Have you ever wondered how to choose the right financial advisor?
Whether you’re looking to work with a financial advisor for the first time, or you are looking to change advisors, the looming question in your mind might be:
HOW DO I CHOOSE THE RIGHT FINANCIAL ADVISOR FOR ME?
One thing I will admit is there’s no shortage of financial advisors in the world!
In fact, when it was suggested to me by a friend of mine that I should consider being a financial advisor, my response was “hey man, thanks – but, the last thing the world needs is another financial advisor!”
I’m glad I rescinded that statement, however. I love the work I do now.
What should you be looking for in an advisor? What questions should you ask, and what questions might they ask you?
In my opinion, you want to choose someone who you can get to know, get along with but also be challenged by, and someone who you can trust and can earn your trust in return.
Another part of that is getting clear on what you expect from a relationship with a financial advisor. A few factors to consider:
Many people get referred to an advisor from a friend, family member, colleague, coach, or therapist. Or, maybe you have that college buddy or family member who is an advisor.
Regardless of how you find them, the next question is: How will I know if this is the right advisor for you?
The factors I just talked about cover the expectations of the job.
This question – how to find the right advisor for you – is very important, and one I think you should spend the most time thinking about. Most advisors I know can do the job and do it well.
Some who carry the job title of “financial advisor” are only focused on selling financial products that may or may not be in your best interest. Those folks need a wake-up call to how they’re really impacting people’s lives, but that’s another blog article for another time.
Actually, let me just say one more thing about these folks: a product salesperson – I won’t name specific firms, but it their lead is life insurance or annuities – they are not delivering financial advice at all, and are therefore not qualified to be the right advisor for you.
Moving on…
When interviewing for the right financial advisor, here are a few things to look for:
Now that we’ve covered what expectations to consider and what to pay attention to during the meeting, let me share a couple of questions you want the advisor to ask you, as well as a couple of questions you may want to ask the advisor.
First, the right financial advisor is probably going to ask some variation of good questions, such as:
All of these questions have a monetary implication, but none of them dig into your financial specifics.
That’s precisely why I do not ask anyone to bring any statements to the first meeting. I don’t ask anyone to fill out the 10-page “intake” form that has you list everything out for me.
My approach with this is highly intentional. In my first meetings, I do not ask financially nosy questions! From my perspective, your financial specifics are none of my business until we decide to begin working together.
Some people don’t want to waste time, they want to get right down to brass tacks, and that’s fine. I can adjust. However, I find most people appreciate lowering the pressure for the first meeting.
Now, here are few questions you may want to ask the advisor in that first meeting:
If you are considering working with a financial advisor for the first time, or feel underserved and looking for a new advisor, use this as a “know before you go” resource.
If you’re reading this and want to talk with me about your situation, or click here to access my calendar and schedule time to explore how.
Life Moves Wealth Management is a registered investment advisor offering advisory services in the States of Arizona and Indiana, and in other jurisdictions where exempted. Registration does not imply a certain level of skill or training. Information contained on this site should not be considered a solicitation to buy, an offer to sell, or a recommendation of any security in any jurisdiction where such offer, solicitation, or recommendation would be unlawful or unauthorized.
The information on this site is not intended as tax, accounting or legal advice, as an offer or solicitation of an offer to buy or sell, or as an endorsement of any company, security, fund, or other securities or non-securities offering. This information should not be relied upon as the sole factor in an investment making decision. Past performance is no indication of future results. Investment in securities involves significant risk and has the potential for partial or complete loss of funds invested. It should not be assumed that any recommendations made will be profitable or equal any performance noted on this site.
HYPERLINK DISCLOSURE – The information being provided is strictly as a courtesy/convenience. When you link to any of the web sites provided here, you are leaving this website and assume total responsibility and risk for use of the web sites you are visiting. We make no representation as to the completeness or accuracy of information provided at these websites. Life Moves Wealth Management is not liable for any direct or indirect technical or system issues or any consequences arising out of your access to or your use of third-party technology, web sites, information and programs made available through this website. Life Moves Wealth Management does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to Life Moves Wealth Management’s web site or incorporated herein, and takes no responsibility thereof.
Stocks have recently been in a pullback period after what has been a great year so far.
After a year like 2022 where both stock and bond markets had terrible returns and inflation peaked at 9.1% year-over-year, we all entered 2023 extremely cautious.
If we’re being honest, most of us were a bit – or a lot a bit – bearish. But, we started to see positive stock market returns in early January and February, only to be pulled back in March to the tune of about 8%. If you remember, it felt like confirmation that we were headed for another down year.
It felt like confirmation of the looming recession everyone seemed to be predicting.
With what felt like catching lightning in a bottle, stocks lifted off again in April based on forward guidance around A.I. and the semiconductor demand to expand the use of that technology.
Now, nearing the end of August, we have seen a recent pullback of about 5%.
So, why is it happening and where might we go from here? Let’s get some context for where we are and think about where we might be headed.
