Now is an excellent time to start evaluating your current financial situation, determining your future goals and expectations, and working toward pursuing them. If you need help pulling together a plan for your finances, a financial professional can explain how you can work together to identify strategies to help you work toward financial independence.
Making a plan for your finances may give you the confidence to stay on track to work toward your goals. Staying prepared occurs over time and throughout your life because your goals are unique and can change due to circumstances. Here are a few things that your financial professional and you can work together to address:
Some of the factors your financial professional will consider include your marital status, types of assets, amount of income, health, risk factors, employee benefits, number of children, and your desired retirement income. You may also include planning for other goals such as education and wealth transfer to heirs or a vacation home. Preparing can help make your first and future meetings with a financial professional go smoothly. Here are some things you can do before the initial meeting so you are ready: Think about your goals. Envision what you want from your life, your investment and retirement goals, and the timeline for reaching them. Write out your short-term goals (two to three years) and long-term goals over several years, and share them with your financial professional, who will help you track your progress over time. Understand your money in and money out. Understanding what money comes in and where it goes each month is essential to staying on top of your finances. Here are some things that can help you keep track of your money goes:
Gather your financial information. Collect and organize all of your financial information before your first meeting. Here is what your financial professional may want to review:
Your financial professional will use this information to create a financial strategy. They may also ask you for additional information or to complete specific tasks. The more open you are to sharing your financial and personal situation, the more your financial strategy can be helpful. Remember that it's ok to ask questions of your financial professional throughout the process so that you feel confident in their recommendations. Important Disclosures: The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. No investment strategy or risk management technique can guarantee return or eliminate risk in all market environments. All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy. This article was prepared by Fresh Finance. LPL Tracking # 1-05377243 Sources: https://www.investopedia.com/terms/f/financial_plan.asp You may have heard people in the office talking about FedNow. FedNow is an instant payment service that the Federal Reserve will offer businesses and individuals to send and receive money within seconds on a 24-hour, 365-days-a-year basis. The Federal Reserve's goal is to revolutionize how people transfer money and manage transactions.
Pros Real-time Payments and Refunds. This capability helps lower the delays consumers have to contend with when accessing traditional payment systems. Individuals can pay bills on time without worrying about generating a late fee because there is no longer that frustrating lag time. Small businesses can receive payments immediately, allowing them to manage their expenses and cash flow more efficiently. Improved Security against Fraud. By having real-time transactions, suspicious activity can be identified quicker and benefit consumers by allowing banks to flag the accounts and investigate attempted fraud before the money gets stolen, making committing fraud more difficult and less attractive to criminals. FedNow is Not Replacing the Dollar. There are myths circulating on the internet and social media claiming FedNow will replace the dollar with a new digital currency. This, however, is false. Cons FedNow is Not Necessarily Available in All Banks. Keep in mind that banks can opt into FedNow – they will not be forced to join the platform. You must check with your bank to see if they are a participant. Transitioning from the traditional payment system to this real-time system may take time, and some institutions may not be on board immediately. Banks Increasing Their Fees. According to Moody's Investors Service, a downside of FedNow is that banks would lose some of the interest they earn on 'float,' money accrued during the time period between fund deposits and when it clears. They also note that with the speed money will be moving, the new system could potentially increase the possibility of a bank run – when customers withdraw their deposits simultaneously over concerns about the bank's ability to pay its debts. Potential for Fraud. There is also the concern for fraud not being reversible in the real-time system. Scammers have designed schemes to make it difficult for banks to track and stop real-time fraud. FedNow, like many new technological innovations, may transform the payment landscape as more financial institutions and consumers embrace real-time payment benefits. However, with all things financial, a certain level of risk will be involved and requires sound decision-making and careful research. You are encouraged to consult a financial professional to learn how FedNow may impact you and your financial goals. Important Disclosures: The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy. This script was prepared by LPL Marketing Solutions Sources: FedNow FAQs: What Is It Really? – Forbes Advisor Moody’s report spotlights FedNow downside | Payments Dive FedNow: A Game-Changer in Instant Payments - Pros, Cons, and Its Impact on Exchange and Travel (linkedin.com) LPL Tracking # 1-05377627 It can be easy to get swept up in the vacation whirlwind and lose track of how much money you’re spending.
