Tips for Developing a Sound Investment Portfolio

A well-developed, diverse portfolio is key to the long-term growth of your investments. It protects your assets from future dips and possible structural changes in the economy.

The first thing you need to do is to determine how you want to allocate your assets in conformity to your investment goals. Study closely your current financial situation, keeping mind your expected future capital needs, and your risk tolerance. All investments involve risks and patience, and some investors give up too quickly when the market falters. Know that declines are normal.  

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Next, study how you will divide your capital among your various assets. Spend time picking stocks, mutual funds, equities, and particular sectors that you’ve found to be most lucrative. Remember that this process is crucial to the portfolio and investment in general. This can get complicated without the help of a financial advisor, so consider getting one at this point.

By this time, your portfolio will have been done. But understand that periodical rebalancing and reassessment are important. This is because as the market fluctuates, so will the value you’ve initially given to particular assets. Adjust your portfolio allocations accordingly, then proceed to sell securities that are now overvalued and buy underweighted ones.

Lastly, take a moment to consider the tax implications of your readjustments.  Discuss with analysts and advisors to better estimate the outlook for your holdings, since sometimes tax-loss selling is a needed strategy to reduce projected tax.

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Springer Financial Advisors stands out in the financial planning industry with its holistic approach and a dedicated team of advisers who don’t just ask about a client’s financial goals, but give more thought to their life goals. For more sound investment options, visit this blog.

What to do in case the stock market seesaws

In 2016, the market spikes that recurred throughout the year had some investors, especially the novices, feeling butterflies in their stomach. It also caused some short-sighted investors to gamble on the market fluctuations to try and catch a quick score. Financial planners in the Sacramento area issued a warning that stock investment is not for the faint of heart. 

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Market seesaws are not uncommon. Therefore, crafting a game plan or abiding by a set of rules in such cases is needed to ensure profits are maximized in the long run. Here are some advices on what to do: ·

Take daily Dow and S&P 500 reports with a grain of salt. 

Every trading day, there is an unpredictability in the gyration of the numbers in these stock market indices. It can increase or decrease by several hundreds, but then net change after a month or two could be just 100. Predicting how the stock market would behave is a waste of time, and at times a perilous task. There needs to be a long-term outlook; experienced investors have a 10- to 20-year horizon. ·

Listen to experts. Unfortunately, rampant nowadays are doomsayers and clickbait media outlets who “predict” the collapse of the stock market or an oncoming recession when there is market fluctuation. It is better to consult with investment or financial advisors to better understand the state of the market. 

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What are the indicators of a bull market

Since 2009, the stock market has been bullish, and for numerous financial experts, there is no end in sight for the trend. 

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This is good news for many investors and the market. A bullish stock market means more trading movement and plenty of opportunities for profit. A strong market also boosts employment rate and disposable income for the larger economy. 

However, the beginning of the bull market is not always apparent to the regular stock investor. One needs to have a keen eye and ability to analyze trends in order to know if there is bull market in the horizon. Some of the signs to look for are the following: 

Index of Leading Economic Indicators (LEI) 

One of the most accurate ways of determining whether the stock market is on the rise or receding is to check the LEI. The index is a combination of many factors, including stock prices, real M2 (measure of money supply), index of consumer expectations and many more. Increasing or above average LEI, especially after hitting the bottom, is an indicator of a bull market. 

General pessimism on stock market 

The first phase of a bull market is marked by pessimism from investors and the media. During these times, stock prices decrease to a point where the cost outweighs investment risk. It results in investors beginning to buy stocks again and sustaining earnings. 

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The three essentials to a good retirement plan

Young professionals should begin planning for their retirement as soon as they get a chance. Financial experts all agree that the sooner these plans are made, the easier funding the future will be. A secure retirement plan, however, requires more than just a well-padded investment account. There are three essential components to any good retirement plan. These are listed below: 

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Multiple sources of income: This is essential and builds on the school of thought that great retirement plans start from a large nest egg. However, people forget that building nest eggs requires multiple sources of income. Most savings come from an active income, which means that people need to be proactive about their earnings. It is never a good idea to place all eggs in one basket. People should consider looking at other sources of retirement income such as Social Security, pension, real estate income, investment dividends, etc. 

