Maybe you’ve heard the old Wall Street saying that you should sell your stocks in May and go away. This saying comes from historical data that shows stock market returns have been much lower during what’s called the seasonally weak six-month time period, which starts on May 1 and lasts through the end of October.

Since 1950 the Dow has had an average annualized return of 7.2 per cent with most of this return coming during the seasonally-strong period, generating 7 per cent of the return compared to just .2 per cent during the seasonally weak period between May and October.

While you can’t argue with these facts, there’s also historical evidence that shows the market can produce good returns during the so-called seasonally-weak period. In 2017, the Dow posted a positive return of 11.64 per cent from May through the end of October, and during six out of the last 10 years ending in 2017, the market has finished in positive territory during the so-called seasonally-weak periods.

So, should you sell in May and go away? We think the answer to this question is no, not just based on where we are in the calendar. Instead, we think a better approach is to have an investment system that measures supply and demand in all the different asset classes.

Attempting to keep money invested in high demand areas and trying to avoid weak demand areas. After all, money doesn’t disappear, it just goes to where it’s in highest demand.

Avoiding Wall Street myths and having a supply and demand investment system in place will move you one step closer to experiencing your version of an incredible retirement, doing what you want, when you want.

Brian Fricke

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Seems like a number of our clients are new grandparents and naturally they’re interested in taking steps to help pay for college down the road. So, what is the best way for a retiree, a grandparent, to help pay for their grandchild’s college?

If you live in the State of Florida and the grandchild is under the age of 5, I’m a big fan of the Florida prepaid tuition plan. That’s where you pay either a lump sum or make payments over time and in return the plan guarantees the tuition costs of any in-state college. If you purchase these plans when the child is very young, the cost is quite small and very affordable and risk-free.

And no, you don’t lose your money if your grandchild decides not to go to college. You can get a refund, you can transfer the benefit to other family members, and you can even have tuition paid to out-of-state schools.

What about other options? Well, the first option is the easiest and my favorite. Keep your money in your own account and during your lifetime if your grandchild goes off to college, at that time you can decide how and to what extent you want to help them out.

What if you’re not around to see your grandchildren go to college? What do you do then? Well, if you’ve got a good relationship with your children, their parents, and you can trust them to follow your wishes, again to keep things simple, one approach would be just to let your children know what your wishes are and trust that they would follow through on your wishes.

If that doesn’t satisfy what you’re trying to accomplish, you could always make provisions in your estate documents that a portion of your estate be held in trust or for benefit of your grandchildren, whether it’s one or several grandchildren.

Another option might be to establish a uniform gift to minor account or sometimes known as a uniform transfer to minor account. The account uses your grandchild’s social security number, but you or a parent is the custodian of the account, so you control the account, not the grandchild.

If you go this route, I would suggest accumulating no more than maybe $20,000 to $30,000 in the account because when your grandchild turns 18 or in some states 21, legally the money is theirs and they would be free to use it for any reason they saw fit, even taking an around-the-world trip or buying an orange Corvette, so that’s a downside. The upside is it can be a teaching tool. You can share the monthly statement with your grandchild when they’re old enough to understand, show them what the money is invested in, and maybe that will spark an interest in investing and a desire to learn about money and finances on their part.

Another option, which I’m not a big fan of, is 529 plans. A 529 plan works like an investment account. The earnings grow tax-deferred and if they’re withdrawn for higher education purposes they come out tax-free. The drawback, however, is your investment choices are limited and those choices are determined by each state and, quite frankly, some states do better than others. In addition, we see the accounts quite often being confusing to monitor and oversee. So, a 529 account would be an account of last resort and, quite frankly, we only recommend them to our clients when they want to make gifts that exceed the annual gift tax exclusion amount.

Having a strategy in place that makes sense for your situation to help pay for a grandchild’s college will move you one step closer to experiencing your version of an incredible retirement, doing what you want when you want.

Brian Fricke

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Here’s something I bet you didn’t know. The size of the U.S. stock market is about $30 trillion. If you added up the value of all publicly traded stocks in the U.S., the market value of all those companies would come up to around $30 trillion, but what about bonds?

Bonds are hardly ever mentioned or talked about in the financial media, but I bet you might be surprised to discover that the U.S. bond market is actually much bigger than the stock market. The U.S. bond market is estimated to be $40 trillion or more. That’s right, the bond market is actually larger than the stock market and yet the financial media has almost all their attention and therefore our attention on the stock market.

So what about bonds? Should you be buying bonds when interest rates are going up? You may have heard that when interest rates go up, bond values go down, which is true. Think of a seesaw or a teeter totter, the end that goes up is interest rates and the end that goes down is the underlying value of the bond.