From airfare and accommodations to frequent dining out and shopping, the cost of a memorable getaway can quickly skyrocket, leaving you sweating over how to wrangle your budget back together once it’s over. But with these strategies, you can take a breath and regroup without letting financial stress overshadow your blissful travel memories. Survey the damage Before you can formulate a plan for recovery, you need to know exactly what you’re dealing with—so be brave and face your financials. Review and write down the expenses of your trip to see where you spent money. If you used a credit card, or spread out your spending over more than one, make sure you know what needs to be paid to each. Identify any purchases that perhaps didn’t add much value to your vacation so you can make different decisions in the future. Reset your budget Now that you have a clearer picture of how much you spent, it’s time to build a budget to help you get back on solid footing. Consider using a personal financial management app or website that has an online budget planner, such as Mint. Or you can use paper and pen to calculate your monthly expenses, distilling them to only the necessities. Make sure to set aside a portion of your paycheck to go toward vacation debt. Prioritize high-interest-rate debt To bring down your balance as quickly as possible, you’ll need to be strategic in how you clear debt. If you borrowed money or used credit cards for your trip, start by paying those debts first. Institute the avalanche method, which involves prioritizing your high-interest-rate debt first while contributing the minimum balance for everything else. Write down your debts in order from highest interest rate to lowest interest rate, then start at the top. To make the avalanche work, you need to start paying more than the minimum amount for the highest interest debt so you can dissolve it quicker, thus saving you money on interest in the long run. Once that’s gone, move your way down the rest of your list of debts. Limit your spending One great way to press the reset button is to jump on the “no-spend month” trend. This challenge (which can really be as short or as long as you want) means only spending money on absolute essentials, such as food, utilities, shelter, and transportation. Even though it sounds restrictive, it has a multitude of benefits: you’ll see the impact emotional and impulse shopping has on your finances, use up what you already own to cut back on clutter, and discover how to become more resourceful, such as by borrowing from your community and family. Many neighborhoods have Buy Nothing Facebook groups where you can request and donate items. Find ways to get frugal with necessities, too, such as by cooking meals at home instead of going out or using public transportation instead of spending money on gas, (if that ends up being cheaper). Finally, check your accounts to make sure you aren’t paying for subscriptions you aren’t using, and scale back on luxuries like streaming services. Boost your income Having additional income can speed up the process of debt repayment and allow you to build savings. Explore side hustles that align with your talents and interests, such as tutoring, nannying, walking dogs, or doing some gardening and yard work. If you have a closet full of clothes you aren’t wearing, consider selling them on a platform like Poshmark or at your local consignment shops. You could even opt for a part-time job temporarily. Build a vacation fund Once you feel like you’re back on stable footing, you can think about squirreling away some extra money each month to go toward future trips. Having this cushion means you won’t need to lean so heavily, or at all, on credit cards or loans for vacations. Learning how to recover from vacation spending is important for preserving your financial stability and dodging the anxiety that comes from living past your means. And with a little forethought and budgeting on next go-around, your transition from vacation back to reality will be a lot less bumpy. This article was prepared by ReminderMedia. LPL Tracking #1-05377485 The vital role of inflation in planning for children’s college expenses
In today's rapidly changing economic landscape, proper planning has become more critical than ever. When it comes to saving for children's college expenses, accounting for inflation is a fundamental aspect that cannot be overlooked. Inflation, the gradual increase in the cost of goods and services over time, has the potential to erode the purchasing power of your money if not factored into your financial strategy. Rising Costs of College vs. InflationDid you know that in 1980, the price to attend a four-year college full-time was $10,231 annually – including tuition, fees, room and board, and adjusted for inflation – according to the National Center for Education Statistics? By 2019-20, the total price increased to $28,775. That’s a staggering 180% increase. But