Despite Rising Yields, the Economy is Marching Forward

marching forward

Let’s do a reality check. With tax season in full swing, markets doing their day-to-day dance and winter weather still causing havoc, it’s sometimes hard to know what’s going to happen next. In light of the events of 2020, some may be carrying added anxiety into this time of year. Spring and brighter days are on the way as the nation continues marching forward.

Because anxiety can lead to irrational money decisions, the best way to fight it is to take a deep breath, focus on your goals and then take the next step forward — no matter how small. Before long, you’ll find yourself “marching” forward with momentum and greater confidence. 

Last week

Fed officials failed to settle concerns over rising yields. Major equity indices rallied sharply into the weekend after the positive February non-farm payrolls report. The Johnson & Johnson’s vaccine approval propelled the early week rally. The rally fell as Fed chair Powell reiterated the FOMC’s view that rising price pressures are likely transitory. The rates market viewed this “do nothing” attitude as a reason to dump bonds. The tech-heavy Nasdaq losses captivated investors’ attention. This mark the third consecutive weekly decline. The growth index markedly underperformed value as that reopening rotation continued.

Week Ahead

The U.S. Senate passed the $1.9 trillion COVID-19 aid package, so the bill now will go to the House. That said, Friday’s plunge and reversal has elicited calls of surrender, but most technical metrics failed to reach such levels. The indices’ quick rebound should be a warning to the bears, but neither party seems to have the upper hand when looking at the technical charts. This fight is likely to continue, leading to elevated volatility levels. The darling high-growth names have not recovered anywhere near the extent that big tech companies have. And the easing of yields is likely needed to boost them. The weak Treasury auction two weeks ago sent yields sharply higher, so this week’s demand for government paper will be closely watched. The Federal Open Market Committee’s next policy meeting is on March 17 and will provide updated economic projections.

Despite what happens to the economy, you have the right to be confident — you have crafted a plan and I’m here for you each step of the way. As Warren Buffett famously said, “I don’t try and guess interest rates, I just buy businesses I like.” Maybe your next step is to set up some time to talk about your options for marching forward? I’d welcome that! Year-to-date the S&P 500 is up 2.29%, Dow Jones Index is up 2.91%, and the Nasdaq up 0.25%.

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.

Financial Advisor Erie CO focus on investments, wealth management, retirement in Boulder, Louisville, Niwot, Lafayette, Windsor, Berthoud, CO

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


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.

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 Start Investing

How to start investing

So, you’ve landed your first “real” job! Now’s the perfect time to create your first investment plan and start investing.

First, let me congratulate you on getting through school and starting your first “real” job. You’ve worked hard to get here, and I’m sure there are many things you’ll want to spend your new paycheck on. An apartment of your own, some decent takeout (not from a student cafeteria), maybe a little traveling.

You should do those things, as long as they fit into your budget. You’ve earned a little breathing room. But now that you have some stability, you should also thinking about how to start investing for your future. Here are three ways to get the ball rolling.

1. Pay down debt

As a student, you may have accumulated a mix of debt, from student loans to credit cards. Create a debt-repayment plan that focuses on paying off your high-interest debt, like credit cards, first.

Student loans often carry lower interest rates, so these loans might not be your top priority. At the same time, many student loans require you to make a minimum monthly payment shortly after you graduate, and you only have so much time to repay the entire loan. You still need a loan-repayment plan to make sure you don’t default on these loans.

2. Build your emergency fund

Post-graduate life isn’t all sunshine and rainbows. Sometimes your air conditioner breaks down in the middle of a heat wave or your car dies on the way to a meeting. I suggest putting 10% of your paycheck into an emergency fund to cover unexpected expenses. The goal is to eventually have enough money in your emergency fund to cover three to six months’ worth of expenses, but it can take a while to get there.

Your emergency fund should be low risk and easy to access, like a regular savings account.

3. Think about retirement

This is the best time to take advantage of the power of compounding. If you start putting just $200 a month into a retirement savings account at age 25, and let it grow over the next 40 years at a 4% rate of return, you’ll have about $237,000 in that account when you turn 65.

