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The threat of a recession continues to be one of the most pressing concerns for investors. Inflation has proved hard to restrain, and the Federal Reserve continues to raise interest rates. Disagreement on recession likelihood Whether the U.S. will fall into a recession is still uncertain, and a subject of debate amongst experts. According to a recent UCLA Anderson Forecast, the U.S. is not currently in a recession, and the chance…

You’re embracing the idea of a midlife gap year. You’re picturing the landscapes, culture, and bucket list experiences in your mind. But unattended business is holding you back from peak excitement. You need proper insurance in case something goes wrong. When you’re taking a career break it’s tempting to ignore that responsible voice in your head. But if you do, this thrilling chapter of your life will be written with unnecessary…

The stock market has been anything but stable recently. And unsurprisingly, that usually means our emotions haven’t been either. Financial freedom is tied to market performance, and when you start hearing about “down markets” or “recessions,” one question tends to come up in our nervous brains… Should I sell my stock? At its face it seems like a reasonable question. Afterall, if the market is headed for a prolonged downturn,…

Helping Ukraine is the primary focus of many right now, and you may be rushing to direct your charitable giving to the country and its people. You may also want to aid businesses, schools, and organizations trying to recover from COVID-19.  Maybe supporting weather-devastated areas razed from fires, earthquakes, and hurricanes is a top priority for you. Add in cause-driven and political contributions along with tithing to religious institutions, and…

Retirement contribution limits increase for 2022  Employees will be able to save more in 2022 with the IRS increases to retirement plan contribution limits. You can defer an additional $1,000 through payroll deduction in 2022.  This means you can contribute up to $20,500.  One way to accelerate your path to financial independence is to make sure you are taking advantage of the tax-deferred contributions and compounding growth available through your retirement plan(s).   Which of these…

Are you ahead of the game when it comes to achieving your financial independence? Has the unusually strong stock market boosted your wealth to the point where you think you could work less or stop working sooner than expected? Are you at a point where you are increasing your current or future lifestyle expectations? Maybe your experience is all of the above. If so, that’s an exciting feeling. The possibility…

What is one of your big life goals? What’s a wild dream you’d like to achieve? When you’re in the midst of peak busyness, you may feel you can’t go after what you desire. Not true! As we head into the last few months of 2021, now is the perfect time to reflect on what you want to accomplish, not only through the end of the year, but in 2022 and…

There has been a lot of talk lately about inflation, in great part because inflation has been so low for so long, but recently had a small spike.  Unfortunately, when inflation is low, investors tend to forget it is a “sleeper risk,” gradually eroding their purchasing power and lowering after-inflation returns. Below are thoughts to consider. Why does monetary policy matter when it comes to inflation? Historically, periods of major…

As you reach certain midlife milestones, you gain opportunities to save more money, whether through tax-deferred vehicles or identifying key expenses where you may be overpaying.  Business owners also have a chance to bounce back from what may have been a slower year in 2020 with some favorable tax rules.  Which of these options can you take advantage of this year? Delay tax payments Business owners who had a down…

Does money buy happiness?  Wealth and happiness are often paired together.  As you earn more income, invest more into the market, or reduce your debt, you likely feel more life satisfaction. This seems obvious, and many studies* prove this to be correct.  However, in a study conducted by researchers from UC, Riverside, a surprising factor emerged about how you can improve your overall feeling of well-being:  the amount of cash you have…

On election day, the narrow passage of Proposition 19 in California brought good news for some homeowners.  The new law allows homeowners who are over 55, or disabled, or victims of wildfires or other disasters to transfer the tax base of their primary residence to a replacement residence.  This expands on the current law which allows homeowners over 55 to retain their tax base within their own county or some reciprocal counties,…

  What if you had the recipe of life choices that could help you live longer, healthier, and happier? That is exactly what studies show happens in “Blue Zones,” parts of the world with unusually high numbers of happy centenarians. If you don’t live in a Blue Zone, you do not have to move.  You can strive to create your own Blue Dot right where you are.  Read on for some of…