let’s look at it another (and more sobering way): If the cost of going to college increased consistently with the U.S. inflation rate over the last 50 years, students today would be paying between $10,000 to $20,000 per year to attend public or private universities. The Inflation Challenge Inflation is a natural economic phenomenon that affects virtually every aspect of our lives. From groceries to healthcare to college costs, the cost of living tends to rise over time. If not addressed in your planning, inflation can have a profound impact on your savings' ability to cover future expenses. This is particularly relevant when it comes to saving for children's college education, given the long-term nature of the goal. Preserving Purchasing PowerImagine you start saving for your child's college education when they are born. Over the next 18 years, you diligently save a significant amount. However, if inflation averages around 3% per year, the cost of college education could easily double during that time. Without accounting for inflation, you might find that the money you've saved falls way short of covering the actual expenses when your child is ready to enroll. By accounting for inflation, you can work towards financial confidence in the purchasing power of your savings. You are essentially future-proofing your investments, allowing them to maintain their value over time. This safeguards your ability to meet rising expenses without compromising the quality of your child's education. Realistic Goal Setting Incorporating inflation into your planning helps set realistic goals. When planning for a future expense like college, it's essential to understand the true cost. Ignoring inflation can lead to underestimating the required savings amount, potentially causing stress and financial strain in the long run. When you accurately account for inflation, you gain a more accurate understanding of the amount you need to save to cover college expenses. This empowers you to allocate your resources effectively, thereby mitigating the risk of falling short and optimizing the chances of confidently pursuing your goals. The Power of Compounding Compound interest is a powerful force in wealth accumulation. When you invest your savings, they have the potential to grow over time. However, if you fail to account for inflation, your investment returns might not keep pace with rising costs. Inflation-adjusted returns are crucial to help your investments work towards generating wealth and providing the returns you need to pursue your financial goals. Mitigating Financial Stress One of the primary purposes of financial strategizing is to manage financial stress and provide confidence. Inflation, when unaccounted for, can disrupt this objective. Unexpectedly high costs can lead to last-minute financial scrambling, potentially forcing you to compromise on the quality of your child's education or take on substantial debt. By accounting for inflation, you are adopting a proactive approach to planning. You are preparing for the future's uncertainties and working towards confidence that your child's educational aspirations are not compromised due to financial constraints. Planning Matters Planning your financial future is a holistic process that requires careful consideration of various variables, with inflation being a critical one. When saving for children's college expenses, it's vital to factor in inflation to preserve the purchasing power of your money, set realistic goals, harness the power of compounding, and mitigate potential financial stress. By incorporating inflation into your financial strategy, you are taking a proactive step toward preserving your child's education and your family's financial future. Remember, time is on your side, and early, informed financial decisions can make all the difference in pursuing your goals. Important Disclosures The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. Investing involves risks including possible loss of principal. All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy. This article was prepared by FMeX. LPL Tracking #1-05377479 Dear Friends and Family,
Financial markets lived up to their reputation during the month of August, which has a record for being difficult. On the first day of August, markets had to contend with a downgrade of U.S. long-term debt by the rating agency, Fitch. They attributed the adjustment to the “expected fiscal deterioration over the next three years, a high and growing general debt burden, and the erosion of governance.” Many financial leaders characterized the downgrade as “ridiculous,” but the stock and bond markets still felt the effects. Another setback for markets came from Moody’s, an important credit agency. They issued a credit downgrade for 10 small-to-medium-sized banks and 11 larger banks, with a warning of increasing financial risks in the form of higher interest rates, escalating funding costs, and rising risks from banks’ commercial real estate holdings. Still, despite the credit-related downgrades, markets were able to navigate their way through the ongoing debate of the country’s financial strength. Better than expected earnings reports, coupled with an optimistic outlook, helped underscore the overall durability of corporate America. That durability showed up in a couple of ways:
