Portfolio Matters Q1 2018 – Reframing Volatility & Risk

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“The Return of Volatility.” “Volatility Is Back With A Vengeance.” These are some of the headlines recapping the first quarter of 2018. Many of them
discuss volatility and risk interchangeably, as though they were both the same … but they’re not.

Risk and volatility are different, and we intend to set the record straight. In this issue of Portfolio Matters, we cover the first quarter’s risks and volatility that was (and wasn’t) witnessed in markets, and provide investors some clarity on thinking about the two individually and separately…read more.

If you read the Wall Street Journal or Barron’s Magazine this last week, you will see that Barron’s listed Joseph J. Janiczek of Janiczek Wealth Management in its 2018 listing of top advisors in the nation.

This represents the fifth year in a row we made this prestigious list, adding to our tradition of making many top investment and wealth management lists and/or rankings going all the way back to 2001.

 

This latest award adds to top advisor lists published in or by:

  • The Wall Street Journal
  • Barron’s Magazine
  • Financial Times
  • AdvisoryHQ
  • Worth Magazine
  • Mutual Funds Magazine
  • NAPFA

Janiczek® Wealth Management specializes in serving high net worth investors (portfolios $1.5 million to $20-million) and ultra-high net worth investors (portfolios $20-million+). The firm is a pioneer in Evidence Based Investing (EBI), Strength Based Wealth Management® (SBWM) and in fiduciary (legally need to do what is in best interest of clients), fee-only (no sales of products or commissions earned), full-disclosure (no undisclosed arrangements) and full-breadth (EBI and SBWM together is our full breadth solution) investment and wealth management services.

Mr. Janiczek, our Founding Partner, has been awarded the patent on Systems and Methods for Optimizing Wealth and is the author of Absolute Financial Freedom (which was named Best Business/Finance Book of the Year by CIPA in 2001), Investing from a Position of Strength and co-author (with Tony Jeary) of Family Wealth: Being Strategic about Your Family Legacy.

To begin exploring how our expertise and proprietary services can assist you, call us at 303-721-7000. Cathy Wegner, our Director of New Client Engagements will be glad to begin the conversation and, if appropriate, arrange a conversation or meeting with one of our advisors.

*Sources: Barron’s March 2018, 2017, 2016, 2015, 2014; Advisory HQ 2018, 2017, 2016; Financial Times June 2017, 2015; Five Star Professional November 2016, 2015, 2014, 2013, Mutual Funds Magazine January 2001; NABCAP September 2010, 2011, 2013; Worth Magazine July 2002, January 2004, October 2004, October 2008; Wealth & Finance International, October 2014, CIPA, 2001.

*Disclosure: Rankings and/or recognition by unaffiliated rating services and/or publications should not be construed by a client or prospective client as a guarantee that he/she will experience a certain level of results if Janiczek Wealth Management is engaged, or continues to be engaged, to provide investment advisory services, nor should it be construed as a current or past endorsement of Janiczek Wealth Management by any of its clients. Rankings published by magazines, and others, generally base their selections exclusively on information prepared and/or submitted by the recognized adviser.

Tax season is in full swing, and it can bring some uneasy thoughts.  “How much will I get back?”  “How much will I owe?”  “Am I forgetting anything?”  “What can I expect next year?”

In a recent team meeting, one of our firm’s partners shared a question from a client that’s often not heard, “Why is my tax bill so low?!”

This client had been taking significant IRA distributions since the beginning of retirement as they had settled into a routine of travel and other retirement leisure.  Of course, IRA distributions are generally going to be taxed as income, and the client became accustomed to paying a steady tax bill each year.  In recent years, their travel slowed and their expenses correspondingly decreased, but their regular withdrawals had not.

During a meeting with us last year reviewing their financial plan, this client shared their updated spending with us.  As our team reviewed the numbers, it was clear that they were taking far more than they needed even after accounting for required minimum distributions (RMDs) from their IRAs.

With less travel spending and a bloated checking account balance, our team updated the client’s plan and made the simple recommendation of reducing distributions to align with their current expenses.  Specifically, reducing the excess withdrawals (above RMDs) from the IRAs lowered the client’s taxable income.