This post will be relatively long, contains several charts, and will include a TL;DR at the end.
First, let’s talk about stock pullbacks. Even though they can seem to come out of nowhere or for no good reason, they happen every single year. In fact, they happen every single year at an average of 14.3% drawdown.
The below chart shows the S&P 500 intra-year pullbacks and recoveries going back to 1980. Notice the red dots that show up every year. Also, notice the grey bars to reflect where the S&P 500 finished in each respective year.
In 30 of the 42 years (not including 2023), the S&P 500 rebounded to finish positive. In 2011 it finished with a flat return at roughly 0%.
If we count 2011 as not having a negative return, the S&P 500 has finished with gains 74% of the time. I like those odds.
chart source: JP Morgan Guide to the Markets, data as of 07/31/23
Sometimes when stocks go through a pullback period we think there’s something wrong. We look for a culprit or signal of something to come; another shoe to drop.
In the case of 2023, there’s not much negative to point to. Well, other than the fact the Fed has continued raising rates, which I’ll get to shortly. For now, here’s a look at effect of Fed rate hikes on the US Treasury Yield Curve since March 2022.
If you’re unsure what this chart represents, let’s just say the top line is not healthy for the bond market. It does, however, show why money market funds and CDs are so attractive this year.
As I type this, the S&P 500 is up 14.73% year to date. But that return is a little deceiving. Just 7 stocks account 27.4% of the S&P 500 index value, yet as of July 31st they collectively delivered an average return of about 64%.
The “Magnificent Seven” stocks: Microsoft (MSFT), Amazon (AMZN), Meta Platforms (META), Alphabet (GOOG), Apple (AAPL), Nvidia (NVDA), and Tesla (TSLA).
These seven stocks have lost their shine, now account for something like half of the market value loss so far in August.
On a month-to-date basis, Microsoft is down 4.13%. Amazon up 1.94%. Meta is down 10.88%. Alphabet is down 2.57%. Apple is down 8.05%. NVDA is down 1.80%. Tesla is down 10.68%.
Because of how much these stocks ran up, we may be able to chock this up to profit taking and the market not having the confidence to justify higher multiples based on the forward earnings guidance.
Let’s now look a little broader than stock performance.
Since March 2022, the FOMC has aggressively raised rates by more than 525bps, or 5.25%. By historical context, it’s a head-spinning pace. When you add the fact that they’re also unwinding their balance sheet – effectively removing money from the market – at the same time, it’s one of the tightest – if not THE tightest – periods of tightening on record.
What’s more? The FOMC appears poised to raise rates YET AGAIN in 2023. Why? Inflation remains higher than their 2% target, and the labor market is still tighter than target at a persistent 3.5% or so.
chart source: JP Morgan Guide to the Markets, data as of 07/31/23
Even if the Fed does raise rates again this year, the broad expectation is they will have to cut rates over the next year.
The chart below shows the Fed even forecasts rates to fall by up to 1% by the end of 2024. They also expect to see positive GDP growth, lower inflation, and more slack in the labor market over the same period.
chart source: JP Morgan Guide to the Markets, data as of 07/31/23
Interest rate hikes take a while to filter through the economy, and they are doing their damndest to engineer a “soft landing.” But, historically, they always overshoot their target.
Never mind 2024 is an election year and, aside from all the other social issues and candidate hoopla, the economy will of course be a primary issue.
Speaking of the economy, let’s have a further look under the hood.
After the pandemic the obscene (my carefully chosen word) amount of stimulus that followed, we kept right on spending and have pretty much returned to trend. As the chart below shows, 68.2% of GDP is consumption.
And for all that spending, the U.S. consumer still has a significantly healthier balance sheet than the period heading into the Great Financial Crisis. Even going back to 1980, the debt payments as a percentage of disposable personal income is historically low.
However, the chart to the lower left shows a slight increase in 30+ days delinquencies in auto and credit care payments over the past two years.
Look at the student loan line in orange… keep in mind payments for federal loans restart in October. I fully expect to see a rise in delinquencies here, as payments have been removed from cash flow for 3.5 years, and some borrowers will flat refuse to pay in protest to the Biden forgiveness being reversed by the Supreme Court.
Speaking of delinquencies, some financial pundits have pointed to a possible correlation with a significant rise in credit card balances since the pandemic, and even pre-pandemic. By the numbers, total credit card balance in this country has topped $1.031 Trillion, which is the highest balance ever.
At the same time, it’s estimated that just over 2% of Americans are delinquent by 30 days or more on their credit card payments.
In context though, there are significantly more consumers with credit cards now than back in 2008 – so OF COURSE the total balance number is higher.
And then there’s the persistently high mortgage rates.
The average rate for a 30 year fixed mortgage in 2021 was 2.96%, then 5.34% in 2022, and now roughly 8.14% in 2023.
The St. Louis Fed (FRED) estimates the current average home sales price across the country at $495,100, which is roughly $100,000 higher than just two years ago, but down approx. $50,000 from just one year ago.
