FINANCIAL CONCEPTS BLOG

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Staying Home To Do Our Part

In these days of travel restrictions, several conferences have become teleconferences. Today, I had two such meetings. Although I love to travel and visit different places around the country, I’ve got to say; it’s nice to be at home in my bed tonight! 

Thank goodness the opportunity to learn is still available every single day. (Parents enjoy the time you are learning with your kiddos from home! Granted, I would not want to be teaching algebra and science!) When this is all over, we will know who the real heroes in our community are. The teachers, the administrators, the health care workers (all of them), the people who stock our groceries, the drive-thru clerks, and the truckers! And of course, the people who manufacture the paper goods!

The first phone conference today was with two amazing women who manage money in our investment funds at Capital Group/American Funds. Janet Gordon and Jody Jonsson have become friends, brilliant friends, over the years. Learning their current perspective recharged our batteries. Today’s topic was What’s Next for the Equity Market.  

One of the reasons that make Capital and American Funds so different is their intense research. The relationships Capital has with the biggest, oldest, AND newest, strongest companies around the world is a strength that cannot be measured. Folks like Janet and Jody can ask the hard questions. And they do! Research doesn’t stop because the world closes business doors while we pause to heal or flatten the curve of a virus. The research continues. Their conversations are deep. Both leaders mentioned strategies and companies they feel will come out of this event stronger and will present exciting investment opportunities. Some companies, have been initially impaired but will come out healed. Some companies will suffer for years to come.

A couple of factors we admire about Capital Group and American Funds are 1) the philosophy of finding value or bargains in this research and 2) the tremendous experience of our investment team.  Their mission is to provide consistent results, especially in negative periods. Janet mentioned an early morning investment meeting in a virtual room with professionals located around the globe. (For participants on the call, it was either an early morning, late afternoon, or midday meeting given the various time zones around the world.)  She said they started the session with a roll call of those professionals with 25 plus years of managing money in the funds, asking them to share their insight for this bear market. She said many of them felt last week was the week to put cash to work. 

Yet another factor on which we agree is diversification—owning lots of companies. Across industries. Across continents. And we also like the diversification of opinions. Janet said she is keeping “dry powder” because she thinks there may still be some bargains on her shopping list in the companies she likes in defense, health care, and high-quality technology companies. Jody has found the multinationals she follows are suddenly a bargain as she believes we will experience an industrial renaissance in the United States. Multinational companies want to err on the side of resiliency and flexibility versus efficiency. And they want to control supply chains close to their customers. 

The last factor in which we align with Capital Group and American Funds segues into the last meeting of my day. Janet and Jody both reiterated that we should reassure our clients, who strongly feel the desire to do something because of heightened emotions, that our professionals at Capital are doing something ALL day EVERY day. 

They are positioning you for the next few days and months, but most of all, for the rest of your life plans. They monitor changing conditions. Along with analysts, portfolio managers, we have scientists, physicians, and consumer pollsters determining how this virus will change our lives. They asked us to share with you to stay focused on your long-term plans and goals. Their last statements reiterated the professionals at Capital who manage your money are working night and day, around the world, with you in mind, in each and every investment decision. 

On the next teleconference, I was invited to speak, along with two other financial advisors and two mentors, on a panel for newer advisors about how we are communicating with our clients. A common theme among us, we are all working as hard and as much as we can to keep you focused on plans and goals.  And to make sure you understand that we know how hard these kinds of periods are. All advisors agreed, these are the days we earn our keep. Our efforts during the volatile times matter to you the most. We all mentioned communicating in all the ways we know how. It may look like we are writing or talking a little too much, but self-isolating is very hard for helpers! 

As this call ended, I remembered how Janet and Jody finished their meeting earlier. Their closing comments were, “Never give up on the power of positivity and ingenuity in times when negativity abounds.” 

Janet stated, while the characteristics and nature of bear markets are always different, the similarities in all bear markets in history are that the problems were solved. The market recovered.

Jody ended the call by saying, “The best advice is to lean the opposite direction of the negativity.” I think I will post that on my computer screen! Don’t be surprised if you hear me repeat it once or twice or ten times over the next 20 years!

 

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Home Sweet Home

Be fearful when others are greedy and greedy when others are fearful.

                                                                                                                   Warren Buffett

In scary times, we tend to look to see how much have I lost? But did you know, you don’t lose anything unless you sell something when it’s down? Selling when values are down will lock in a loss, for sure. That minute. Forever.

Investors tend to focus on the bottom line. It’s natural with headlines screaming what went up and what went down. But planners know, the bottom line isn’t always what matters.

What matters most is what your investments can accomplish for you. What your investments can do for your lifestyle. The biggest fear shouldn’t be is the value or bottom-line going down.  The concern should always be am I invested in a way that I can always do the things I choose?  For most, if not all of our clients, they are investing for income…either now, or for later, or for those they love to have income. If your investments continue to give you the income or the lifestyle you desire now, does the bottom-line really matter?

Remember, you can think this way about every thing you own. If the housing market suddenly declines, but you still live in the neighborhood you want, in a comfortable place that is warm, dry and cozy, does it matter if housing prices are down? You are accomplishing what you want with this large investment. A nice place to live.

Back in the “olden days” or when Rhonda first started helping clients retire, she called it mailbox money because your investments sent you a check in the mail, month in and month out. Now the deposits go right to your bank account on the right day. Historically over time the bottom line grows. Not every year does it grow. And rarely like it did last year in 2019. And sometimes it does go down like it did in 2008. But over time it grows.