Sometimes, WealthStep needs to change the investments (i.e. mutual funds) held within 401k plan portfolios, or WealthStep Direct (for individual investors outside of retirement plans) portfolios. Rebalancing and tax loss harvesting for taxable portfolios are ways to keep portfolios’ allocation in check and lower tax bills, but what happens when a specific investment manager of a mutual fund or other vehicles needs a change? How does WealthStep decide when to…

These past several weeks are a good reminder of the value of humility in facing something not seen before. There potential economic implications of COVID-19 are significant, and there are learnings from past crises, even if they were different. Back to basics It is very difficult, but especially important, to rely on fundamentals at times like this. The disruption that COVID-19 brought forces all people to get back to basics…

In the midst of the COVID-19 pandemic, the term rebalancing now extends past investment portfolios as we all rebalance our lives around staying at home, creatively social distancing, and protecting our health. It is a rebalancing act that people did not anticipate; we’re all learning lessons that will linger on once this crisis is behind us. The rebalancing that WealthStep does for 401k plans and “WealthStep Direct” individual clients, however, is…

To help businesses survive the coronavirus economy, the government is providing support. If are in or run a small business adversely affected by the coronavirus directly or indirectly, explore the recent CARES Act Paycheck Protection Program (PPP) forgivable loan, Disaster Loan (& grant) Assistance, or Employee Retention Credit program. The PPP started 4/3/20 for small businesses, and 4/10/20 for sole proprietorships and independent contractors. These programs expects high application volume,…

Gain perspective about the confluence of events affecting the markets, including the coronavirus. What are the drivers of current volatility? Where do markets and diversified portfolios stand now? How does this market compare to the many volatile markets in the past? See how bad markets have strong recoveries. See why panic is not an investment strategy. See how an even bigger drop would still leave investors with solid medium-term average…

It’s been a difficult week and a half for investors, as the uncertain trajectory of COVID-19 upset people’s sense of well-being, public health systems and the financial markets. Coronavirus and its economic fallout, coupled with the Saudi/Russia oil tension, have created a unique mix of anxiety that makes markets particularly volatile. No one can predict what will happen over the short term, but we have confidence, based on past experience,…

As if Gen X (now age 40 – 55) didn’t have enough to think about in midlife, they also need to be careful about including any expected inheritance in their retirement planning.  While there is much talk about a great transfer of wealth in America in the coming 25 years, with estimates anywhere from $30 – $65 Trillion, this estimate and its timing is by no means a sure thing….

Business owners, especially smaller employers, now have more incentives and options to offer retirement savings plan.  Individuals have additional opportunities to grow their retirement savings.  Signed in to law by the President on December 20, 2019, The SECURE Act (‘Setting Every Community Up for Retirement Enhancement”) brings the most significant pension reform in more than a decade.  The goal of the legislation is to promote retirement savings and affects both individual investors…

Preparing your workplace for a natural disaster is as critical as preparing your home, yet many businesses do not have an emergency plan in place.  In the Bay Area, earthquakes are a constant threat with no advanced warning, and the “new normal” of California fire season reminds us how devastating nature can be. Other regions have risks that are different but also dangerous. Whether or not the business and your…

How many generations does it typically take to wipe out family wealth, and what can you do about it? What is the impact of emotional investing on the average investor’s returns? How would the economies of all US 50 states rank if they were countries? How should Fiduciaries evaluate target date funds? Is a CEO economic confidence index up or down? How many months after an inverted yield curve does…

If you have children that plan to attend college, you have opportunities to make it easier to pay for college. And, if you happen to be a small business owner, one of the most favorable treatments for business owners is your ability to increase the amount of financial aid for which your child may qualify by lowering your “expected family contribution” (EFC).  The EFC is the baseline for calculating federal…

Most people are not investment experts, and don’t have the time, inclination or energy to research and design the right mix of investments for their personal portfolio. Yet, with daily hype from the media or the unsolicited advice of friends who invested in a winning stock, you may still experience FOMO with your investing.  This ‘fear of missing out’ on the most recent hot returns may cause you to make…

