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.

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On The Watch: Spotting a Bear Market In The Horizon

At the turn of the year, the US stock market hit rough roads.  Thankfully, the market did not officially turn bearish.

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Investors dread bear markets, which indicate an economic slowdown or a recession and a fall in the prices of securities.  And unlike a market correction, a bear market lasts for more than two months, and the bottom of the market is indeterminate.  Profit losses are difficult to recover, more so when the proper strategies had not been implemented prior to the downturn.

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A bear market is augured by a decline of 20 percent from a market high in various broad market indexes, such as the Dow Jones Industrial Average (DJIA) or Standard & Poor’s 500 Index (S&P 500), over two months.  The slide early this year was tabbed at around 14 percent.

Still, smart investors know how to prepare for the onset of a bear market by watching out for several signs including:

i) Volatility in the Federal Reserve

ii) General decline in earnings among companies

iii) A low confidence score from small-business optimism indexes

iv) Decreasing consumer confidence

v) Unhealthy GDP rates

vi) Indications from analysis of fund flows

vii) Economic and political uncertainties

Economic coping strategies for a looming bear market include one of the most common: short selling. This is offering borrowed shares for sale and buying them back at lower prices.  Or people could just wait out bear markets before they buy stocks again.

 

For more advice on financial planning, especially for a post-retirement life, visit this Springer Financial Advisors blog.

Cutting The Tax Bill In Retirement

Financial stability is every retiree’s goal. But just because you are not taking home a paycheck doesn’t mean that you are free from paying your taxes. With smart planning, strategic money moves, and timing, you can avoid huge tax bills. In retirement, the crucial steps for financial preparation should be taken a couple of years before the ‘long holiday.’ Here are some steps to take:

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1. Consider opening a Roth IRA account, besides 401(k) or IRA. Here, your money grows tax-free and there are no levies on qualified withdrawals. Married couples who earn less than $193,000 qualify for a Roth IRA.

2. Use your health savings account as your retirement account. This is especially true if you are investing more in your health savings. In this case, your money grows tax free, same as the Roth account. Also, withdrawals aren’t taxed as long as they’re used for qualified health expenses.

3. Donate to your favorite charity. This is the largest and most common tax deduction strategy most financial planners suggest. While legally cutting on your levies, you are also making a difference in the world by supporting the cause of your charity.

As soon as you retire, the most crucial aspect to look into is making a solid withdrawal plan. You can start making withdrawals from your tax-deferred accounts early in retirement. This means that you are paying less taxes because you are in a lower tax bracket. You can also make your Roth account as a contingency fund.

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Springer Financial Advisors help retirees equip themselves with the best retirement plan that will help them live conveniently despite the ever-changing economic situation. For more information, visit this website.