Yet, with significantly higher borrowing costs than in recent memory, consider the average mortgage rate from 1971 to 2023 is 7.74%. With low down payment programs and seller-funded rate buy downs, homes are still selling. And, home building is still booming and will continue to do so for the foreseeable future.
With unemployment under 4%, housing starts rising another 3.9% month-over-month in July, and real wage growth now outpacing inflation by more than 1%, the probability of a recession is significantly lower than we all expected at the start of 2023.
All things considered, the economy continues to soldier on despite Fed rate hikes of more than 5.25% since March 2022. Higher rates, in theory, are a tool to slow down economic growth and bring down inflation. The trailing effect of slowing economic growth, which means slower GDP growth, which means lower corporate production, which may mean lower stock valuations.
That said, where the market goes from here will largely hinge on whether or not the Fed continues to raise rates. If the Fed pauses, or even eventually cuts, we could possibly see borrowing rates decline based on bond yield movements.
Stock market pullbacks are a natural part of investing, and so far in 2023 we’ve seen as much as 8% drawdown, which is less than the average intra-year decline of 14.3%. Much of the current pullback of roughly 5% or so has been caused by the same 7 stocks that led the market significantly higher through July.
Clients of Life Moves Wealth Management have over and over heard me state the importance of remaining on the field and playing the game – staying invested. Market pullbacks are an opportunity, for those who have the capacity, to invest more.
More importantly, we keep buying regardless of what the market is doing today because the game is won by playing smart over time.
The performance of your investment accounts may not match the return of the S&P 500 in any given year; in fact, if your investment strategy is properly diversified and appropriately matched to your individual risk tolerance, the performance of a broad stock-only index is an irrelevant comparison.
What IS relevant, however, is what your investment strategy is designed to accomplish over time and what you have in place to help weather periods of market volatility… financially and emotionally.
What is your investment strategy built to accomplish? Unsure? We can help.
Life Moves Wealth Management is a registered investment advisor offering advisory services in the States of Arizona and Indiana, and in other jurisdictions where exempted. Registration does not imply a certain level of skill or training. Information contained on this site should not be considered a solicitation to buy, an offer to sell, or a recommendation of any security in any jurisdiction where such offer, solicitation, or recommendation would be unlawful or unauthorized.
The information on this site is not intended as tax, accounting or legal advice, as an offer or solicitation of an offer to buy or sell, or as an endorsement of any company, security, fund, or other securities or non-securities offering. This information should not be relied upon as the sole factor in an investment making decision. Past performance is no indication of future results. Investment in securities involves significant risk and has the potential for partial or complete loss of funds invested. It should not be assumed that any recommendations made will be profitable or equal any performance noted on this site.
HYPERLINK DISCLOSURE – The information being provided is strictly as a courtesy/convenience. When you link to any of the web sites provided here, you are leaving this website and assume total responsibility and risk for use of the web sites you are visiting. We make no representation as to the completeness or accuracy of information provided at these websites. Life Moves Wealth Management is not liable for any direct or indirect technical or system issues or any consequences arising out of your access to or your use of third-party technology, web sites, information and programs made available through this website. Life Moves Wealth Management does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to Life Moves Wealth Management’s web site or incorporated herein, and takes no responsibility thereof.
Today I want to talk about using Kaizen to become a 1%er.
I’m not talking about those that fall in the higher earning bracket…. Although that may be a goal for some…
And, I’m not talking about that particular motorcycle club either….
But what I am talking about is Kaizen.
Kaizen, in practice, usually delivers small improvements that yields big results over time.
It starts by simply improving by 1% at a time.
I have found this to be an effective way to get to where you want to be financially, physically, relationally, emotionally, professionally… literally anywhere you want to see improvement.
And by the way… all of those areas: financial, physical, relationships, emotional control, your profession… those are all directly correlated. The more financial stress you are under, the less effective you will be in the other areas.
On the flip side, the side-effects of financial success show up everywhere – and that’s the direction we need to be headed.
And the key is this: you have to wake up every morning and re-commit to taking action towards improvement… just like in your marriage, your career, or your job as a parent. Every day you make a new commitment to stick with it.
1% at a time.
Listen to this episode of the Financial Purpose Podcast here:
Life Moves Wealth Management is a registered investment advisor offering advisory services in the States of Arizona and Indiana, and in other jurisdictions where exempted. Registration does not imply a certain level of skill or training. Information contained on this site should not be considered a solicitation to buy, an offer to sell, or a recommendation of any security in any jurisdiction where such offer, solicitation, or recommendation would be unlawful or unauthorized.
The information on this site is not intended as tax, accounting or legal advice, as an offer or solicitation of an offer to buy or sell, or as an endorsement of any company, security, fund, or other securities or non-securities offering. This information should not be relied upon as the sole factor in an investment making decision. Past performance is no indication of future results. Investment in securities involves significant risk and has the potential for partial or complete loss of funds invested. It should not be assumed that any recommendations made will be profitable or equal any performance noted on this site.
