Market and relationship updates for my clients and prospective clients….
Aaron DelSignore, CRPC®, CPFA | January 19, 2022
The markets are unfortunately off to a disappointing start in 2022 much like I warned about in my autumn update and various conversations with you. Even though economic growth is strong and the latest Covid variant seems to be less “potent” (but much more contagious) there are many reasons for this:
By “every” valuation metric that I know of the U.S. stock market is grossly “overvalued” (trailing P/E, forward PE, cash flow, market cap to GDP, etc). While that was “fine” when there was “no alternative” to stocks (besides illiquid real estate), interest rates were at 0% (and the Fed was creating “trillions” of dollars monthly out of “thin air”) there has been and are “dark clouds” on the horizon.
Rising interest rates, historically high inflation, increasing taxes, regulations, international tensions (think Russia/Ukraine and China/Tawain), and this “profoundly unsettling labor/supply chain shortages” and historically “high government spending” it does not take a PhD in Finance to understand that there is now “more risk than reward” in the U.S. stock markets.
While it is normally “foolish” to time the markets, there are times (and this is the 3rd time in my 22 year career) when the risk/reward ratio is so “skewed” that it makes sense to “reposition” your portfolio for downside risk and other opportunities going forward. This is “especially true” for the “darlings” of the past decade (Large cap growth/tech). An “even bigger” bubble is in “bonds” with “negative real rates of return with the average yield at 2% and inflation at 7–9%”.
“Especially” for those of you that are “at or near to retirement” it is “incredibly important” to reposition your portfolios and hedge your risk. There are “numerous Alternative Strategies” that can and should grow strongly even as the U.S. stock market “stalls” for the next 12-18 months (my estimate). You can contact me to schedule a review or consultation (virtually or over the phone until this latest Covid strain passes).
Remember Warren Buffets #1 rule of investing: “Don’t lose money”. What is Buffets rule #2??? “Don’t forget rule #1”! There are unique ways that I can “hedge your equity and bond risk” that the vast majority of Advisors and Firms “don’t utilize”. Why? You might ask? Well….#1. these Alternatives pay “me” (and the firms significantly less) and involve “dramatically more paperwork, time, and bureaucracy” for the Advisor and firms. Secondly, they tend to be complicated and most advisors (and business today) are “obsessed” with “scaling, repeating, and profits” much more than “craftmanship or customization”. And lastly….”some clients” have become so “irritable” and so “impatient” these days, that most businesspeople just won’t risk the “headache” (or the time to educate themselves, you, or their team on Alternative Investments and the dramatically more work and admin involved). But, for those of you that can be “nice and patient” I “will” help you.
I cannot “fathom” why anyone that has an adjustable rate/short term mortgage did not refinance or “why” you would want to hold “bond funds” and “balanced funds” at this point in the cycle. BUT….there is still some time to “hedge” those risks as well if you contact me.
As many of you know, I own and operate several residential and vacation rental properties and they have performed exceedingly well (after sometimes months and years of initial losses). But speculating on real estate here (especially residential) can easily “blow up” in your face if you are not careful with your analyses and specific market. For example: Some of you keep “trading up” to bigger and better homes not realizing that if it were not for immigration (for well over a decade now) the U.S. population would be shrinking. These “McMansions” will become “obsolete” as the millennials (and people like me for that matter) have absolutely “no desire” for the “biggest, most expensive, house on the block” (especially with 1.2 kids per household and shrinking fast in the developed world).
2021 was personally the worst year of my adult life, but I am optimistic about the future (for those of us willing to embrace “change”, fortitude, and yes…the occasional “failure”). Be loyal to your loved ones, be good to those who try to do good by you (and don’t always succeed), and remember….that life is precious, short, and tenuous. Be kind to others (even if they are not perfect or agree with you) as life passes by so quickly……statistically speaking, even I have more days behind me than ahead (although I will easily ‘beat that statistic😉).
I have attached some articles that shed further light on where we are now and how to be successful in the future. Enjoy!
A final note, for my “top tier” clients (and soon to be new clients) I have offered you “complimentary stays” at my Panoramic Lake View cabin in Lake Tahoe. Although it is NOT luxurious (at all) the views and location (and the jacuzzi) are to “die for”. Feel free to utilize (although not in July).
3 Ways to Benefit from a Bear Market
Aaron DelSignore, CRPC®, CPFA | October 13, 2022
With the most recent bear market being confirmed in the S&P 500 on June 13th of 2022, there could still be several months left. Bear markets are portrayed as being bad for your investments but there are still ways to take advantage of a bear market and come out strong on the other side. Continue reading to learn 3 ways to benefit from a bear market.
Before going into the benefits of a bear market, it is important to understand what a bear market is and what causes it. A bear market is when there is a drop of 20% or more from recent highs in stocks. There are several different causes of bear markets, such as movements in oil prices, poor lending practices, investor speculation, and more.
Now, onto the benefits:
1. The opportunity to increase savings and investments
When stocks are selling for a discounted price, it can be the perfect time to pick up some new assets. If you have any money that you have been saving to use for investments, this is the time to use it. Investing in the long-term market now will give you long-term returns. You can get a better return on your investment by purchasing stock while it is selling for less in a bear market. Bear markets occur fairly routinely so there is nothing to be scared of. This is a great opportunity to continue to grow your investment portfolio.
2. The chance to complete Roth conversions
If you have assets in a traditional IRA, a bear market is a good opportunity to complete a Roth IRA conversion. With a conversion from a traditional IRA to a Roth IRA, you will have to pay taxes on the assets. With the value of the assets being down, you can lower the associated tax bill. In addition to the lower tax bill on the transfer, all of your funds in the Roth IRA will grow tax-free so you will see an increase in your assets’ value, you can withdraw your funds from the Roth IRA after five years without any taxes or penalties, and you will not have to take required minimum distributions from your Roth IRA in retirement.