Bonds by the way are nothing more than a loan to a company, government or government agency. Typically, bonds pay their interest twice a year, every six months, and when the loan comes due, they have a maturity date which could range anywhere from 90 days to 30 years, when you get your money back.

If you look at long term returns of investments, let’s say a 15-year timeframe or longer, then it’s no secret stocks have outperformed bonds by a large, large margin. So if stocks do better than bonds over the long term why not just have all of your money in stocks?

Well, the problem is while stocks tend to deliver nice, long-term returns, the short term could be a whole other story. Stocks on the short term can be extremely volatile. Just look what happened in the financial crisis of 2008. The S&P 500, the 500 largest publicly traded companies in America, lost about 38 per cent in value. So, $100,000 in the S&P 500 at the end of 2008 was now worth $62,000. Ouch! That’s a lot of short-term volatility which tends to make you and I uncomfortable, to say the least.

So how do we dampen or minimize that volatility? Imagine you have a sailboat and you have entered it into a race. One way to make your sailboat go faster is to make it lighter. But the lighter the sailboat, the more likely it is to capsize with a gust of wind.

To prevent that you add weight or ballast to the sailboat. That slows the speed of the boat, but it reduces the odds of the boat capsizing and sinking. This is how you should think of bonds in your overall investment strategy. They are going to slow down the overall growth of your investment accounts, but they are there to keep you from capsizing, to keep you from sinking during short-term periods of market volatility.

So, the answer to the question should you buy bonds, even when interest rates are going up, as a long-term investor, the answer is a qualified yes, and here’s what I mean by that.

If you buy individual bonds and hold the bond until it matures or is called away early by the issuer, then you’ll receive the interest and get all your money back when the bond matures. The value of the bond can and will fluctuate while you own it, but it doesn’t affect you if you hold it to maturity because then you get all your money back.

This is why it’s important to own individual bonds, especially in a rising interest rate environment, you don’t lose money if you hold the bond until maturity.

Why not just use a bond mutual fund? The problem with a bond mutual fund is it doesn’t have a maturity date. People are constantly adding or withholding money from the mutual fund itself and typically at the wrong time. In a rising interest rate market, a lot of people in bond mutual funds take some or all of their money out of the mutual fund which forces the mutual fund manager to sell bonds even if they didn’t want to. They have to generate the money to pay back the investors and that could drive the value or the price of bonds down even further. Ideally, you want to use individual bonds so you know for sure you get your money back when the bond matures.

If you have a small account, and I would say a small account would be $200,000 or less, then you may not have enough money to properly diversify into individual bonds and you may have to still use bond mutual funds and if that’s the case in a rising interest rate market you want to focus on short term bond funds or floating rate bond funds.

Buying individual bonds as part of your investment strategy will help you move one step closer to experiencing your version of an incredible retirement doing what you want, when you want.

Brian Fricke

The post Is it a Bad Idea to Buy Bonds When Interest Rates are Going Up? appeared first on Your Better Life.

I just read an article where the author has compiled a list of stock market predictions from well-known stock market experts. Since 2010, there have been 62 “can’t miss” predictions; 43 of those predictions were wrong. In other words, 69 per cent of these almost-certain predictions were wrong; two were neither right nor wrong and only 17, or 27 per cent, of these “can’t miss predictions” actually turned out to be right.

Keep this in mind the next time you see a well-known stock market expert on one of the media outlets speaking with strong conviction about their latest predictions. Odds are they’ll be wrong 69 per cent of the time.

This is just another reminder that when it comes to investing, the media is not your friend.

Understanding that the track records of well-known market experts aren’t really that accurate after all will help move you one step closer to experiencing your version of an Incredible Retirement – doing what you want, when you want, with the resources you already have.

Brian Fricke

The post Bad News For Stock Market Experts And Your Retirement Account appeared first on Your Better Life.

For many, the Christmas season can be a very stressful time of rushing around trying to find and afford the perfect gifts for family and friends. Here are seven gifts that are suitable for children of any age, and I guarantee they will beat the best holiday deals you can find in stores. The best part? These gifts are free and given in a good way they will far outlast any store-bought gift.

Find Beauty. Gather up your children and drive to a beautiful spot. It can be a provincial or state park, the ocean or someplace with natural beauty. They can bring anything they want except – cell phones. When you have reached your destination, tell your children in your own words that the most beautiful things in life are free and to never take them for granted. Pack a lunch or hot chocolate and snacks – ensure you are focused only on your loved ones – leave the rest of the world out of this gift – and have a memory making day together.