HYPERLINK DISCLOSURE – The information being provided is strictly as a courtesy/convenience. When you link to any of the web sites provided here, you are leaving this website and assume total responsibility and risk for use of the web sites you are visiting. We make no representation as to the completeness or accuracy of information provided at these websites. Life Moves Wealth Management is not liable for any direct or indirect technical or system issues or any consequences arising out of your access to or your use of third-party technology, web sites, information and programs made available through this website. Life Moves Wealth Management does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to Life Moves Wealth Management’s web site or incorporated herein, and takes no responsibility thereof.
Personal finance is personal. Your money story is yours alone, and sometimes changing your money story is key to taking your next financial step forward.
“This isn’t going to be my story anymore…”
In this episode of the Financial Purpose Podcast, I’m joined by special guest Sarah VanHoose for a conversation around how to change your money story.
Listen to hear how she and her husband got serious about their money values, paying off more than $500,000 of debt in three years!
And, hear how she decided to leave her corporate health care career to fully launch her financial and corporate coaching business, Journey to Influence.
Money shame exists all across the wealth spectrum and Sarah is on a mission to change that mindset and help people get control of their money.
Click here to learn more about Sarah and Journey to Influence.
Download Sarah’s 5-Step Plan to thrive with your personal finances.
Life Moves Wealth Management is a registered investment advisor offering advisory services in the States of Arizona and Indiana, and in other jurisdictions where exempted. Registration does not imply a certain level of skill or training. Information contained on this site should not be considered a solicitation to buy, an offer to sell, or a recommendation of any security in any jurisdiction where such offer, solicitation, or recommendation would be unlawful or unauthorized.
The information on this site is not intended as tax, accounting or legal advice, as an offer or solicitation of an offer to buy or sell, or as an endorsement of any company, security, fund, or other securities or non-securities offering. This information should not be relied upon as the sole factor in an investment making decision. Past performance is no indication of future results. Investment in securities involves significant risk and has the potential for partial or complete loss of funds invested. It should not be assumed that any recommendations made will be profitable or equal any performance noted on this site.
HYPERLINK DISCLOSURE – The information being provided is strictly as a courtesy/convenience. When you link to any of the web sites provided here, you are leaving this website and assume total responsibility and risk for use of the web sites you are visiting. We make no representation as to the completeness or accuracy of information provided at these websites. Life Moves Wealth Management is not liable for any direct or indirect technical or system issues or any consequences arising out of your access to or your use of third-party technology, web sites, information and programs made available through this website. Life Moves Wealth Management does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to Life Moves Wealth Management’s web site or incorporated herein, and takes no responsibility thereof.
Federal Student Loan payments are scheduled to begin on October 1, 2023. After more than three years of extensions, delays, an executive order, and a pending Supreme Court hearing, you may be wondering what to expect.
First, expect this case to be long from being decided and fully closed. A few things to know:
There’s no doubt in my mind this will continue to be a political and economic issue for the foreseeable future.
Recent surveys suggest upwards of a third of borrowers claim they will be unable to make their original payments. Many borrowers have publicly stated they are refusing to restart payments.
Many are also pressing for government action to reinstate bankruptcy protection on federal loans. Currently, the only two options available to retire federal student loans is to 1) pay the loan in full, or 2) die.
While all of that gets sorted out, what remains true is these student loan payments have not held a spot in your cash flow for more than three years.
I still personally have federal student loans and have begun planning to reintroduce these payments into our monthly cash flow.
For those who also have student loans outstanding, I want to share a couple of tips to help you get ready for payments to begin in October:
Finally, if you or someone you care about are reviewing monthly cash flow and concerned about the impact of student loan payments, it may be helpful to get another set of eyes on the numbers.
Reach out if I can be helpful in this area – click here to schedule time with me.
Life Moves Wealth Management is a registered investment advisor offering advisory services in the States of Arizona and Indiana, and in other jurisdictions where exempted. Registration does not imply a certain level of skill or training. Information contained on this site should not be considered a solicitation to buy, an offer to sell, or a recommendation of any security in any jurisdiction where such offer, solicitation, or recommendation would be unlawful or unauthorized.
The information on this site is not intended as tax, accounting or legal advice, as an offer or solicitation of an offer to buy or sell, or as an endorsement of any company, security, fund, or other securities or non-securities offering. This information should not be relied upon as the sole factor in an investment making decision. Past performance is no indication of future results. Investment in securities involves significant risk and has the potential for partial or complete loss of funds invested. It should not be assumed that any recommendations made will be profitable or equal any performance noted on this site.