Resilience aside, the market still experienced some volatility with a pullback in the stock market and high bond yields—specifically the 10-year Treasury. Reports of consumer confidence and the number of available job openings also came in softer than expected, which helped alter expectations that the Federal Reserve (Fed) would raise rates again this year. Although the debate over the need for another rate hike continues as the Fed monitors incoming data, the equity markets responded decisively and resumed their march higher at the end of the month. So where does that leave the market through year-end, especially since September historically tends to be another difficult month? Since 1950, a strong market performance in the first seven months of the year has been followed by average returns of 5% until year end. Given that the S&P 500 enjoyed a 19% gain for the first seven months of the year, we may be positioned for a positive end to 2023, although potentially with some bumps along the way. As always, please reach out to us with any questions. Sincerely, Straight Forward Wealth Management This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes. Investing involves risks including possible loss of principal. Any economic forecasts set forth may not develop as predicted and are subject to change. References to markets, asset classes, and sectors are generally regarding the corresponding market index. Indexes are unmanaged statistical composites and cannot be invested into directly. Index performance is not indicative of the performance of any investment and do not reflect fees, expenses, or sales charges. All performance referenced is historical and is no guarantee of future results. Any company names noted herein are for educational purposes only and not an indication of trading intent or a solicitation of their products or services. All index data from FactSet. The Standard & Poor’s 500 Index (S&P500) is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries. All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy. For a list of descriptions of the indexes and economic terms referenced, please visit our website at lplresearch.com/definitions. This research material has been prepared by LPL Financial LLC. Securities and advisory services offered through LPL Financial (LPL), a registered investment advisor and broker-dealer (member FINRA/SIPC). Insurance products are offered through LPL or its licensed affiliates. To the extent you are receiving investment advice from a separately registered independent investment advisor that is not an LPL affiliate, please note LPL makes no representation with respect to such entity. Not Insured by FDIC/NCUA or Any Other Government Agency | Not Bank/Credit Union Guaranteed Not Bank/Credit Union Deposits or Obligations | May Lose Value RES-1627790-0823 | For Public Use | Tracking # 475033 (Exp.09/24) Making economic forecasts and stock market predictions can be humbling. It’s especially tough when you expect stocks to go higher and get a big drop instead. The environment today is the opposite, but still tricky, as recession hasn’t followed the chorus of predictions. In some ways, figuring out what to do now that stocks have gone up is as difficult as considering what to do when stocks are down.
Today’s more fully valued stock market is pricing in an increasingly optimistic outlook for economic growth and corporate profits, but the economy still faces challenges that will likely lead to slower growth in the second half — and perhaps even a mild economic contraction. So why stay invested? First, it’s difficult to time the market. We’ve seen this play out several times in just the past few years. For example, few foresaw the strong market rebound that occurred as we came out of lockdown in 2020, or that inflation would become the ongoing problem that we’re still dealing with today. We saw it again this past spring – professional portfolio managers and investors alike were broadly pessimistic about the stock market, particularly in the wake of several bank failures. Yet, stocks have gone virtually straight up since. Another reason to stay invested is recent and encouraging economic data, which supports higher stock prices as the odds that the U.S. economy achieves a soft landing have increased. The U.S. economy grew 2.4% in the second quarter, a solid pace for a typical economic expansion these days. The job market remains healthy with near record-low unemployment. A resilient economy has fueled better profits for corporate America than most expected, setting