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Can a robot really help you financially?

jim Financial advisor, invest, Investing, Investing Strategy, investment manager, investment strategy, Retirement Planning, wealth management, wealth planning strategies January 13, 2021August 2, 2023financial advisor, Investing, investment management, investment planning, retirement planning, wealth management

We’re hearing a lot about robo advisors these days. Are they right for you?

The financial services industry is no stranger to developing new products and innovations. Years ago, it was different types of stocks and bonds, then mutual funds were launched. More recently, exchange-traded funds (“ETFs”) that mimic indexes were launched. These days, robo advice is a hot topic. While having features that are certainly attractive to some investors, robo advisors aren’t right for everyone.

But first, the “what?”

What are robo advisors?

The term “robo advisor” is actually a bit misleading. Advisors generally guide their clients through the financial planning process to help these individuals achieve their life goals.

Robo advisors are automated portfolio managers. They take a limited amount of information about a client and create a portfolio of holdings. These holdings usually include a basket of ETFs. Robo advisors require little human involvement once their algorithm has been set.

Pros and cons

Robo advisors are programmed to automatically buy and sell holdings based on a desired risk-return profile. As there is little human involvement or management, they tend to be cheaper to invest in than actively managed portfolios. They also tend to be “set-it-and-forget-it” solutions that require very little effort by individual investors.

These portfolios rise and fall according to market and macroeconomic conditions, they typically don’t make adjustments to reflect the market. Conversely, as your advisor I’ve gained a deeper understanding of your financial picture, including your long-term needs and goals. Our work together means that your portfolio is suited specifically to you. Not just to a lot of people who may simply be your age and have a similar amount of savings.

Example of robots investing versus humans investing

During periods of rising markets, robo advisors will tend to perform quite nicely. As they reflect the performance of the wider markets in which they invest.

That said, markets don’t always go up. When markets are falling, portfolios run by robo advisors will tend to drop to the same degree as their corresponding markets. Meanwhile, active portfolio managers tend to rebalance or otherwise adjust their funds to reduce the downside impact of this market weakness. Possibly even taking advantage of it. By doing so, these portfolio managers are able to negate the losses that could result from market weakness. Which is something robo advisors can’t do.

Robo advisors are also not equipped to provide all of the other services that an advisor can provide. Including access to tax and estate planning, lawyers, accountants and other professionals who can help me ensure you have a complete financial plan that truly reflects your short- and long-term needs.

Please feel free to reach out to me to learn more about the benefits of a human vs. robo advisor.

Click here if you would like to learn more about your options and if we can assist you with your wealth management, investment, and retirement planning.

This website is for informational purposes only and is not intended to be specific advice or recommendations. For specific advice or recommendations you would need to meet directly with one of our advisers.

How to Tame Market Volatility through Diversification

jim diversification, family wealth management, Financial advisor, invest, Investing, Investing Strategy, investment manager, investment strategy, Mutual Funds, retirement, Retirement Planning, Stock Market, wealth management, wealth planning strategies December 7, 2020December 7, 2020financial advisor, invest, Investing, Investing Strategy, investment management, investment planning, investment strategy, Investments, retirement planning, strategic wealth management

It’s that time of the year again. Whether it’s in person or virtually, the holidays are an opportunity for more conversations with loved ones. This year, let’s strive to put some positivity into our conversations. There is a lot to gripe about, but there’s more to look forward to. And the more we talk, the better we plan, prepare, and progress. Discussing your financial strategies with loved ones can help reinforce them or pivot according to new circumstances. And I’m ready to hear you! Knowing what may have changed this year will help us become more successful in pursuing your financial goals.

One topic that is front of mind is how to diversify your portfolio. One way to help investors reach long-term financial goals is through an investment technique known as diversification. Diversification basically means spreading out your invested money across different investments types, industries, countries, etc. Diversification can smooth out volatility of your portfolio and potentially lead to stronger returns over the long term. Helping you take advantage of the benefits of diversification is a central part of my job as your advisor.

One guiding factor behind diversification is that not all investment categories perform well at the same time. As some are increasing in value, others may be decreasing. Market volatility is the movement of investment categories going up and down.

Maintaining a well-balanced portfolio

As your advisor, I help maximize returns and reduce the risks associated with market volatility. Essentially, your portfolio represents a collection of different investments that work in harmony to help you reach your goals. One way you can achieve portfolio diversification is to divide your investments among the major asset classes. Such classes include equities, fixed income and cash.

Asset classes – A range of risks and rewards

Each asset class comes with varying degrees of risk and return characteristics. Typically, each class performs differently in certain market environments. Here’s a quick summary of each.