HYPERLINK DISCLOSURE – The information being provided is strictly as a courtesy/convenience. When you link to any of the web sites provided here, you are leaving this website and assume total responsibility and risk for use of the web sites you are visiting. We make no representation as to the completeness or accuracy of information provided at these websites. Life Moves Wealth Management is not liable for any direct or indirect technical or system issues or any consequences arising out of your access to or your use of third-party technology, web sites, information and programs made available through this website. Life Moves Wealth Management does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to Life Moves Wealth Management’s web site or incorporated herein, and takes no responsibility thereof.
If you’re considering buying a house vs renting, here are several important considerations based on the seven key areas of financial planning.
Even with mortgage interest rates at a higher level, buying a house can still be an opportunity. Rates may come down but home prices may not.
Is buying a house NOW better than renting?
A good place to start is to do the math, asses how the decision aligns with your financial purpose, and get a good understanding of how the decision impacts the key areas of your financial plan.
The below considerations are based on the seven key areas of planning. You may find some of these helpful when deciding if buying a house vs renting is right for your situation.
Buying a house adds to the asset column, while the mortgage adds to the liabilities column. Depending on your down payment and closing cost amounts, you will be “moving” assets from cash to property.
Buying a house may be net worth neutral initially, but becomes positive net worth growth over time. It’s also important to assess debt currently carrying vs assets. Also, how does your current debt impact your credit risk score?
Does the mortgage payments, plus expected utilities and maintenance work with your cash flow? Will you need to adjust the rhthym of when you are paid vs when you pay certain bills? Will you need to adjust autopays to “smooth” out cash flow?
Is buying a house less cash flow intensive than renting? Will you need to hire caretakers for landscaping, pool, house cleaning, etc? What will it cost to furnish the space?
What is your expected cost to insure to own vs rent? Will you need to take on a higher umbrella liability coverage? Does it save money to bundle these coverages or split between different carriers? Will you need to adjust life insurance benefits to cover additional mortgage debt?
Depending on cash flow adjustments, does the new expected expenses for mortgage, insurance, taxes, and utilities allow you to continue to invest both pre-tax and after tax?
Does the cost difference limit or improve your ability to continue saving to cash reserves, 401(k), and/or other brokerage accounts?
Most people take the standard deduction now so deductible interest may not be a consideration. However, with the TCJA set to sunset with the 2025 tax year, your tax strategy may change. At the same time, you qualify for certain state tax credits.
If you purchase items like solar panels or new energy efficient windows and doors for your home, there may be tax incentives. Talk to your CPA to learn more about tax strategies for your situation.
Depending on your life stage, buying a home could impact your retirement planning. Not just in terms of dollars and cents, but also in how you expect retirement to look. Who will handle home maintenance while you’re traveling?
Are you able to continue payments with retirement income? Will it be in your best interest to review reverse mortgage options? Do you have space for family gatherings? Or, will you need to downsize?
Does the home suit aging in place? Is the neighborhood suitable for older adults?
Who should hold title for your house? What restrictions might your lender and/or insurance company place on individual ownership vs Trust ownership?
Do you intend to own the home long-term, or is this an intermediary life stage home? Will the home stay in the family or be sold as part of your estate settlement?
As you can see, there are many, many considerations to make before buying a house. Also, there are several key professionals to have in your corner: Financial Planner, Mortgage Lender, CPA, and Estate Planning Attorney.
It’s helpful to have a good understanding of your financial situation before applying for a mortgage loan and writing a purchase agreement.
Our financial assessment will give you a read on your financial vitals.
Life Moves Wealth Management is a registered investment advisor offering advisory services in the States of Arizona and Indiana, and in other jurisdictions where exempted. Registration does not imply a certain level of skill or training. Information contained on this site should not be considered a solicitation to buy, an offer to sell, or a recommendation of any security in any jurisdiction where such offer, solicitation, or recommendation would be unlawful or unauthorized.
The information on this site is not intended as tax, accounting or legal advice, as an offer or solicitation of an offer to buy or sell, or as an endorsement of any company, security, fund, or other securities or non-securities offering. This information should not be relied upon as the sole factor in an investment making decision. Past performance is no indication of future results. Investment in securities involves significant risk and has the potential for partial or complete loss of funds invested. It should not be assumed that any recommendations made will be profitable or equal any performance noted on this site.
HYPERLINK DISCLOSURE – The information being provided is strictly as a courtesy/convenience. When you link to any of the web sites provided here, you are leaving this website and assume total responsibility and risk for use of the web sites you are visiting. We make no representation as to the completeness or accuracy of information provided at these websites. Life Moves Wealth Management is not liable for any direct or indirect technical or system issues or any consequences arising out of your access to or your use of third-party technology, web sites, information and programs made available through this website. Life Moves Wealth Management does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to Life Moves Wealth Management’s web site or incorporated herein, and takes no responsibility thereof.
Are we at the start of a new bull market? Is FAANG striking back after abysmal performance in 2022?
A couple of weeks ago I wrote to you about market trends I am watching, specifically around growth stocks and the recent A.I.-fueled rally in tech companies.
Around the same time frame I released a more in-depth blog and podcast episode on the difficulties of stock picking and how to develop an investment discipline. You can read the blog and listen to the episode here.