3. A time to harvest any tax loss
Many of your 2021 or 2022 investments could be showing as a loss, and this bear market is your chance to take the loss on these investments. When you realize a loss on your tax return, you can offset the capital gains you received from other investments. If the loss is greater than the amount of capital gains you have for the year, you can offset your taxed income by up to $3,000. Any losses beyond that can be applied to future tax returns. The benefit of tax loss harvesting is offsetting gains and income while retaining capital in your investments by not having to sell off your stocks.
With the volatility in the market, it can be difficult to keep up with the current investment trends yourself. Our team at Abundance Wealth Solutions can manage your investments and retirement planning on your behalf, personalized to your goals. If you’re looking for personal
finance management, contact us today.
3 Key Pieces of Advice from Warren Buffett
Aaron DelSignore, CRPC®, CPFA | November 10, 2022
Warren Buffett is a self-made billionaire and the CEO of Berkshire Hathaway. Buffett amassed his wealth from his investing tactics and strategies. He has also been dubbed as one of the greatest investors of all time. However, he has used his success for good by offering up bountiful advice on investing. Continue reading for 3 key pieces of advice from Warren Buffett.
1. Don’t lose money. Warren Buffett’s #1 rule for investors. Valuations matter, prices matter, risk tolerance, time horizon, & especially asset allocation matters. Don’t get complacent about risk!
2. His rule #2….” Don’t forget rule #1”.
3. Continue Investing
As we’ve seen during the Covid-19 pandemic and in 2022, the economy and stock market has its ups and downs. The United States economy is cyclical; meaning there is a cycle of economic booms and recessions. Since 1949, the U.S. economy has experienced 11 recessions and has recovered from each one of them. While some news headlines may be alarming about the stock market declining, investing is still the best way to build wealth. Buffet explains that economic downturns offer up investing opportunities when stock prices dip. Set yourself up in a position to be able to purchase more stocks and invest more during recessions for a greater return. One of his popular quotes regarding these opportunities is, “Opportunities come infrequently. When it rains gold, put out the bucket, not the thimble.”
4. Investing is not all about intellect, but temperament
Buffett believes there is great value in temperament when investing. He is noted saying “You need a temperament that neither derives great pleasure from being with the crowd or against the crowd” in reference to investing. With social media and personal finance influencers,
there are many different stocks and cryptocurrencies that you’re being told to invest in. One of the most recent ones was Dogecoin. Instead of going with the crowd, you should focus your investing decisions on what is going on in the market, and most importantly…..”the future of
the markets”. By focusing on the facts, future, and not on emotion or peer pressure, you can make sound investment choices.
While taking advice from the best of the best on investing can be beneficial, it’s helpful to have a knowledgeable financial advisor to execute on the investing advice. Our team at Abundance Wealth Solutions can manage your investments and retirement planning on your behalf, personalized to your goals. If you’re looking for personal finance management, contact us today.
Financial Considerations For The End of 2022
Aaron DelSignore, CRPC®, CPFA | December 20, 2022
As 2022 is coming to a close, deadlines for your personal finances are rapidly approaching. With it being the end of the fiscal year on December 31st, it’s time to get everything wrapped up in time to start 2023. To make sure you have everything taken care of, continue reading for financial considerations for the end of 2022.
Required Minimum Distributions (RMDs)
Traditional Individual Retirement Accounts (IRAs) come along with RMDs once you turn 72 years old. Your RMD amount is determined by dividing the amount in your IRA by a life expectancy factor that you receive from the Internal Revenue Service (IRS). If you have multiple Traditional IRAs, you will have an RMD for each one.
One of the main rules of Traditional IRA RMDs is when to take out your RMDs. The year after you turn 72 years old, you have to take your first RMD by April 1st. For every year after that, you have to take your RMD before December 31st. If you miss the deadline, you’ll be facing a penalty of 50% of your RMD amount.
Tax-loss harvesting is a tax planning strategy to lower your tax implication for the year by selling an investment at a loss. This is a great strategy if you had a significant capital gain on the year that you need to offset tax-wise. Your significant gain could have been through the sales of securities, real estate, or your own business. It could also be a great idea if your personal income was much higher than it was in previous years, causing you to jump multiple tax brackets. By taking advantage of tax-loss harvesting, you can reduce or offset your tax bill
However, you have to take advantage of tax-loss harvesting before the end of the year for it to be reflected on your 2022 tax return.
If your portfolio is down and you have a significant amount of life left to live, it’s a great opportunity to convert your Traditional IRAs into Roth IRAs. Instead of paying taxes on disbursements, you will pay taxes just one time on the conversion. You will no longer have to take RMDs since it is not a requirement on Roth IRAs. In a Roth IRA, your funds can grow tax-free over time.
Previously, you may not have been able to contribute to an IRA due to income limitations. However, a Roth IRA conversion does not have income limits, so regardless of your adjusted gross income, you can take advantage of the Roth benefits. This is a great option especially
if you plan that your income is higher in retirement than it was during your career.
A Roth conversion is taxable in the year it is done, making the deadline December 31st to include it on your 2022 tax return.
The end of the year includes the need to wrap up several different areas of your personal finances. To make sure you reach these deadlines, enlist the help of a knowledgeable and trustworthy financial advisor. Call or email me today to set up a consultation: (702) 818-1116 or firstname.lastname@example.org