product may have a surrender period of 12 to 20 years before you can withdraw all of your money for your preferential use.

Balance in investing is similar to balance in life. It is often a tragic turn of events when someone places all of their investment assets within a non-liquid investment for the promise of greater returns. These products may have their place in the portfolio but are often erroneously sold by insurance brokers as a superior investment to other options that allow liquidity and control to be retained by the investor. 

To alleviate this concern during retirement, carefully review your cash flow needs. There may arise a need that is unexpected and will cause greater concern if you are strained for lack of funding. We believe it is critical to maintain sufficient cash flow, at all times, by creating a 90-day reserve for potential disruptions in life. Times will arise, they often do, when you will be faced with an incident that you will be proud you reserved plenty of funds to meet the need.

Always challenge the costs of any investment. There are no “free” investments. If the insurance salesman is being paid a commission to sell you a long-term product, the higher his commission, the longer the penalty period for withdrawing your money out of the product. Control is the name of the game. When you ask questions, you should be receiving clear, concise answers instead of confusing statements.

Lastly, be alert to any investment approach that does not allow you the opportunity to understand the underlying investment strategy. Many people have been harmed by failing to truly ask the hard questions of the insurance salesman. Don’t be a victim, take control of your finances and your future. If you have questions pertaining to your current investments, seek out a Certified Financial Planner practitioner to receive a “second opinion”. We provide this service as a courtesy to individuals within 5 years of retirement or already retired. You can expect honesty, transparency and integrity in the process. Your retirement is not an infomercial on TV. You can’t set it and forget it!

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