Over the past couple of weeks the market rally has continued to march forward at a mostly steady pace, although much of the gain is coming from just a few companies. In fact, many of the companies that drug down the markets last year are the same ones giving us a boost so far in 2023.
While stocks have been moving higher for most of this year, the big boost came near the end of May, thanks to the earnings call from Nvidia (NVDA), during which they forecasted higher earnings and semi-conductor demand/production due to rapid advancements in A.I.
In fact, 18 of the companies listed on the above chart are involved with A.I. and semi-conductors.
The good news is clients of Life Moves Wealth have ownership of and/or exposure to these companies. In fact, one of the long-time core holdings in our portfolios is the iShares Seminconductor ETF, ticker SOXX, which as of today is up 39.97% YTD.
If we look beyond growth and tech companies, it appears the S&P 500 broke out and crossed back into technical bull market territory last week with a confirmed rally of +23% from the October ’22 low.
Upon reading excerpts from some of the recent corporate earnings calls, many companies are sounding increasingly optimistic about the remainder of 2023. Consumer spending is still holding on, foreclosures are lower than pre-pandemic trends, the labor market remains strong, and core inflation has come way down from one year ago. Lastly, the Fed is likely near the end of this rate hike cycle.
Speaking of the Fed, they meet this week and are largely expected to pause on rates; however, expectations for one more hike in July have been seen as high as 70%. On the other hand, if inflation shows steadiness or declines for the May and June reports, it is likely the Fed will continue to pause to see how much the prior rate hikes have yet to filter through the economy.
The markets and our portfolios are much easier to talk about than just about any point since mid-2021. Even as such, at this time I am not suggesting any major changes in portfolios and, as you well know, I do not advocate chasing the hottest returns.
Clients of Life Moves Wealth will see portfolios continue to be titled to cautious optimism. Our allocation is still titled a little more to value than to growth; however, historically I have allocated with a heavier tilt to growth stocks.
BUT – games are still being played that we need to watch closely…
The U.S. government just suspended the debt ceiling and promptly added another +$350B of debt last week. An election cycle is soon to begin. Democrats appear to be sticking to their candidate – for better or for worse – and who knows who the GOP will tout. There’s still money going from US taxpayers to all things Ukraine. China is doing China things. OPEC is moving oil production around.
That said, I will continue to nudge the portfolios back toward growth on the optimism of a better earnings outlook for companies investing capital into technologies, health care advancements, energy, and smart land use. The best way to participate in a bull market is through a solid investment discipline.
Have questions about your investments, the amount of risk you’re taking, or how it all fits into your financial health monitoring and goals? Click here to schedule time with me.
Charts used in this post are from “The Week in Charts” by Charlie Bilello. Click here to receive Charlie’s weekly newsletter in your email (free). Follow Charlie on Twitter.
Life Moves Wealth Management is a registered investment advisor offering advisory services in the States of Arizona and Indiana, and in other jurisdictions where exempted. Registration does not imply a certain level of skill or training. Information contained on this site should not be considered a solicitation to buy, an offer to sell, or a recommendation of any security in any jurisdiction where such offer, solicitation, or recommendation would be unlawful or unauthorized.
The information on this site is not intended as tax, accounting or legal advice, as an offer or solicitation of an offer to buy or sell, or as an endorsement of any company, security, fund, or other securities or non-securities offering. This information should not be relied upon as the sole factor in an investment making decision. Past performance is no indication of future results. Investment in securities involves significant risk and has the potential for partial or complete loss of funds invested. It should not be assumed that any recommendations made will be profitable or equal any performance noted on this site.
HYPERLINK DISCLOSURE – The information being provided is strictly as a courtesy/convenience. When you link to any of the web sites provided here, you are leaving this website and assume total responsibility and risk for use of the web sites you are visiting. We make no representation as to the completeness or accuracy of information provided at these websites. Life Moves Wealth Management is not liable for any direct or indirect technical or system issues or any consequences arising out of your access to or your use of third-party technology, web sites, information and programs made available through this website. Life Moves Wealth Management does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to Life Moves Wealth Management’s web site or incorporated herein, and takes no responsibility thereof.
Honest investors can attest that stock picking is hard. A strong conviction pick can lead to out-performance one year and under-performance the next. Or, vice-versa.
I recently saw a discussion on Twitter among financial professionals based on the following question:
Without Googling the answer, what is the best performing US stock over the last 20 years?
Some of the responses included companies like:
I responded with Phillip Morris (PM).
The correct answer: Monster Beverage (MNST). By a lot!
Would you have guessed that one correctly?
Over the past 20 years, Monster Beverage stock has returned a whopping 130,697%!
Yes, you’re reading that number correctly. In fact, it’s YTD total return is near 35%. Good news – 66% of the outstanding shares are held by institutions. Odds are you can find it in one (or more) of your mutual funds or ETFs.