Wait another 10 years to start investing the same amount at the same rate of return, and you’ll reach age 65 with about $140,000. That’s a big difference.

If your employer offers a 401(k), use it. With this tax-advantaged retirement account, you contribute pre-tax dollars directly from your paycheck. You employer will also match your contributions up to a certain percentage of your salary.

If you don’t have a 401(k), look into a traditional IRA (individual retirement account) or Roth IRA. With a traditional IRA, you’ll get a tax break on your contributions, while with a Roth IRA, you won’t pay federal taxes when you withdraw money in retirement. With both types of IRAs, you won’t pay taxes on any investment income you earn within the plan until you start making withdrawals.

Ready to start investing? Contact me today and we’ll work on creating your first investment plan.

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.

Positive Investing News

Positive Investing News

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.

Click here if you would like to learn more about our thoughts on Positive Investing News. Also, to discuss 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.

Roth IRA Advantages

We have a special blog post tonight from the one and only Senor Frog, one of our biggest fans, submitting this question through the website contact formWhat are the advantages to setting up a Roth IRA plan?  Great question Senor, thanks for writing us!  First, a Roth IRA is a retirement account for individuals.  The contributions (money you put in each year) grow tax free, and then when you pull the money out it is also tax free!  Pretty nice right?  Does this sound to good to be true?  All these tax advantages, there must be a catch, and there are, a few anyway…

Roth IRA

  1. Income Limits – not everyone can open a Roth IRA, you have to be below a “Modified AGI” (Adjusted Gross Income) amount each year.  In 2018, the amount for married couples filing jointly to make full contribution amounts is $189,000, and single/head of household tax filings the max modified AGI is $120,000.  If you file married but filing separately, contact your tax specialist for plan details.
  2. Contributions Limits – with tax advantages who wouldn’t want to put all the money they can into this plan, this includes me, what’s the maximum each year?  In 2018, the maximum contribution to a Roth IRA is $5,500, or your total taxable compensation amount for the year, if your compensation was less than $5,500.  Bonus for the 50+ crowd, if you are age 50 or older, the maximum contribution amount is $6,500.  This additional amount is often referred to as the “catch-up” provision.
  3. Tax Limits – what tax limits, in the intro of this post there was nothing but tax advantages!  With a Roth IRA, there is no income tax deduction on the contribution amounts.  This is also the reason when you withdraw the funds it is tax free, because you already paid taxes on the money you put in!  Also, unlike a non-qualified brokerage account, if you have a loss in the account there is no tax write-off for the losses incurred.
  4. Withdrawal Limits – if you satisfy the requirements, qualified distributions are tax free.  The basic qualified distribution would be pulling money out of this plan after age 59 1/2.  However, if the account has grown and you are under the age of 59 1/2 you are penalized if the withdrawal includes contributions and gains.  In this scenario, the gains are taxable and penalized.
Roth IRA Advantages

Hmmm, not sure this plan sounds so great anymore, read on, it gets better!  The advantages of the Roth IRA plan are:

  1. It’s a savings plan often used alongside a 401(k) or other retirement plan to mix tax strategies in retirement.
  2. The contributions made into the plan grow tax free. Compounding tax free growth adds up to a lot of money over 10, 15, 20, or even 30+ years.
  3. If you still have earned income, you can make contributions to this plan beyond age 70 1/2. People are living longer, and working longer, this may be a bigger advantage than people think.
  4. There are not RMD’s (Required Minimum Distributions) with this plan. Unlike a IRA/401(k), at 70 1/2 nobody (IRS) is demanding you take a certain amount each year. This is very important during market corrections or downturns.
  5. And finally, tax free withdrawals! Wouldn’t it be nice after paying 30 or 40 years of taxes to receive tax free income.

Summary: It’s not a perfect plan, those don’t exist.  But this plan offers tremendous tax savings opportunity. To grow a retirement account over a working period of time, whether its 40 years or 5 years.  If you would like to speak with one of our advisors regarding how you can take advantage of a Roth IRA, contact us today.

For more information on individual retirement planning, follow this link.

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.