I’m not sure Yogi Berra is big source of investment knowledge for most investors. But, that doesn’t mean his words of wisdom, “déjà vu all over again,” don’t apply.
Today’s Wall Street Journal included an article titled, “Value Investors Face Existential Crisis After Long Market Rally.” It discussed the “rut” that value investing has experienced since 2009. No arguments there. Value stocks are down about 1% year-to-date while growth stocks are up nearly 8%. The tech-heavy NASDAQ Composite Index, which holds many of the favorite tech names among growth investors, is at its all-time high.
A Familiar Scenario
But as I sipped my morning coffee and read further, I didn’t ask myself how we should change our current value approach (for the portion of our portfolios dedicated to value investing) to match the current environment. Instead, I found myself thinking about earlier in my career, the late 1990s. Tech ruled the day from 1995 through 1999, and value investors lagged back then too.
“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
- Worth Magazine
- Mutual Funds Magazine
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.
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:
- Financial Times
- Worth Magazine
- Mutual Funds Magazine
- CIPA (best Business/Finance Book of the Year)
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.
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!
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.