Equities (e.g., stocks)
Equities refer to buying stocks or shares of a business, making you a part owner. This means the investor is subject to stock appreciation when the company outperforms. But also subject to the risks of declining stock value if companies underperform.
Fixed income (e.g., bonds, Treasury bills)
Fixed income investors lend capital in exchange for interest. Considered as creditors, bondholders often have a priority claim in case of company bankruptcy. This makes the investments less risky. Fixed income typically provides income at regular intervals.
Cash (e.g., money market funds, bank accounts)
Cash investments provide low returns versus other asset classes, in the form of interest payments. These investments typically come with very low levels of risk.

Investment funds – One-stop diversification

I can also help achieve diversification through the use of investment funds; namely, mutual funds and exchange-traded funds (ETFs). These investment vehicles represent convenient and affordable ways to access a wide range of investments.

Mutual funds – These are made up of a pool of assets from many investors. Mutual funds are managed by a portfolio manager. The portfolio manager actively seeks to produce greater returns than a specific market benchmark, such as the S&P 500 Index. With the large scale of a mutual fund, you benefit from professional management and can get strong diversification by gaining access to investments that would normally be inaccessible or too expensive for most individuals.
ETFs – These are funds that track and seek to replicate the performance of select market indexes. ETFs represent a basket of securities based on the underlying index. This allows investors to gain broad diversification across entire markets, industries, regions or asset classes. ETFs are known to incur fewer administrative costs, therefore charging lower fees to investors.

Please feel free to contact me if you have questions on the terms discussed in this article, or on how your investment portfolio is diversified.

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The Great Divide – Economy and Markets

jim Economy, Financial advisor, financial plan, Financial Planning, invest, Investing, investment strategy, Market Brief, Market Commentary, Market Outlook, Retirement Planning, Stock Market, wealth management August 17, 2020August 17, 2020financial advisor, Investing, investment strategy, market brief, Market Review, Stock Market, stocks, wealth management

The Dog Days are here! School is back in session, some in-person, some virtual. The virus continues to be present and the economy slowly is rebuilding while the markets continue to climb. Last week indexes finished slightly up. The Dow up 1.8%, S&P up 0.64%, and Nasdaq up 0.08%. The S&P began the week rising for it’s 7th straight session in the green and briefly passed the all-time high on Wednesday. The flat performance was a result of uncertainty with economic data, the latest virus patterns, and a second fiscal stimulus package that never was.

Last Week

The S&P 500 index is close to record territory once again. The economy and the stock market seem far off. Thursday marked the 100th day since the market lows on March 23. The markets have rebounded 50% since then. A strong recovery for investors, while millions have lost jobs and over 160,000 Americans have lost their lives. Management reports on earnings calls have been surprised at the speed and scale of the demand rebound. Many companies expected a short lived drop, followed by a gradual recovery. Not so much the “snap-back” experienced.

It is encouraging that the U.S. has added back millions of jobs lost during the first wave. Last Thursday marked the first jobless claims report under 1 million since March. Also, from earnings calls, consensus views are pointing towards record breaking earnings next year. Strongly supported by interest rates, which continue to be favorable for the foreseeable future. Investor fears over companies falling into financial distress are offset by the Feds support of buying bonds and Congress spending on relief. Retail sales also rose in July 1.2% higher than June, setting a new all-time high, and another sign of recovery.

The Week Ahead

The equity markets will have their eyes on Washington in hopes of a new stimulus. On Thursday, unemployment claims will be reported and the hope is that a under 1 million trend goes on. Continuing unemployment claims are still above 15 million, however, this is much lower than the 25 million in May. Stress for parents remains as school openings have created more unrest than security. How the school year unfolds for parents will no doubt impact the workforce productivity. Some areas of the country have already started so watching closely for signs that reopening in person can be done safely is key.

At the end of the day, it is clear the markets and the economy are not one in the same. Very different directions, as reflected in year-to-date index performance; Dow down 2.1%, S&P up 4.4%, and Nasdaq up 22.8% through the close on Friday.

Have a safe week!

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Retirement Planning Options – 401k or IRA – Which is Best?

jim 401k, Financial advisor, financial plan, Financial Planning, Investing Strategy, investment strategy, qualified account, qualified plan, retirement, Retirement Planning, Roth IRA, tax savings, Traditional IRA April 9, 2020April 9, 2020401K, retirement, retirement accounts, retirement planning, retirement plans, traditional IRA

Amid the recent market turmoil, lots of questions have risen around the best ways to save money for retirement. There are multiple retirement planning options for the individual saver. Now is a great time to re-evaluate your plan and strategy moving forward. Below I have highlighted a few of the basic accounts for retirement savings.