Is recent market volatility making you nervous? Perspective could help you stay calm and on track. Your financial journey is a lot like a car trip. On your route from point A to point B, while driving wisely, it is normal to experience stoplights, curvy roads, bad weather, or other elements that slow you down. A few times in your life, you might hit a pothole or nail that causes…

As we hit the 10-year anniversary, there are lessons to learn from the economic challenges and 2nd worst market in history, and subsequent recovery, that began a decade ago. 10 years is long enough that some people don’t even remember this major financial event, while others feel like they are still recovering, given that the economy’s recovery has been gradual, even though the market’s recovery has been strong… maybe a…

The Federal Reserve Bank’s Open Market Committee adjusts rates, down to stimulate the economy when needed, and up control inflation and prevent the economy from overheating during times of growth. In the first several years after the Great Recession, people thought little about rates. The Fed’s target rate fell to 0% late in 2008 and stayed at 0% for 7 years. Such extended periods of low rates is highly uncommon,…

Summer months are typically a quiet time for the markets. Recent events, however, may disrupt this tradition. Threats of escalating trade wars have cast a pall over equities, and numerous geopolitical uncertainties continue to push investors toward a more cautious stance. A desynchronization in global growth as well as a divergence in central banks’ monetary policies have contributed to U.S. dollar strength and wreaked havoc on emerging markets. Currencies of emerging…

After years of unusually low market volatility that hypnotized a large swath of investors into believing yet again that markets only rise, the market drops of the last 2 days are a healthy reminder that stock market fluctuations should be viewed as a normal part of investing. Don’t forget, as is the case with food, good nutrition isn’t always tasty, but is beneficial in the long run. Eat your Brussels sprouts! As disciplined institutional investor Warren Buffet wisely said a while back, “The stock market is a device to transfer wealth from the impatient to the patient.” So, the real question is… do you want to be in the panic (impatient) group? Or the profit (patient) group?

News articles to help you make better financial decisions. Topics include investor behavior, smart financial choices, investor pitfalls to avoid, and other topics.

2017: A Year of Records Macroeconomic Environment Another record low in volatility, more record highs in global stock markets, mixed records in global temperatures, a record number of natural disasters in the U.S., and many records associated with President Trump. The VIX Index, a widely used measure of expected stock market volatility, fell more than 20% in 2017, reaching an all-time low in November. Stock markets hit a number of…

Some time back, a fast food chain ran an advertising campaign featuring a study group of meat and cheese lovers.  In the ad, the facilitator explains company’s new burger, and one of the test attendees indicates that he’d rather only have the tastiest part of the meal when he answers “I like the meat and cheese part, but why a bun?” Investors also sometimes ask themselves “Why the bun?”, however the question…

After 8 years of positive market returns and increased uncertainty in politics, should you be more worried about market fluctuation risk? Is it “different this time” and should you be more conservative as an investor? It is common to feel nervous and have questions questions at this point in a market cycle and when the Oval Office has changed hands. It may make sense to make a change if you…

It’s a new year and president, and with that comes uncertainty and many opinions about the direction of the investment markets. What’s key to remember is that uncertainty is nothing new. Studies suggest that despite major political and economic events that can impact returns in unpredictable ways in the short-run, it’s better to keep stay away from the panic button if you want better long-term results. A recently updated Dalbar,…

Life would be less interesting if we knew how everything would turn out in advance. However, the same factor of the unknown that makes investment markets nervous is what makes investing attractive in the long-run. Unpredictability can cause asset prices to drop, but is also indirectly what pushes prices higher when good news occurs and fear diminishes. Over the last year, surprises included continued slow global growth, the first interest…

SUMMARY: The United Kingdom’s vote last week to leave the European Union has global significance, but it may take years to know the full impact. The U.K. is likely to feel long-term affects. In the short term, uncertainty about the degree of global ripple-effect makes investment markets nervous. Given tepid global economic growth, the medium-term stock market outlook that was already guarded before Brexit is a bit more so now,…

How many songs have you heard that include lyrics like “Here we go again” or “It happened again” or “I did it again”? There are many, because trials and tribulations in life are many. The best outcomes happen, however, when you push on through.

