Investments 101

We’re bringing you another webinar that is part of our ongoing series to help you build Your Financial Success Matrix. Previously, we talked about one of the staples of any financial planning foundation - the emergency fund.

This week, we’re talking the basics of investing. No matter how sophisticated of an investor you are, you’ll get a lot out of this topic. How would you define a stock and a bond? What are some common risk-return trade offs? What does it take to realize investing success? There is no free lunch…we’ll help you unpack all of this in Investments 101.

Financial Planning Foundations - Emergency Fund

As part of our bi-weekly webinar series, we’ll be speaking to you about three main topic areas: 1) financial planning foundations, 2) investments and 3), advanced planning.

In this webinar, we start with the basics - each financial plan must be built on a strong foundation, and an important part of that foundation is an emergency fund. Learn the why, what and how, and understand why it’s not a one-size-fits-all model.

Note: while we have been Zoom users for quite some time, we’re still adjusting to technology for recording and playback. We had some technical difficulties and unfortunately, the first few minutes of the webinar were cut off. However, much of it was captured, and we’re a phone call away for any of your questions!

Click here to view our prior webinar - Uncertain Times - where we discuss fear and volatility in the markets and what you should do about it.

Our next webinar is April 13 at 12:00 p.m. EST. Please let us know if you would like to attend.

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Baer Facts Friday - March 20

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We’ve put together an enhanced communication strategy to keep you up-to-date on all you need to know. It will include one update each Friday and two webinars each month. That way, you won’t have to expend as much time and energy throughout the week…you have many other important things to focus on! However, we’re always here for you whenever you need, 7 days a week.

Our best advice this week comes from Lisa - spend this weekend disconnecting from devices and distractions; devote yourself to spending quality time with your family and loved ones.

Uncertain Times

COVID-19 (coronavirus) is impacting people and markets in significant ways. Markets globally continue to be under stress and volatile. More importantly, the health of many people in the US and abroad is at risk. These are uncertain times that have understandably caused anxiousness for many. Below is a recording of our update from March 16, 2020.

SHIFT Conference

Last week, I attended the 2020 SHIFT Childcare Leaders Conference in Miami, Florida - hosted by HINGE Brokers. If you haven’t been, you’re missing out!

I also had the honor of presenting during one of the breakout sessions. We talked about how there can and should be harmony in providing exceptional education and having a prosperous and successful business.

This group of 300 people from around the country was simply amazing! Here’s a recap of some of my top takeaways.

2019 Annual Market Review

Equity markets around the globe posted positive returns in 2019. Looking at broad market indices, the US outperformed non-US developed and emerging markets for the year.  (Though that doesn’t mean countries like Greece and Switzerland didn’t outperform the US, individually.)

Interest rates generally decreased in the US Treasury market and global markets during 2019. In terms of total returns, short-term corporate bonds gained 6.99%. Intermediate corporate bonds had a total return of 10.14%.

The Market Has No Memory

Note: This article was published by David Booth, Executive Chairman and Founder of Dimensional Fund Advisors. The original article can be found here.

I have worked in finance for over 50 years, and it seems that every January the same thing happens. Lots of folks look back at last year’s performance to draw conclusions they can use to predict what markets will do in the year to come. I don’t make predictions, but I do think it’s worth answering this question: What are the lessons from 2019 that we can apply to 2020?

Let’s go back to where we were this time last year. The words running across CNBC’s home page were, “US stocks post worst year in a decade as the S&P 500 falls more than 6% in 2018.” The Wall Street Journal summarized the state of market affairs with this headline: “U.S. Indexes Close with Worst Yearly Losses Since 2008.” Amidst gloomy predictions for 2019, I posted a video on the limitations of forecasting.

Things felt ominous. We started the year with a lot of anxious people. Some decided to get out of the market and wait for prices to go down. They thought that after 11 years, the bull market was finally on its way out. They decided to time the market.

We all know what happened. Global equity markets finished the year up more than 25%1, and fixed income gained more than 8%.2

Missing out on big growth has as much impact on a portfolio as losing that amount. How long does it take to make that kind of loss back? And how is someone who got out supposed to know when to get back in?

The lesson from 2019 is: The market has no memory. Don’t time the market in 2020. Don’t try to figure out when to get in and when to get out—you’d have to be right twice. Instead, figure out how much of your portfolio you’re comfortable investing in equities over the long-term so you can capture the ups and ride out the downs. A trusted professional can help you make this determination, as well as prepare you to stay invested during times of uncertainty.

Not enough “experts” subscribe to this point of view. They’re still trying to predict the future. You’ve probably heard the saying, “The definition of insanity is doing the same thing over and over again and expecting a different result.” I’ve been seeing people make this same mistake for 50 years.