As the client filed their tax return, they were pleasantly surprised to find their tax bill is far lower: $20,000 lower!

This seeming simple tweak just illustrates the power of having a system, structure, discipline, and support in managing your wealth, and this example is just the tip of the iceberg.  Life happens, and circumstances change.  When is the last time you reviewed your situation to ensure your financial plan is still serving your needs?

Janiczek® Wealth Management is pleased to announce we have once again been named among the TOP RANKED WEALTH MANAGERS IN DENVER COLORADO by AdvisoryHQ. This ranking adds to a long list accolades going as far back as 2001 and as recent as 2018, including:

  • Barron’s
  • Financial Times
  • AdvisoryHQ
  • Worth Magazine
  • Mutual Funds Magazine
  • NAPFA
  • CIPA (best Business/Finance Book of the Year)

Janiczek® Wealth Management specializes in serving high net worth investors (portfolios $1.5 million to $20-million) and ultra-high net worth investors (portfolios $20-million+). The firm is a pioneer in Evidence Based Investing (EBI), Strength Based Wealth Management® (SBWM) and in fiduciary (legally need to do what is in best interest of clients), fee-only (no sales of products or commissions earned), full-disclosure (no undisclosed arrangements) and full-breadth (EBI and SBWM together is our full breadth solution) investment and wealth management services.

Mr. Janiczek, our Founding Partner, has been awarded the patent on Systems and Methods for Optimizing Wealth and is the author of Absolute Financial Freedom, Investing from a Position of Strength and co-author (with Tony Jeary) of Family Wealth: Being Strategic about Your Family Legacy.

To begin exploring how our expertise and proprietary services can assist you, call us at 303-721-7000. Cathy Wegner, our Director of New Client Engagements will be glad to begin the conversation and, if appropriate, arrange a conversation or meeting with one of our advisors.

 

*Sources: Barron’s March 2018, 2017, 2016, 2015, 2014; Advisory HQ 2018, 2017, 2016; Financial Times June 2017, 2015; Five Star Professional November 2016, 2015, 2014, 2013, Mutual Funds Magazine January 2001; NABCAP September 2010, 2011, 2013; Worth Magazine July 2002, January 2004, October 2004, October 2008; Wealth & Finance International, October 2014, CIPA, 2001.

*Disclosure: Rankings and/or recognition by unaffiliated rating services and/or publications should not be construed by a client or prospective client as a guarantee that he/she will experience a certain level of results if Janiczek Wealth Management is engaged, or continues to be engaged, to provide investment advisory services, nor should it be construed as a current or past endorsement of Janiczek Wealth Management by any of its clients. Rankings published by magazines, and others, generally base their selections exclusively on information prepared and/or submitted by the recognized adviser.

 

What separates the ordinary from the extraordinary? I believe consistently doing the best with what you have with daily choices and actions. In a word: habits!

When you use the power of choice and habit, outside forces play a secondary role. It doesn’t matter how educated you are, what occupation you choose, how much you earn or who you know. What does matter is what you do with what you have today.

Habits Make the Difference

For instance, take Gladys Holm who, as a secretary, earned no more than $15,000 a year throughout her life. Yet she left $18 million dollars to a hospital for heart disease research when she passed away! Gladys had the opportunity to invest in her employers’ stock over her career and she did. She also had the opportunity to invest in other stocks (like all of us do) and she did. She had the opportunity to participate in her employer’s stock option plan and did. Notice the trend… she had many opportunities and took advantage of each one to the degree she could with her modest salary. She became known for driving her fire-engine red Cadillac and delivering teddy bears to children at a local hospital in her Chicago neighborhood.

You might need to evaluate your comfort zone to see if it is holding you back!

As a practicing financial advisors who conduct hundreds of financial review meetings a year, we can say with authority that financial stagnation in some form hinders most people.

Financial stagnation is a state of impaired action – when you are stuck in an inactive state due to some fear, conflict, or mental block. A classic example is avoiding participating in the stock market for fear of losing money while simultaneously feeling stressed about dismal bond or money market returns. Another classic example is delaying to create or update your estate plan, even though you are exposed to more taxation than necessary or have family members who would suffer the consequences of an unoptimized or incomplete plan.  Financial stagnation may be isolated to one financial domain, such as investments or estate planning, or may be present across many financial domains.