Tom Watson

The post 7 Impactful Gifts You Can Give This Christmas For Free! appeared first on Your Better Life.

We received an email from a potential new client asking about our services and what makes us different from a couple of other advisors they were considering.

In the email they indicated that they were quickly approaching retirement and had accumulated about $1 million in retirement assets. Since we specialize in retirement planning, they seemed like the type of client we serve best!

We explained our philosophy towards planning and investing and were confident that they could tell whether we would be a good fit for their situation.

But maybe they don’t need a financial advisor at all. Up until now, they had been doing things on their own and were pretty sure they could keep handling things on their own.

If this describes you, here are four questions to ask yourself to help you decide if you really need a financial advisor:

1.    How is your health? Are you happy with the amount of exercising that you are doing?

2.    How is your spiritual life? Is your faith as strong as you’d like it to be?

3.    Are you happy with your relationship with your spouse, your children, your family and friends? Do you see them as often as you’d like?

4.    Do you have hobbies or want to learn new ones? Do you have enough time to enjoy them?

These are all areas of your life that you can’tdelegate to anyone else. You can, however, delegate your retirement planning and investment management.

Even if you’re more than capable of handling all of your financial affairs, is this how you want to spend your time? And what about your spouse, are they able to carry on if something happens to you?

Being brutally honest with yourself and knowing whether or not you should hire a financial advisor will move you one step closer to experiencing your version of an Incredible Retirement – doing what you want, when you want. 

Brian Fricke

The post Do You Really Need A Financial Advisor? appeared first on Your Better Life.

Recently, a client sent us a copy of Suze Orman’s “Guide to Retirement” and asked us for our thoughts. Here’s what we told them:

While I personally don’t care for how Suze delivers her advice or opinions, I do tend to agree with most of what she has to say, which is also very similar to Dave Ramsey and I’m sure many others like them. As I skimmed through the article, five thoughts crossed my mind:

1. I don’t think our client is Suze’s typical audience. I could be wrong, but I think her typical audience is folks who, for the most part, are living paycheck to paycheck with some consumer debt and not a whole lot of savings.

2. The work until you’re 70 years old advice is good for her typical audience; but I don’t think it applies to the majority of our clients, at least from a financial sense. On the other hand, if you enjoy what you’re doing, why stop just because you’ve arrived at some arbitrary age?

3. Claiming social security at age 70 is in most cases mathematically correct. If you’re married, it provides the surviving spouse with a potentially bigger social security benefit if they out-live you. However, what we usually see is folks starting social security after they retire or when they reach full retirement age. That’s because no one knows for sure how long they’ll live. Health can change without notice and accidents do happen.

4. We totally agree with being debt-free, including the mortgage, at or before retirement. Living debt-free just puts less stress on your remaining investments and creates more peace of mind for you.

5. The ‘save less in your retirement account’ advice might be good for Suze’s typical audience, but I don’t recommend it for our clients or higher income earners in general. The reason I say this might be good for her typical audience, is that it assumes folks have the self-discipline to use the extra money that they’re no longer putting into the retirement plan at work to pay off consumer debt and mortgages. I think most folks, unfortunately, don’t have the level of self-discipline necessary to make this happen.

The important thing to ask yourself when you come across generic advice, is who is the target audience? And, am I part of that audience?

Knowing how generic financial advice applies to your specific situation can move you one step closer to experiencing your version of an Incredible Retirement – doing what you want, when you want, with the resources you already have.

Brian Fricke

The post Suze Orman’s Guide to Retirement appeared first on Your Better Life.

Prior to my talk at a recent speaking engagement, I walked around the room, consisting mostly of retirees and pre-retirees, asking everyone what they considered to be their top financial concerns.

My unofficial survey results revealed the top two concerns being, not surprisingly, the fear of running out of money and poor or declining health.

During my talk, I shared with the group a way to have increased confidence about the long-term outlook of your retirement money using what we call a Nest Egg Stress Test. This is essentially a way of putting your money under all kinds of stress: the stress of time, the economy, the financial markets, and even what our fearless leaders in Washington may come up with next.

When you have an effective way of stress testing your money, you’re able to make decisions with more confidence. Like the time one of our clients bought a boat during a stock market correction. They realized the reduced value of their investment accounts really wasn’t going to affect their long-term outlook.

When it comes to maintaining or possibly improving health, we all know the basics that we’re supposed to be doing like eating sensibly and exercising regularly. While you can delegate most aspects of your finances to a financial advisor, unfortunately, you can’t delegate eating healthy and exercising regularly, but oh how I wish we could.

