Meme stocks, Real-Estate, Initial Public Offering (IPOs), Special Purpose Acquisition Company (SPACs), Bitcoin, and Precious Metals – what do all of these share in common? Each is an example of an investment or asset currently receiving lots of “buzz” and client curiosity. While we do not typically follow these items intimately and prefer the diversification and liquidity of traditional mutual funds, bonds, and ETFs, we do not necessarily have anything against a client owning other assets when the exposure is properly managed. We do encourage anyone exploring ideas that are receiving intense attention from the media or “peers” to proceed with caution as the waters are often dangerous. If we were lifeguards at the beach, we would hang the yellow flag on the chair, “proceed with caution.”
Category Archives: Personal Finance
ARPA What?
On March 11, Congress passed a third round of COVID-related stimulus via the American Rescue Plan Act (ARPA) with a price tag of $1.9 trillion. This latest package – months in the making – is best known for direct payments of $1,400 to qualifying persons and each of their dependents. A more abrupt income phase-out (adjusted gross income of $75,000 or $150,000 married filing jointly) made fewer people eligible this round. Those who are near that threshold may consider making a deductible IRA contribution for example. But stimulus payment eligibility aside, there are other provisions in the bill that may provide you with some strategic planning opportunities – even for those who do not qualify for direct payments.
Light Bulbs Reveal a “Better Idea”
In 1967 Ford unveiled a “see the light” marketing campaign for its new Mustang. That campaign utilized a light bulb which was turned on to illuminate the room with the new Mustang model. This symbolized how seeing something in a new light can result in an epiphany moment – the message: “Ford has a better idea”, a different approach.
Don’t Surrender to Cash
“Forced Perspective” is a technique employing optical illusions to make objects appear closer/farther, or bigger/smaller than they actually are. Filmmakers would for example place a miniature dinosaur close to the camera so that it would look gigantic in the film. Similarly, many tourists at the Leaning Tower of Pisa take a “selfie” with their smartphone camera, making it appear as though they are preventing the structure from toppling. Reflecting on years of experience it is hard to recall a time where it felt like there was more uncertainty than the present. A global pandemic, social unrest, and a polarizing US presidential contest are presently being placed very close to the “camera” by media, creating HUGE worry – a forced perspective. We cannot recall a time where there were not several big worries simultaneously distracting investors. The chart below provides just some past examples.
A Focused Financial Life: New Tool to Aid Financial Fitness
1) Set financial goals; 2) Understand where your money is going; 3) Manage your debt; 4) Put your finances on autopilot; 5) Maintain a steady lifestyle; 6) Invest wisely; 7) Obtain knowledge and advice.
At Nvest, our primary goal we strive to achieve with each client is “delivering financial peace of mind.” We believe this goal is best achieved through regular communication; a prudent, time-tested approach to investment management; and via a strong and detailed understanding of how your accumulated assets form the big picture, “financing” you through each stage of your life. In these respects, we are excited to introduce and make available to clients a new tool we call the LIVING LIFE client portal.
When Life Throws You Lemons, Make Lemonade – Strategies During a Bear Market
No sugar-coating it; the start of this New Year is not what any of us hoped for. Day to day life is highly uncertain, and investments are bruised. While the cause of the current environment is unique and uncharted for every living generation, this too shall pass. Periods like this can cause one to feel paralyzed, with nothing to do but wait it out. However, there are strategies individuals can pursue that will position them to benefit when the storm begins to clear, and simultaneously help you restore a long-term mindset.
The “SECURE” Act
Against a noisy political backdrop and busy holiday season, it would be easy to miss a key piece of legislation called the SECURE Act that was signed into law in late-December that touches in one form or another most all investors and current retirees.
We are receiving some questions regarding the act’s passage and would like to call attention to the two sections we believe are of greatest impact. Before we jump to discussing The Setting Every Community Up for Retirement Enhancement Act of 2019 (SECURE Act), we want to remind you that we view it important to stay abreast of changes to laws or rules that could impact your financial future. We monitor them almost as closely as we monitor the markets.
Transitioning From A “Saver” to a “Spender” In Retirement
I carefully saved for most of my life… now you are telling me that I need to spend my retirement nest egg?
One of the most difficult transitions many individuals will face in financial life is moving from being a “person at work” (the accumulation phase where you are saving and building wealth) into someone now living off their “money at work” (the “decumulation” phase). A recent study by BlackRock Retirement Institute found that “instead of actively and systematically decumulating assets, retirees display a tendency across all wealth levels to retain assets and not spend down their initial principal.” The study also found that, “More than one third of current retirees actually grew their assets – leaving considerable potential consumption on the table.”
Life Insurance is NOT for Saving
Careful! Avoid buying life insurance as a savings strategy! Stop buying it as a tax-deferral vehicle for retirement savings!
Insurance of any kind is a risk-management tool. From our perspective, an individual should buy life insurance for one reason: because there will be a financial impact on one’s family or business if they unexpectedly die. For most individuals, that financial impact is typically highest early in life when working years ahead are many, financial assets accumulated are low, and financially dependent children and/or significant debts (such as home mortgage) exist. Over time, one’s insurance need generally declines and ultimately reduces to zero at some point prior to retirement.
Excited About That Tax Refund? Think Again!
Another tax filing season is quickly drawing to a close, and for many people that means the anticipation of a sizable refund headed their way. The IRS indicates that about 80% of taxpayers receive a refund, with the average being around $3,000. That’s a nice chunk of cash! What’s not to be excited about?