I have witnessed how exciting it can be when people plagued by inaction for 10 years or more make more progress in one year than they did in the previous decade by confronting the root cause(s) of their stagnation. You will feel tremendous relief and personal satisfaction by identifying and confronting the causes of any financial stagnation you are experiencing.

Lifelong learning.  It’s a core belief here at our firm, and we regularly read across a variety of topics.  I recently asked the team to share any of their favorite books from the past year, business or otherwise.  Below is what we’d offer up as our recommendations from 2017, and if you have any good book recommendations from the last year, please let us know!

Brady Siegrist

As my clients know, planning for the future eventually includes a conversation about mortality.  When Breath Becomes Air by Paul Kalanithi is a powerful memoir that tackles this topic to its core.  This story made me reflect on how the human spirit allows us to re-imagine a new future that includes hope, faith, love and joy – no matter what the circumstances and regardless of the uncertainty. There is so much about this story that lingers, leaving each reader a new set of ideas, and most likely questions, that will, no doubt, leave you changed.

 

Carole McKeown

My favorite book of 2017 was The Obsession by Nora Roberts.  While Nora Roberts is probably better known as a romance writer, her last several books are more mystery/thriller types that appeal to me.  This story is a mystery about woman who (as a child) discovered her dad was a serial killer.  Fast forward to her adulthood and she is being stalked by a serial killer who is mimicking her father’s style.  The setting is the islands of Puget Sound, and I liked the story and flow of the book.

 

 

Kyle Kersting

I thought Principles by Ray Dalio was a great read not just from a business perspective (Dalio founded what is now the world’s largest hedge fund), but also life principles. Obliviously he has been vastly successful in the business world, but he also shares valuable thoughts on how he lives his own life, and I think most would take something meaningful away from this book.  As Dalio writes, “Time is like a river that carries us forward into encounters with reality that require us to make decisions. We can’t stop our movement down this river and we can’t avoid those encounters. We can only approach them in the best possible way.”  Good stuff!

 

Joseph Janiczek

This year, I re-read The Power of TED by David Emerald because it provides great guidance on how to best interact with others in more effective ways. It explains the undesirable roles and techniques we often find ourselves in and provides an empowering alternative. For anyone who wants to lead, manage, coach, parent or help others with greater impact and results, this book is for you.

 

 

Matt Gray

One that caught my attention earlier this year and challenged many of my longstanding beliefs was Predictably Irrational by Dan Ariely. It’s a book about human behavior and how we consistently act irrationally. So consistent, in fact, our irrational behavior is predictable. Many of his illustrations point out the ways we repeatedly act irrationally in every day behavior and makes the reader much more conscious of these actions.

 

 

Jim Callahan

The most common question clients ask me in meetings these days is, “When will this run end, and how bad will the downturn be?”  Published in 2008, “The Great Depression: A Diary” is part history and part finance that offers some perspective for today’s environment.  Authored by a young attorney who was fascinated with the 1929 stock market crash, this story offers an in-the-trenches account of the ugliest recession our country has ever faced.  My takeaways include not only the changes in our economy and markets since the 1930s that will help prevent another 10-year depression, but also the things that remain the same, such as fear, greed, and the folly of relying on predictions in managing one’s money.

 

Are you making up your plan as you go along?

Powerful changes in today’s world are empowering individuals and consumers like no other time in history. But as our employment, political and social circles rapidly change, we seek ways to cope, survive and thrive under these new circumstances. While providing tremendous opportunities on one end, they challenge our beliefs and security blankets on the other. These changes can at first seem alarming because they not only allow us to be our best but actually demand us to be our best. How do we handle all of this change? What do we do?

The turbulence of our times demands strong finances and habits that can be effective in all economic climates. With the breakdown of employment security, it is a dangerous moment in history not to have our finances in tip-top shape. To face the future with poor financial flexibility and stamina creates a severe disadvantage. Therefore, the economic and job stability we cannot find in the outside world must be created within our own personal finances.