Stress testing your nest egg and taking care of all the areas of your life that you can’t delegate to someone else – like proper diet and exercise – will move you one step closer to experiencing your version of an Incredible Retirement – doing what you want, when you want.

Brian Fricke

The post Survey Reveals Top Financial Concern of Today’s Retirees appeared first on Your Better Life.

Recently, I came across a “Wall Street Journal” article quoting someone from Morningstar, the mutual fund rating service, saying retiring is dangerous now because no one knows what is going to happen in the future.

I am pretty sure this has always been the case. No one knows for sure what’s going to happen in the future.

So, is retiring now dangerous for you? You really need to look at the question from two aspects.

One is the financial aspect. Do you have sufficient financial resources that will hold up to the stress of time, the economy, the financial markets and whatever our fearless leaders in Washington send our way?

The second aspect is, are you emotionally and psychologically prepared for retirement?

To determine if you are financially prepared for retirement you are going to come across all kinds of articles with generic advice like withdraw no more than four per cent of your retirement nest egg. Unfortunately, what this rule doesn’t take into account is your own individual situation.

You might be fortunate enough to have a traditional pension plan. Your pension plan, combined with your social security, might be more than enough income for you to experience your version of an Incredible Retirement, making the withdrawal rate of your investment nest egg not that big of a deal for you.

If you don’t have a pension, social security alone probably isn’t enough. You’ll have to make up the difference from savings and investments.

The best thing for you to do to determine if you are financially prepared for retirement is to do what we call a Nest Egg Stress Test. This stress test will show you how your money will hold up to the stress of time, the economy and financial markets.

Then you need to step back and ask yourself whether you are emotionally and psychologically ready for retirement.

It is becoming more and more common for us to speak with recent retirees who, after 6 to 12 months into retirement, look back and regret retiring. That or they wish they had an opportunity to do productive work because, let’s face it, how many times can you repaint the house? Playing golf is fun, but probably not every day!

The good news is there are now resources available to make sure you have thought through the emotional and psychological aspects of retirement. These will help you prepare as best as possible for what joys and obstacles retirement may bring.

Retiring now is no more dangerous today than it was over the last 25 years!

Making sure you are emotionally and psychologically prepared for retirement, in addition to being financially prepared, will move you one step closer to experiencing your version of an Incredible Retirement – doing what you want, when you want.

Brian Fricke

The post Is It Dangerous For You To Retire Now? appeared first on Your Better Life.

You probably noticed that when President Trump recently declared a trade war against China, it triggered sharp downturns in the stock market.

But what exactly is a trade war and what really is a trade deficit?

A trade deficit is a monthly calculation made by government economists. The value of products manufactured in China that are purchased in the U.S. are subtracted from the value of products manufactured in the U.S. that are purchased by Chinese consumers.

Simple math tells us that Chinese manufacturers are taking more dollars from U.S. consumers compared to U.S. manufacturers taking dollars from Chinese consumers.

But, this simple math doesn’t really tell the whole story and ends up with trade deficit figures that probably aren’t as accurate as we are made to believe. Let’s take a simple example, like the Apple iPhone.

Apple has its phones manufactured in China and then ships them to the U.S. for sale. The value of all these smartphone sales count as a Chinese export to the U.S. market.

But wait a minute, Apple is a U.S. company generating huge profits from the sale of its iPhone. In addition, the design of the phone, and the software that runs it, were all created in the U.S. and are a large part of the value of the phone itself. However, this isn’t reflected in the trade numbers.

Many economists don’t think a trade deficit is a bad thing in the first place. You probably run a significant trade deficit with your local grocery store.

You give them some of your money and in return you import some of the food from their shelves to your kitchen table. But I’m guessing the grocery store doesn’t import much, if anything, from you. So, are you harmed by this trade deficit with your grocery store?

Tariffs are simply a tax on specific items when they cross the border. Anyone buying those products will see their taxes go up invisibly by an increased cost of the product itself.

So far, none of the tariff’s announced by the U.S. or China have been put in place. In other words, no actual shots have been fired in the trade war, so it’s really not a war at all – yet. The U.S. and China are just trading lists of potential trade targets. 

Remember how worried the financial markets were when the Trump Administration made a surprise announcement with tariffs against global steel and aluminum? Well, as it turns out, 50 percent of all U.S. steel imports were exempt from those tariffs.

Our guess is, if and when the time comes to actually fire those shots – impose tariffs – the most likely scenario is lots of exemptions that leave us with the status quo.

Not over-reacting to trade war headlines will move you one step closer to experiencing your version of an Incredible Retirement – doing what you want, when you want with the resources you already have.

Brian Fricke

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