The next highest stock is Apple with a 20 year total return of 61,169% – numerically less than half.
Interestingly enough, when you look at top performers over the past 5, 10, and 15 years, Monster is #17 in the past 15 years and then doesn’t crack the top 20 stocks in the recent 5 or 10 year periods.
If you look at the results, a lot of stocks fall in and out of favor over various time periods. This is why time in the market beats timing the market.
As I write this post, the current darling is Nvidia. The stock price has just recently regained it’s December 2021 high after a price decline of roughly 65% through 2022.
Since it’s October 2022 low, the stock has rocketed back near 238% as of today’s trade price. in October 2018 the stock dropped a quick 54%, fully recovering in late April 2020.
A stock like this that makes big swings requires one to have a strong stomach and lots of patience. It’s one you wish you would have bought at it’s low, never mind that psychologically the lows are where many people get scared out of owning stocks.
Below is NVDA’s 10-year chart with Relative Strength Indicator at the bottom.
Then, there are doozies. These are stocks that performed well in one year but not the next. This happens all the time. In fact, investing in last year’s high performers can be a recipe for disappointment.
The best performing stock of 2022 was Occidental Petroleum (OXY), with a total return of 119.1%. The stock is now down a little more than 22% Since hitting it’s high in early November 2022.
Speaking of a strong stomach and patience, below is OXY’s 10-year chart with Relative Strength Indicator at the bottom.
Making investment decisions based on recent performance is akin to the proverbial “live by the sword, die by the sword.” Charts like these can be helpful for technical analysis and spotting trends. They can also be completely non-helpful for long-term investors who may tempted to buy or sell based on timing.
I’ve made the wrong calls in my own portfolio at times when I’ve tried to outsmart the market. I have several of these stories, and my own mistakes are why I’m slow to trade and rebalance in client accounts. Temporary underperformance – like in 2021 – eventually leads to steady performance and sometimes even outperformance – like in 2022.
Admittedly, I’ve been tempted to trade on changing trends at times. However, I must remember my criteria for making the investment in the first place, the long-term fundamentals.
I believe a lot of investment mistakes are made when investors invest without a dependable investment discipline. Fear and FOMO are often the basis for investment decisions. When you violate a defined investment discipline, you’re likely chasing things that are hazardous to your wealth.
To create your investment discipline, start with defining the reasons you wish to invest. What is the purpose for any performance results you achieve? Are you funding education, saving for a specific purchase over the next 2-5 years, or providing retirement income? Knowing your purpose is the best barometer for staying on track.
Then, decide the time period you intend to invest. The longer the time period, the more patience you can exercise through market volatility. There will always be market volatility for all sorts of reasons. Long-term investors should not be driven by fear and FOMO. Rather, they should be cautious of fear and FOMO and use these opportunities to rebalance portfolios.
Next, understand the amount of risk you are comfortable taking with your investment strategy. Risk is a key component to investment selection and allocation. Fear and FOMO can influence your feelings about risk, so try to assess from a mindset of steady markets.
Now that you have your purpose, your time frame, and your risk tolerance, set your allocation accordingly. As an example: using the Nitrogen Risk Number® methodology, if your speed limit is 65, an allocation of 65% or so to stocks is probably most appropriate.
For moderate investors with a longer time frame a sample strategic allocation might look like:
This sample allocation can be dialed up or dialed down based on your purpose, time frame, and risk tolerance.
Short-term investors may want to take the extra step to set up and down limits on investment results. As a basic example: an investment that rises by 10% or declines by 10% over a 1 year period should be evaluated and potentially sold.
If you aren’t sure how to evaluate individual stocks or bonds, consider index ETFs or mutual funds. Choosing a fund for an entire index such as the S&P 500, factor funds like growth or value, or sector funds like tech or healthcare, ETFs and mutual funds participate in the collective growth of many companies.
The key to investment success over time is setting your asset allocation, occasionally rebalancing, and avoiding emotional decisions based on fear and FOMO. If a stock you don’t own starts ripping, you may not want to chase it. If a stock you own falls fast, you may not want to sell it.
An investment discipline keeps you top of what you own, why you own it, and for what time period. Sticking to your strategy helps you ride the inevitable volatility waves that come with investing and avoid the trap of chasing performance.
Want a review of your investment strategy? Learn more about our financial advice approach here.
Life Moves Wealth Management is a registered investment advisor offering advisory services in the States of Arizona and Indiana, and in other jurisdictions where exempted. Registration does not imply a certain level of skill or training. Information contained on this site should not be considered a solicitation to buy, an offer to sell, or a recommendation of any security in any jurisdiction where such offer, solicitation, or recommendation would be unlawful or unauthorized.
The information on this site is not intended as tax, accounting or legal advice, as an offer or solicitation of an offer to buy or sell, or as an endorsement of any company, security, fund, or other securities or non-securities offering. This information should not be relied upon as the sole factor in an investment making decision. Past performance is no indication of future results. Investment in securities involves significant risk and has the potential for partial or complete loss of funds invested. It should not be assumed that any recommendations made will be profitable or equal any performance noted on this site.