How often are monthly stock market returns negative? Is there a pattern within years or across years? How about the bond market? You may notice that short-term volatility is a fair price to pay… the longer the time period, the fewer the negative returns. In other words participation and patience pays. And, remember that inflation (i.e. purchasing power risk) is a bigger long-term risk than market volatility. Gain perspective from…

True or false?: All financial firms and professionals are required to act in your best interest, right? Answer: FALSE. Many have conflicts of interest, and biased “advice” damages results… A recent White House Council of Economic Advisers analysis estimate showed that conflicts of interest hurt affected investor accounts by ~1% each year. This amounts to around $17 billion annually. And since it is mostly related to fees and costs, it…

There are two very different standards of care, when it comes to financial professionals: “Fiduciary” (registered investment advisors, regulated by the SEC/Securities & Exchange Commission) and “suitability” (brokers, “self-regulated”). Below is a condensed version of a Washington Post article that summarize it well: Fiduciaries have a much stricter duty and legal obligation than do those who operate under suitability rules. Investors rarely come out on top when a self-regulating entity…

Corrections are more normal than often thought and should be inconsequential.  Bear markets, which are periods of more significant decline, should be surmountable if you have planned properly. Stock market “corrections,” defined as drops of 10% or more, are not more likely at the top of a market. Between the years 1900-2013, the Dow (DJIA) stock index dropped 10% or more about once a year.  Stocks do not maintain steady…

“Goin’ up, goin’ down, goin’ up-down-down-up… any way you want, let it roll” (song lyrics). Volatility has been low in the past few years. As measured by the VIX volatility index, market fluctuations are at the lowest level since before the global financial crisis. That doesn’t mean high volatility is immediately around the corner, but it is important to remember that smooth markets are not the norm. All investors should…

Are there clear patterns of investment market returns over time?  How does a “balanced” portfolio compare to individual asset classes over time?  Our chart entitled “The Periodic Table of Investment Returns – A Case for Diversification Amid Uncertainty” is a colorful illustration that addresses these questions. People are not naturally wired for investing.  Without discipline, it is human nature to make mental errors, often due to “recency bias” and the…

Consider focusing where you can make an impact, in terms of your life goals and financial goals. The simplicity of this diagram is profound.  The world around us is complex and full of “noise,” both statistical and theatrical (e.g. TV news, etc.).  The senses are bombarded with eye and ear-catching attempts to grab your attention.  The challenge is to remain focused on what counts. Insufficient focus leads to distraction and…

Market Volatility is the norm, not the exception.  Yearly, we provide an updated version of the enclosed Periodic Table of Investment Returns.  Given the recent global financial crisis and partial recovery market experience, the table is particularly timely, as it provides a broader perspective.  This chart is a powerful visual demonstration of the unpredictability of investment returns across major asset classes, and indirectly illustrates the importance of diversification, discipline, rebalancing…

Year-end is often a time of reflection and gratitude.  Recent events make that difficult, but not impossible… The Sandy Hook tragedy makes our hearts ache.  But, our hearts will not break, having seen the overwhelming response to the victims’ families and the possibility of the positive changes which may result from the experience.  WealthStep’s mission is to influence and facilitate positive changes in the lives of our clients and in…

Are you in the panic group or the profit group? Often times, the discomfort of sea or motion sickness can be avoided or reduced by keeping one’s eyes on the horizon. Similarly, keeping a long-term focus can reduce “emotion sickness” of the investor kind. Anticipating and managing such discomfort is paramount, because an investor’s ability to focus on the goal rather than on short-term disturbances can impact the timing and…

Instincts are sometimes critical for survival. If you experience fear of physical danger, your instinct may be what saves your life or the life of others. Before you’ve had time to think, fear triggers an automatic response that may cause you to run, duck, jump or fight. Unfortunately, an increasing number of behavioral finance studies show that instinct and investing often mix poorly. The human brain often responds to concern…