We’ll never know when the best time to get into the market is because we can’t predict the future. And if you think about it, that makes sense. If the market’s doing its job, prices ought to be set at a level where you experience anxiety. It’s unrealistic to think the market would ever offer an obvious time to “get in.” If it did, there would be no risk and no reward.

So what should you do in 2020? Keep in mind 2019’s most important lesson (which is the same lesson from every year before): Stay a long-term investor in a broadly diversified portfolio. Reduce your anxiety by accepting the market’s inevitable ups and downs. Make sure the people advising you align with your perspective. Stop trying to time the markets, and you’ll find you have more time to do the stuff you love to do.

Here’s Why You May Need to Update Your Estate Plan

Estate planning—the process for how you transfer your wealth to heirs and others—can be very important for anyone who wants to be certain that their loved ones are adequately provided for and taken care of. When done well, estate planning aims both to allow you to pass on your assets as you see fit, and to minimize the state and federal tax bite that often accompanies the transfer of significant wealth.

Even if you are not subject to estate taxes or don’t have family, estate planning can potentially enable you to decide which people and charitable organizations will receive your wealth at your death. Failing to plan can mean that you will let the government make those decisions—and we find that few people are fond of that choice!

But if you think that your current estate plan is up to those tasks, you might want to think again. Here’s why your estate plan may need to be refreshed.

Most estate plans are old—and potentially outdated

First, some good news: Eight out of ten affluent individuals (those with investable assets of $500,000 or more) in one survey by AES Nation had some sort of estate plan in place.

Here’s the less sanguine news: Even if you have an estate plan, you may not be nearly as well prepared as you think you are for transferring wealth according to your wishes. That’s because more than half of the estate plans these affluent individuals have in place are more than three years old.

Here’s why that’s a big deal—one that should raise a red flag that your plan could be outdated:

·        Continual changes in tax laws mean that older estate plans may not take full advantage of current opportunities to transfer assets optimally.*

·        Tax law changes also could mean that some aspects of an older estate plan are no longer effective.*

·        Changes in your wealth status mean that your estate plan may no longer accurately reflect your financial situation—and your future needs and goals.

·        Changes in your personal and family situation may make your estate plan ineffective in accomplishing what you actually want it to do given those changes.

* A tax professional should be consulted on all tax-related issues.

Estate Planning Uncertainty Abounds For Many

In order to attain the greatest benefits from estate planning, it’s a good idea to stay on top of your plan and revise it when appropriate—especially when new events occur that potentially affect your wealth.

Having an old estate plan can potentially create uncertainty in a key area of managing your wealth. Example: The vast majority of individuals—71.4 percent—with estate plans that were three or more years old said they did not know whether their plan would deliver the results they wanted, according to AES Nation. Just 17 percent of this group said they were confident their plan would deliver the results they wanted. And a little more than 10 percent said it would not perform as desired.

In contrast, an updated plan can potentially provide a sense of confidence. Consider the individuals with plans that were less than three years old: Nearly half said they knew their plan would deliver the results they want. About 15 percent said that their plan needs to be revised because it would not deliver the desired results. Fewer than 40 percent did not know or were unsure about how their plan would perform.

Those results are much better than the results of the group with the older plans—but the AES Nation data shows that a large percentage of people from both groups are uncertain about the effectiveness of their plan. 

Next steps to consider

The messages from these findings that should be considered are:

·        Have an estate plan in place if you want a say in where your wealth goes after you’re gone.

·        Don’t let your plan gather dust in a binder, folder or drawer (or in the cloud, for that matter).

Your next step: If you already have an estate plan set up, you might want to stress test it to see if it is still positioned to achieve your specific wealth transfer goals (especially given some of the tax law changes in recent years). By stress testing the plan, you can assess the outcomes it would likely deliver under various scenarios that could potentially occur. Many families regularly use stress testing to evaluate their existing strategies as well as strategies they are considering implementing.*

*A tax professional should be consulted on all tax-related issues.

ACKNOWLEDGMENT: This article was published by the VFO Inner Circle, a global financial concierge group working with affluent individuals and families and is distributed with its permission. Copyright 2019 by AES Nation, LLC. This report is intended to be used for educational purposes only and does not constitute a solicitation to purchase any security or advisory services.

Market Review - Q3 2019

“Timing markets is the dream of everybody. Suppose I could verify that I’m a .700 hitter in calling market turns. That’s pretty good; you’d hire me right away. But to be a good market timer, you’ve got to do it twice. What if the chances of me getting it right were independent each time? They’re not. But if they were, that’s 0.7 times 0.7. That’s less than 50-50. So, market timing is horribly difficult to do.”