It zig-zags its way up, or at least it always has, if history is any guide…and really history is the only guide we have.  The average annual return for a conservative mix of stocks and bonds has been 8.8% a year for the last 30 years. March of 1990 to February of 2020. If you had started taking 5% income 30 years ago, and increased it by 3% each year for a cost of living increase, you would have income that grew by double what you started with AND your principal grew to 4 times what you started with. (Of course, past results are not a guarantee of future results.) But this conservative portfolio of half stocks and half bonds would have produced more income so when the light bill went up, or the grocery bill went up, or you planned a big trip or you had to buy a car, the mailbox money grew!  

But we know some of you will say but I don’t have 30 years. None of us comes with an expiration date stamped on the bottom of our foot. And everyday we meet with retirees talking about helping their parents (while helping their children). Life expectancy is increasing. The longer we live, the longer our parents live, the longer we are likely to live. Whether your lifetime is 30 days or 30 years, the rest of your life is what we call a long-term investment horizon.  And we know some of you will say, but the bad days were so bad. In this conservative investment, the worst was uncomfortable. But as long as you didn't sell when it was down, the decline didn't matter for the plan to work. but the worst was uncomfortable....down right scary. The bottom line was down 28%. Down from an exaggerated high. If you had $100,000 invested, the value was $72,000 at that scary bottom.  But you know what? The income was $416 a month. And the next year it was $428. And the next $441. and you get the idea....It took a little while (4 years) for $100,000 to be back to $100,000, but the mailbox  money came.  That's what the folks in the cozy, warm, dry house needed. The money to pay all the bills and still help their families and enjoy the lifestyle they dreamed and worked toward. 

Source: American Funds Hypothetical Illustration for American Balanced Fund March 1990 through February 2020.

 

 

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Time In the Markets is More Important than Timing

When we have volatile days, up or down, it’s easy to think the pendulum swing has begun and it will never stop. But if history has shown us anything, that is not the case. The pendulum swings both ways. And over time, the advances have far outlived the declines.

We recently shared an essay illustrating the importance of why we believe it is critically important to stay invested – through both the ups and the downs of the market. While today’s headlines may be filled with negative news, this essay shows how quickly things can change! Time in the market is far more important than trying to time the market ups and downs. (If you’d like a copy, send us a message, an email, or give us a call)

Remember, you own investments tailored around a financial plan built upon your own individual dreams and goals. While it’s never fun to see investments decline in the short-term, history has shown that staying invested has rewarded investors in the long run.

Your plan wasn’t created with just days, weeks, or months in mind. Your plan was created to help you reach your dreams and goals for years to come!  

Remember, we are here to help you stay focused on your plan! Give us a call if you need to talk things through!

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HEADLINES! HEADLINES! HEADLINES!

Or As Chicken Little Cried , “The Sky is Falling! The Sky is Falling!”

The headlines are terrible. They seem worse than they ever could be or ever have been! The world is going to “you know where” in a handbasket. Things couldn’t get much worse.  Or, they are going to get much worse week after next. (As the media would have us believe.)

But we are pretty sure if you all looked around at your family, your life, your work, your conveniences, you’d say in many ways things are better than we ever could have imagined!

In our opinion, the market has skyrocketed since October and has been looking for a reason to let off steam. And wouldn’t you know it? There are plenty of “reasons.”

The election…If he wins, life as we know it, is over. If she is nominated, life as we know it, is over. Whoever lives in power in Washington, D.C. runs the world and the other guy’s candidate is the Dark Force. Warren Buffett, the wisest investor the world has ever known, will tell you it doesn’t matter who lives in D.C. But what matters most is what consumers in Mississippi, Kansas, Paris, Mumbai, Rio and Moscow are doing! We wholeheartedly agree!

Health tragedies…Are sad realities for too many humans. But should we all stay inside?The headlines have us believing the Wuhan coronavirus is the next plague. Ebola was the last one. Before that, we had the swine flu. Before that, we had the bird flu. Before that, SARS. And remember the days when the world was collectively stockpiling antibiotics because of white powder mailed around the country? (We all have relatives that suffered terribly from illnesses or surgeries that, way back when, would have rivaled the plague! But think of the health advances that have improved the quality of life beyond measure.)

Does it feel really bad to you?  Does it feel like everything is terrible and nothing is going right? Then it might be time to turn off the television or at least change the channels. It’s human nature to feel this way with this kind of noise.

Our advice is to focus on what you can control and what you can do. Focus on who you can help and how. Focus on your family and your plans. And Pray. We are all going to be okay!

If you walk outside, and it feels like something other than the nonstop rain has dropped on your head, call us. We are here to help you understand what truly matters to your plan.

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All in the Family....YOURS and OURS

We are happy to introduce you to our newest team member, Leslie F. Richmond. And yes that F. is for Ferguson.  Did we expect to be working with a daughter, or a sister? Nope. But we are so excited to have her FINALLY join your financial planning family!

Leslie will serve as our Relationship/Communications manager. Her job will be to help us stay in touch with you, often!

This means knowing what’s important to you, now. It means keeping track of your personal milestones and accomplishments. Most of all, it means always being there when you need us.

Families like yours are why we do what we do. And who better to help you than a family. Whether it be a mother, grandmother, brother, son, sister or daughter, just like yours!  

Leslie comes to us with her Master of City and Regional Planning from the University of Memphis. In the fall, she realized her love for economic development/job creation and her love for city planning was very similar to financial planning. She wants to help those recipients of good jobs to reach their goals and dreams.  She finally understood the reasons why we love what we do! (We’ve been telling her since her undergraduate days at Mississippi State.)  

Leslie will call you soon, but in the meantime, if you have any questions, or if there is any thing we can do for you, please don’t hesitate to let us know. Thanks again letting our family be a part of your family!

 

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