Similarities and Differences

The following discusses two popular retirement accounts, the 401k and the Traditional IRA. 401k’s and Traditional IRA’s are great accounts to save money for retirement. Both are similar in that the accounts grow on a tax deferred basis. Meaning once contributions are made into the account, growth and capital gains are not taxed. Another similarity is the taxation on withdrawals. When it is time to withdraw the money from the accounts, all the money taken out is taxed at ordinary income rates.

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Differences between the accounts include contribution levels. With a 401k, in 2020, an individual under the age of 50 can contribute up to $19,500. With a Traditional IRA, the max contribution amount for savers under the age of 50 is $6,000. Another difference is that with a 401k, all the contributions are eligible for a tax deduction.

With a Traditional IRA, depending on your income, you may not qualify for the deduction. The “catch-up” provision allows for savers over the age of 50 to contribute more to their accounts. In 2020, the catch-up for 401k accounts is $6,500 and $1,000 for Traditional IRA’s. The deduction amount for a Traditional IRA depends on whether you already have an employer sponsored plan, your income level, and tax filing status. So be sure to discuss available options in detail with your tax and financial professional.

Another IRA option is a Roth IRA. The Roth IRA provides tax free growth in the account, as well as, tax free withdrawals after the account owner is 59 1/2. The contribution levels are the same as the Traditional IRA, however, income levels for making contributions are much lower. For example, a “single” tax filing status in 2020, the modified adjusted gross income must be below $124,000.

Pro’s and Con’s

The pro’s of owning a 401k are the big annual contribution limits, along with the tax deduction on your contributions and tax deferred growth. The downside of a 401k account is the limited investment choices within the employer plan. Also, the entire amount of withdrawals will be taxable. The pro’s of a Traditional IRA is that you may qualify for a deduction of contributions, tax deferred growth, and the investment options are fairly wide open to most investment choices in the marketplaces within the IRS guidelines.

The downsides of Traditional IRA’s include the small contribution amount and that all withdrawals are taxable. Another downside for both 401k plans and Traditional IRA’s is that they fall under the Required Minimum Distribution guidelines of the IRS. The RMD rules require money in these accounts to be withdrawn once the account owner turns 72 years old. Without a hardship, both accounts incur a penalty tax when withdrawals are made before age 59 1/2.

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The Roth Option

The Roth IRA option provides the biggest advantage at the withdrawal phase. Money withdrawn is tax free after age 59 1/2. The downside to the Roth IRA is that there is no tax advantage with contributions. All the contributions made with after tax dollars. Another advantage to the Roth IRA is that Required Minimum Distributions do not apply. Therefore, the IRS does not force the account owner to withdraw funds at anytime.

When it comes to Retirement Planning, there are good options for individuals. I hope you learned something from this post. If you still have a question, connect with us here. Call today if you need help, want to discuss options further, or want to review your current plan alongside your goals.

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Positive Investing News

jim family wealth, family wealth management, invest, Investing, Investing Strategy, investment manager, investment strategy, retirement, Retirement Planning, wealth management, wealth planning strategies March 26, 2020March 26, 2020family wealth, family wealth management, invest, Investing, Investing Strategy, investment planning, investment strategy, Investments, strategic wealth management, wealth management

Finding good news right now can be tough. The Q&A below highlights some of the positive investing news that can result from a crisis.

What is the one positive that you see coming out of this crisis
that is least expected?

Buying opportunity! Valuations have soared during the bull market run following the 2008-2009 recession, individuals interested in long-term investment growth should consider this as one of the best discount sales in recent years. Many people I speak to wish they could go back to the 2008-2009 time period and buy stocks. Today, some quality companies are down 30-80% year-to-date.

What new businesses will break into the marketplace, as a result of this crisis, that no one expected to grow so fast?

Technology has proven to be the winner. The S&P 500 Info Tech sector index has greatly outperformed the market. Included in this index are businesses supporting those working from home, such as, video conferencing and e-document companies.

What existing industries do you feel will rebound the fastest
as things begin to return to normal?

The travel industry is taking an enormous hit. This will not last. Consider how many people will need a vacation after being stuck in their homes for a month (or longer). Or even had their trips postponed. Hotels, airlines, cruises, they are beaten down right now but will bounce back as the virus is contained. The stimulus will also aid, to some extent, discretionary spending for some. Travel is a huge component of discretionary spending.

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