Who is on your side? Insightfully, when asked what his profession was in the 1979 film “Manhattan”, Woody Allen’s character responded, “I’m a stock broker. My job is to invest people’s money until it is all gone… I’m frequently wrong, but never uncertain.” Sadly, most investors still aren’t clear about the difference between securities salespeople, i.e. “brokers” or commission-based or fee-based “advisors” (i.e. accepts fees AND commissions, unlike fee-only advisors),…

To start the new year, let’s take a look back at 2010 from an investment perspective. For the second year in a row, stock markets rose more than the historical averages. Bonds were also positive for the year. Discipline was again important… 8 months into the year the S&P 500 Index was down 5.8%, but later surged to a 15.1% gain for the year, recouping all of its losses since…

After feeling some recovery related relief after the market bottom in March, 2009, the bumpy last few months are making some investors nervous. Such recovery related dips, however, are not inconsistent with previous strong markets. There have been 11 bull markets since 1945, and during those markets there was a correction of 10% on average, in the 11th month of those recovery markets (this recent correction occurred in the 14th…

“The years teach much which the days never know” – Ralph Waldo Emerson. In the past 18 months we have witnessed the worst crisis for the global financial system since the Great Depression, the steepest stock market decline since World War II, the biggest cut in dividend payments since the 1930s, and the fastest stock market surge in 70 years. Many of the “talking heads” incorrectly predicted the beginning of…

During this Global Financial Crisis or “Great Recession,” the foundations of Wall Street and the global financial system were shaken by the collapse of Lehman Brothers, the vanishing of Merrill Lynch as an independent entity, and the take-over of AIG by the government, amongst other events. Roughly six months ago, on March 9th when the Dow Jones Industrial closed at 6,547, the press and average investor felt as if the…

That’s one “mean reversion!” If historical 10-year average cycles are any predictor, now is not the time to abandon long-term strategies (see chart). The response to excess in the form of the dot-com-bomb and the credit-crunch-chaos caused the last 10 years to be one of the worst in U.S. history. However, notice that weak 10-year periods always overshoot the mean, and are often followed by strong recoveries (i.e. your friend,…

It has been said that pilots are paid for “takeoffs” and “landings.” The recent “Miracle on the Hudson” is a reminder of the value of proper process and guidance during freak-events. A flock of birds flew into a jetliner’s engines rendering the engines useless, but a pilot with a lifetime focus on risk management successfully landed the plane in the Hudson River. It was a frightening, and there were minor…

The Bear market has officially arrived, as measured by S&P 500 dropping 20% from its peak. There have been 31 bear markets since 1900, averaging one every 3 or 4 years. According to Standard and Poor’s Equity Research, we have experienced nine bear markets since 1956. They have varied in magnitude from the decline of 20% in 1990 to the drop of 48% in 1973-1974 to the plunge of 49%…

Market volatility is the norm, not the exception. Clear patterns seem to appear… and then disappear. The “Periodic Table of Investment Returns” illustrates this well, and a strategic approach to investing ensures that investors benefit from the best returning asset classes, while avoiding over-exposure to the worst performing asset classes. The key message is that a diversified portfolio approach will combine many or all of these and other asset classes (as…

A process for best-thinking. WealthStep’s purpose is to positively impact lives and the goal achievement of our Clients, with a special focus on people who can’t access or don’t yet want a full-service advisor. To keep our clients’ lives simpler, we conduct a broad set of investment research and monitoring “under the hood” on your behalf. Just to name a few elements of our process, we oversee your accounts, monitor…

Recent volatility has made some investors nervous. However, the recent Dalbar study update is a reminder of the long-term opportunity cost of emotional investing: The S&P 500 Index’s average annualized return over the last 20 years was 11.9%, while the average equity mutual fund investor’s return was just 3.9%. This equates to a loss of 8% per year over 20 years, due to emotional investing, and illustrates the value of…