Risk management: Retirement plans are just like any other savings plan, and they are also susceptible to contingencies and other circumstances beyond personal control. To reduce risks, people should ensure that their retirement plans are underwritten by some form of risk management scheme. The most common and recommended option is insurance. Most people have a homeowner’s insurance and health insurance. However, as retirement age approaches, adults should start thinking about their life insurance along with a long-term care insurance. Potential lost income once upon reaching retirement age should be factored in. 

Having a professional advisor: This is not an additional expense, but an added investment to one’s plan. Having a professional advisor can alleviate a lot of headaches. These professionals can assist with other needs such as insurance, investing, health care, and more. 

Remember that planning ahead is the best way to ensure a comfortable retirement.

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Should You Be Supporting Your Children After Retirement?

A current trend financial advisors are seeing is retired parents supporting their adult children. The current economic and political climate may be to blame for this, but this practice does nothing for either group. Parents burn away their retirement savings and children develop a sense of entitlement and dependence. The latest surveys suggest that supporting children after retirement is a big mistake; perhaps being only better than not planning for retirement at all.

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As harsh as this sounds, parents are highly discouraged from doing so. Children -- especially those that are at a working age -- should be able to support themselves. The value of financial literacy must be emphasized. Adults need to recognize the importance of planning ahead. It is crucial, says financial advisors that retirement plans be made as early as possible. Doing so builds a safety net in which people can depend on after they no longer have a source of active income. The amount saved each month, along with how early these savings begin, determine the strength of that net. It is assumed that following these good saving habits will ensure a relatively comfortable life after retirement.

That said, there is an underlying assumption that people will use their savings wisely. This does not include supporting adult children. Using the same analogy described above, this is similar to taking a pair of scissors and cutting a hole in the net.

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What should be done instead is for parents to teach their children proper wealth management habits at an early age. While parents are still active in their day jobs, good financial practices should already be taught. Similar to planning for retirement, parents can prevent any headaches of supporting their children in the future.

Under extremely rare conditions, parents can help their adult children after retirement, but it is advised to put a time limit on the help.

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Avoid These Financial Mistakes Made By Married Couples

For idealists, the money issue ought to be non-existent as a source of conflict for married couples. In fact, they insist that it shouldn’t be a problem at all. However, for most normal couples, that is just not possible. Finances will always be an essential component in a marriage. That is why it’s very important for couples to know the most common mistakes married couples make when dealing with finances so they can avoid it.

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Some couples don’t define their financial responsibilities. This can become a huge problem early on since they’d be confused as to who will be paying which particular bill. Responsibilities need to be decided early on to organize payments.

Another huge mistake that couples make is ignoring credit card bills. Obviously, this can be a problem since credit card debt can grow so fast that couples can be caught unaware. The end product is that the debt becomes a huge deterrent in their plans. This is especially a pain when one of the people in the marriage keeps overspending. Credit card bills should be one of the couple’s top priorities.

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One of the subtler mistakes, which has a big impact later on is waiting too long before saving up for education. This is of course for couples who have plans of having children. They should realize early on that tuition is getting increasingly expensive, especially for colleges.

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Knowing the difference between monetary and fiscal policy

When President Donald Trump assumed office, he implemented numerous changes that are in stark contrast with the policies the previous administration had enacted. One of those is how the economy is run. Former President Barack Obama based the economy on monetary policy, while Trump intends to run it on fiscal policy.

While both approaches are intended for achieving higher economic growth and balancing inflation, there are major differences between the two policies.

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Monetary policy

This policy is typically carried out by the Central Bank or other financial institutions or authority. The Central Bank, which is also called The Fed, influences the supply of money by incentivizing individuals and businesses to borrow and spend, resulting to an economy that grows faster than normal.

The Fed also sets the base interest rates in order for the economy to reach the target inflation rate. By increasing interest rates (to a safe level), the borrowing costs become higher, while consumer spending and investment weaken. This leads to decreased aggregate demand and inflation.

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Fiscal policy

In a fiscal policy, it is the government which adjusts tax rates and levels of federal and overall spending. If the government perceives a need to raise demand and economic growth, it will cut taxes and increase spending, which results in a higher budget deficit. On the other hand, the government will raise tax rates and lessen spending, if demand and inflation need to be reduced.

Springer Financial Advisors uses a comprehensive and holistic approach in formulating wealth management strategies for its clients who aim to build a fulfilling post-retirement life. For more advice and insights about financial planning, visit this website.