HYPERLINK DISCLOSURE – The information being provided is strictly as a courtesy/convenience. When you link to any of the web sites provided here, you are leaving this website and assume total responsibility and risk for use of the web sites you are visiting. We make no representation as to the completeness or accuracy of information provided at these websites. Life Moves Wealth Management is not liable for any direct or indirect technical or system issues or any consequences arising out of your access to or your use of third-party technology, web sites, information and programs made available through this website. Life Moves Wealth Management does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to Life Moves Wealth Management’s web site or incorporated herein, and takes no responsibility thereof.
The US debt ceiling is all over the news today, so let’s talk about it.
Before 1917, Congress had the ability to use the Power of the Purse at their own discretion. In effort to make the federal government fiscally responsible, the debt ceiling was created.
The debt ceiling cap currently stands at roughly $31.4tn. That limit was breached back in January.
Since 1960, Congress has acted 78 separate times to permanently raise, temporarily extend, or revise the definition of the debt limit – 49 times under Republican presidents and 29 times under Democratic presidents.
House Speaker McCarthy is in a tight spot… Failing to raise the debt limit in the next three weeks could be catastrophic for the U.S. economy, but neglecting to secure the desired spending cuts could cost him the gavel.
Moody’s Analytics predicts that a default would shave around 4% from U.S. gross domestic product (GDP), see stock prices fall by a third, and result in companies slashing nearly six million jobs.
As Ulysses Everett McGill from the movie Oh Brother Where Art Thou? would say “we’re in a tight spot.”
Sources used for this episode:
https://www.investopedia.com/terms/d/debt-ceiling.asp
Life Moves Wealth Management is a registered investment advisor offering advisory services in the States of Arizona and Indiana, and in other jurisdictions where exempted. Registration does not imply a certain level of skill or training. Information contained on this site should not be considered a solicitation to buy, an offer to sell, or a recommendation of any security in any jurisdiction where such offer, solicitation, or recommendation would be unlawful or unauthorized.
The information on this site is not intended as tax, accounting or legal advice, as an offer or solicitation of an offer to buy or sell, or as an endorsement of any company, security, fund, or other securities or non-securities offering. This information should not be relied upon as the sole factor in an investment making decision. Past performance is no indication of future results. Investment in securities involves significant risk and has the potential for partial or complete loss of funds invested. It should not be assumed that any recommendations made will be profitable or equal any performance noted on this site.
HYPERLINK DISCLOSURE – The information being provided is strictly as a courtesy/convenience. When you link to any of the web sites provided here, you are leaving this website and assume total responsibility and risk for use of the web sites you are visiting. We make no representation as to the completeness or accuracy of information provided at these websites. Life Moves Wealth Management is not liable for any direct or indirect technical or system issues or any consequences arising out of your access to or your use of third-party technology, web sites, information and programs made available through this website. Life Moves Wealth Management does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to Life Moves Wealth Management’s web site or incorporated herein, and takes no responsibility thereof.
The Fed raised rates again today – the 10th hike in this current cycle.
As a range, Fed funds rate was 0.00%-0.25% just 13 months ago. With today’s hike, it is now set a range of 5.00%-5.25%.
The Fed funds rate is one of the primary monetary policy tools. By raising this rate, the Fed is slowing a heated economy by indirectly influencing consumer and business borrowing rates.
In the latest episode of the Financial Purpose Podcast, I’ll explain at a high level what the Fed funds rate is, how it works, and what it could mean for the economy.
Life Moves Wealth Management is a registered investment advisor offering advisory services in the States of Arizona and Indiana, and in other jurisdictions where exempted. Registration does not imply a certain level of skill or training. Information contained on this site should not be considered a solicitation to buy, an offer to sell, or a recommendation of any security in any jurisdiction where such offer, solicitation, or recommendation would be unlawful or unauthorized.
The information on this site is not intended as tax, accounting or legal advice, as an offer or solicitation of an offer to buy or sell, or as an endorsement of any company, security, fund, or other securities or non-securities offering. This information should not be relied upon as the sole factor in an investment making decision. Past performance is no indication of future results. Investment in securities involves significant risk and has the potential for partial or complete loss of funds invested. It should not be assumed that any recommendations made will be profitable or equal any performance noted on this site.
HYPERLINK DISCLOSURE – The information being provided is strictly as a courtesy/convenience. When you link to any of the web sites provided here, you are leaving this website and assume total responsibility and risk for use of the web sites you are visiting. We make no representation as to the completeness or accuracy of information provided at these websites. Life Moves Wealth Management is not liable for any direct or indirect technical or system issues or any consequences arising out of your access to or your use of third-party technology, web sites, information and programs made available through this website. Life Moves Wealth Management does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to Life Moves Wealth Management’s web site or incorporated herein, and takes no responsibility thereof.
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