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Ten years after the 2008 market meltdown, U.S. equities are up over 200% and posting fresh new all-time highs.
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Higher interest rates during the quarter presented some headwind for bond investors, but bonds can still generate decent returns within a long-term trend of higher interest rates.
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The underlying economy boasts plenty of strength, with economic growth during the rest of 2018 expected to remain above 3%.
The Art and Science of Getting and Staying “On a Roll”
I love adapting engineering and physics concepts to solve common financial problems many people, even financially savvy people, encounter all the time. That’s why I’m so excited about my latest invention, the Wealth Allocation Wheel.
Illustration 1
The challenge, in simple terms, is “staying on a roll.” There is an art and science to staying on a roll with your wealth. This means having enough inertia with your wealth to successfully navigate the Stages of Financial Freedom (see Illustration 1). The clear aim I have written about extensively is how to achieve controlled growth while avoiding short or long periods of stagnation or depletion.
Brady Siegrist, CFP, Managing Director of Wealth Management at Janiczek Wealth Management explains how the color-coded Wealth Optimization Dashboard, a key exclusive feature of Janiczek’s patented system, can help all clients, regardless of their net worth, business knowledge, age or investment savvy.
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BEFORE
AFTER
We monitor and measure things everyday. We glance at our speedometer to confirm we are not exceeding the speed limit. Thermometers tell us if we are running a fever or if our outside plants are in danger of freezing. A scale lets us know if an envelope requires extra postage. Think of all the diagnostic tests that report plusses and minuses of our physical well-being. How, then, do we measure our financial well-being? Why does financial strength matter?
Strength = Durability
Contrary to what some may assume, the number of digits it takes to record a person’s net worth is not an indicator of his or her financial strength. Size does not determine financial strength. Rather, durability is the measure of strength.
Carole McKeown has regularly rolled out new features of our service packages for 18+ years on the Janiczek® team. In this post, she highlights the features of J-Vault. J-Vault is an application that provides our clients with secure access to all their financial information from any device–desktop, tablet and even your smartphone!
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Announcing J-Vault™
We are aware some advisory firms serving high net worth individuals charge as much as $25,000 a year for an advanced online system that aggregates all of a client’s financial information. At Janiczek® Wealth Management such an application, J-Vault, comes standard with our services. We rolled out our J-Vault application, on a pilot basis, to several clients over the last year. We are excited to announce we will offer the J-Vault application to all clients over the next year.
Secure Current Financial Snapshot
Imagine…a highly secure location from which you can obtain a current financial snapshot on your smartphone. Yes! A complete balance sheet with liquid accounts updated with the prior day’s closing prices; a balance sheet so precise it has your latest checking account, credit card, and mortgage balances. And, of course, all investment accounts, retirement accounts and even private investments are included. A nice snapshot of where you are and that’s not all.
Long-term strategies may challenge investors to stay focused. The fight against short-term thinking is getting harder as we accomplish so many things with increasing ease and speed.
There is more computing power in an iPhone than what NASA had during the first landing on the moon. Remember when Netflix mailed DVDs to your home? Now we can stream just about anything to our smartphones. And what would you have said ten years ago if I had told you the President of the United States’ main communication tool in 2018 would be Twitter?
But speed doesn’t change everything.
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?
Sometimes, 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.
At this point in your journey toward financial strength, you already may have great momentum. All you need to reach the goal line is to exercise self-control in a few vital areas. I call these personal finance disciplines the High Five because they are the key to achieving your highest potential in life. They are:
- Saving Awareness and Control
- Spending Awareness and Control
- Work Ethic
- Goal-Setting
- Learning
By automating or delegating a huge share of the discipline needed to master wealth, you can reserve your energy for situations when it is needed most. This is one of the secrets of the successful people with whom I have the privilege to work. They devote their best to challenges associated with their greatest ambitions, rather than squandering valuable energy on secondary pursuits.
The financial markets are now closed for the year and with all of the theatrics the verdict is in. Those investors with the following five characteristics prevail over those who fall victim to a host of mistakes and unsuccessful approaches:
- Investing from a superior position of financial strength.
- Being well prepared for a range of possible outcomes.
- Having an investment philosophy and approach you can confidently stick with and win with through thick and thin.
- Tuning out the noise, taming the emotion and focusing on what you can control.
- Investing for long-term success and, in the process, avoiding anxiety-toxic predictions, moves, comparisons, concentrations and traps.
What are tactical adjustments? In their 1986 asset allocation research, Brinson, Beebower, & Hood defined tactical asset allocation as:
“…strategically altering the investment mix weights away from normal in an attempt to capture excess returns from short-term fluctuations in asset class prices (market timing);”
When it comes to tactical asset allocation, a growing body of evidence shows investors who make tactical moves in their portfolios do best when both technical analysis and fundamental analysis align.