While the S&P 500 remained near its all-time high, the recent massive selloff in the technology sector went mostly unnoticed. But for investors who follow the so-called “FANG” stocks (Facebook, Amazon, Netflix, Google) the hit was painful: About $60 billion in value was wiped out in just one afternoon, representing the largest selloff in nearly 2 years.

The wipeout was a function of just how big these companies have become and the position they are in with new tax reform looming. Tech companies are expected to receive little benefit given its already-low average tax rate of 18.5% (below the 20% proposed rate).

This has caused investors to rotate out of the tech stocks and into the financial services sector, which stands to benefit more from a corporate tax rate that would drop from the current 35% to 20%.

Interestingly, the S&P 500 was relatively unaffected while this rotation into financials and out of tech ensued.  The index’s volatility actually remained low, as did correlations among the S&P 500’s member stocks.

In other words, the diversity offered by the S&P 500 Index allowed for the index too remain relatively unscathed by the trading within the tech and financial sectors, a key reminder to investors that having proper exposure across the markets continues to be important with the S&P 500 near its all-time high.

 

What Are Your Own Possibilities?

You can't take it with youSometimes, the pursuit of wealth can leave a void in our lives—a place left empty because we lacked the energy or time to pursue a dream. There is a saying: “Wealth is not an end, it is a means to an end.” The problem is that the complexity of creating wealth and the subsequent financial planning often gets in the way of seeing and pursuing an end truly aligned with your highest purpose in life.

My life’s work has been focused on this critical unmet need. I hope to help people see the possibilities that open up once you escape from the chaos and confusion that characterize so much of the wealth management field today. I absolutely know it is possible to put a large portion of wealth management on automatic; I have built the system, structure, support and discipline to achieve this; and I’ve seen how using these benefits helps people define and achieve their highest ambitions. This approach is both effective and rewarding.

Clients are surprised sometimes when I ask them about their higher purpose and possibilities. It is not that they feel I’m prying; they just don’t expect an advisor to be concerned with such matters. I tell them that these are the most important questions for them to consider when it comes to financial planning.


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IMPORTANT DISCLOSURE INFORMATION
Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken Janiczek Welath Management -Janiczek”), or any non-investment related content, made reference to directly or indirectly in this blog will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from Janiczek. Please remember that if you are a Janiczek client, it remains your responsibility to advise Janiczek, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. Janiczek is neither a law firm nor a certified public accounting firm and no portion of the blog content should be construed as legal or accounting advice. A copy of the Janiczek’s current written disclosure Brochure discussing our advisory services and fees is available for review upon request. Please Note: Janiczek does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to Janiczek’s web site or blog or incorporated herein, and takes no responsibility for any such content. All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly.

*Ranked/Named among Top, Best and Most Exclusive Advisors sources: Barron's March 2016, 2015, 2014; Advisory HQ March 2016; Financial Times June 2015; Five Star Professional November 2015, 2013, 2012,2011, 2010, 2009; Mutual Funds Magazine January 2001; NABCAP September 2010, 2011, 2013; Worth Magazine July 2002, January 2004, October 2004, October 2008; Wealth & Finance International, October 2014. Rankings and/or recognition by unaffiliated rating services and/or publications should not be construed by a client or prospective client as a guarantee that he/she will experience a certain level of results if Janiczek Wealth Management is engaged, or continues to be engaged, to provide investment advisory services, nor should it be construed as a current or past endorsement of Janiczek Wealth Management by any of its clients. Rankings published by magazines, and others, generally base their selections exclusively on information prepared and/or submitted by the recognized adviser.

Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Janiczek Wealth Management), or any non-investment related content, made reference to directly or indirectly on this website will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this website serves as the receipt of, or as a substitute for, personalized investment advice from Janiczek Wealth Management To the extent that a viewer has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. Janiczek Wealth Management is neither a law firm nor a certified public accounting firm and no portion of the website content should be construed as legal or accounting advice. If you are a Janiczek Wealth Management client, please remember to contact Janiczek Wealth Management, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services. A copy of the Janiczek Wealth Management current written disclosure statement discussing our advisory services and fees is available upon request.

TM & Copyright 2017, Janiczek Wealth Management. All rights reserved.