How Playing the Long Game Could Help Build Wealth and Success

Many extremely wealthy people have a much better handle than others on a key concept of success: the long game.

The long game means having a concrete vision of your ideal future down the road—years or even decades from now—and taking specific, carefully considered action steps at every stage along the way to maximize your ability to get there.

Unfortunately, we find that most people don’t effectively plot out their financial futures, or lay out a clear and actionable path to follow. As a result, people often come up with scenarios that are as unrealistic as they are attractive—fantasies that stand little chance of becoming reality.

The upshot: It’s probably time to honestly assess how well you’re doing at both creating a detailed vision of your ideal long-term future and acting in ways that consistently move you toward that result. That’s true whether you’re trying to get wealthier through investing, earn a higher salary or retire on your terms.

These guidelines can help you get on track!

Start at the End

Always work backward from your desired end result. This big-picture thinking starts with creating a vision of the ideal future you want (for yourself, your family and so on). Vision—a term some find to be New Agey—is a powerful tool that can be used to motivate, unify and inspire. As you develop a vision for your future, you start to gain an understanding of why you do what you do. Such clarity can be extremely motivational.

Well-conceptualized end goals have a number of benefits, including:

  • Keeping you highly motivated

  • Helping you concentrate your actions productively

  • Helping you focus on the processes and activities that really matter and avoid distractions

  • Helping you stay on the path as times get hard

Next, think about the specific obstacles that could prevent you from reaching those specific goals. Say you’re a business owner. Specific hurdles that might get in the way of your target revenue or valuation goals might include outdated systems you have in place. Or perhaps you have a goal of building your retirement dream home in another state. Your obstacles might include a lack of adequate wealth or liquidity, or even health-related challenges. The things that seem to oppose our goals are actually the raw materials for achieving them. Thinking about obstacles in this way is extremely liberating. If your obstacles are closely tied to the results you said you wanted to achieve, you suddenly have the keys to overcoming them.

PLOT OUT INTERMEDIATE GOALS AND PLANS

As part of your long-game path to your end goal, you will need to specify intermediate goals. These are stepping-stones on your way to the end goals. You’ll also need to delineate well-thought-out plans that will enable you to achieve the intermediate goals that push you toward your end goal. In short:

Intermediate Goals + Thoughtful Plans = End Goals

Example: If you want to become seriously wealthy, you need to specify exactly what that means to you. It might be a net worth of $10 million or $20 million (or much more). This is your financial end goal.

Now, you need to determine how you are going to get there. One possibility is to establish and grow a business. A successful business then becomes an intermediate goal. There also may be other intermediate goals (such as finding and working with a high-caliber wealth manager) that will help you accomplish your financial end goal.

Execute your plan

Perhaps the biggest challenge of playing the long game well is execution. But face it: You’ve got to act on your plan or you’ll make no progress.

Set specific goals and milestones to begin the work of making your vision a reality. Choose the broad strategies you will use to reach each goal. Identify the tactics for implementing each strategy. Once these tactics are clear, decide on actions to execute each tactic. Ensure that each action is specific and achievable, and set a target date for completion.

The importance of perseverance

Perseverance is central to a good long game. As with most meaningful and large-scale endeavors, great results are unlikely to happen quickly. You need to be willing and able to stay the course for quite some time, as most successes are built on incremental achievements—that is, on attaining your intermediate goals.

Of course, life has a way of pulling us in all sorts of directions. Perseverance becomes much easier and more productive when you keep your end goals, your intermediate goals and the plans to get there top of mind. Doing so can help you avoid being overwhelmed by immediate circumstances.

Remain flexible

The advice that you should stay on track and persevere through challenges comes with one big caveat: You can’t be rigidly locked into a plan. Flexibility is vital as you navigate inevitable changes in your life and the world at large that impact your vision, your goals and your course of action. But to constructively adapt, you need clear goals and the processes to achieve those goals. Without them, you risk overreacting to challenges and veering too far off your desired course.

A road and a road map

In the end, long-game planning builds a bridge that links where you are today to where you want to be down the road. To get the most out of your efforts, remember a few key tenets of success—start with the end in mind, develop intermediate goals that propel you forward and execute with focus. With these ideas and your self-created road map to guide you, you can put yourself on the road to an ideal future. 

ACKNOWLEDGMENT: This article was published by the VFO Inner Circle, a global financial concierge group working with affluent individuals and families and is distributed with its permission. Copyright 2019 by AES Nation, LLC. This report is intended to be used for educational purposes only and does not constitute a solicitation to purchase any security or advisory services.