up a likely end to the ongoing earnings recession in the current quarter. Third, lower inflation may continue to support stocks in the months ahead as the Federal Reserve (Fed) winds down its interest rate hiking campaign. The Fed’s preferred inflation measure (the core PCE deflator) dropped a half point in June to 4.1% and could potentially reach the mid-3s by year-end — not far from the central bank’s 2% target. Lower inflation may also be good news for bonds by enabling the Fed to cut interest rates in 2024 as most expect. Fourth is historical comparisons. Since 1950, stocks have gained an average of 40% one year following bear market lows. Nearly 10 months since our bear market low, our current bull market is up about 28% so far. Keep in mind, once the S&P 500 has gained 20% off a bear market low (which it did June 8, 2023), the one-year average historical gain is 18.9%. We’re also in the best year for stocks within the four-year presidential cycle. In other words, more gains, and record highs, in the coming year are reasonable to expect. Finally, for those worried that gains in the broad market have been driven by only a handful of stocks, stock market leadership has started to broaden out. We believe that’s a necessary condition for the next leg of this bull market. Small cap stocks fared better than large caps in July and the average stock in the S&P 500 rose more than the index over the past two months. For those who may have missed the rally, we would advocate for dollar cost averaging which is simply investing at regular intervals over a period of time. This can be a great approach as it takes emotion off the table. Consider maintaining a cash reserve so you can take advantage of dips that will inevitably come and use volatility as an opportunity to get back to long-term target allocations. As always, please reach out to your financial advisor with questions. August 7, 2023 KEY EARNINGS SEASON TAKEAWAYS Jeffrey Buchbinder, CFA, Chief Equity Strategist Quincy Krosby, PhD, Chief Global Strategist Earnings season is mostly behind us with about 85% of S&P 500 companies having reported second quarter results. The high level results aren’t particularly impressive, but if we peel back the onion, the numbers are encouraging. Results and guidance probably haven’t been good enough for stocks to add to recent gains, but they have been good enough, in our view, to end the earnings recession and limit the magnitude of any potential pullback. Here we provide some takeaways from this earnings season. EARNINGS RECESSION IS LIKELY OVER With 424 S&P 500 companies having reported results, a solid 80% have beaten consensus estimates and index earnings are on track to drop 5-6% (Figure 1). The average upside earnings surprise at 7% is also solid. But excluding Merck’s (MRK) significant acquisitionrelated charge, and factoring in typical upside for remaining companies yet to report, the decline is tracking to be more like 3-4%. Consider the energy sector by itself is a 7 percentage point drag on S&P 500 earnings in Q2, and we can see some encouraging earnings power being generated by corporate America. 2 Member FINRA/SIPC Our first takeaway is that the earnings recession is probably over. Second quarter will almost certainly mark the trough for this earnings cycle, though the other part of ending the earnings recession—growing earnings in Q3—is tougher. The consensus estimate for S&P 500 earnings growth in Q3 is now +0.7%, despite a more than 40% expected drop in energy sector earnings compared with the year-ago period. The Q3 estimate has only dipped 0.4% in July, a smaller-than-typical reduction. The historical pattern suggests about 3% upside to that number is a reasonable, even conservative, expectation and that a Q3 earnings gain is likely. Markets anticipated some of this resilience with strong gains for stocks in June and July as markets priced in a greater chance of a soft landing, but it’s clear some bears are being pulled over to the bull side thanks in part to solid results. STABLE PROFIT MARGINS A PLEASANT SURPRISE Our next takeaway is that profit margins have been remarkably stable the past two quarters (Figure 2). Coming into earnings season, we were worried about how companies would manage the revenue drag from disinflation. Less inflation means less pricing power. But the cost controls were good enough to offset the lack of revenue growth (consensus is +0.6% year over year for the second quarter). A higher Consumer Price Index (+3% year over year) compared to Producer Price Index (+0.4% year over year) in June is supportive of margins. Not only have profit margins impressively stabilized over the past two quarters, but they have fallen less than they have historically during recessions, even mild ones. 3 Member FINRA/SIPC Less inflation has helped on the cost side, but we would have expected higher wages to have more impact on margins through this cycle than they’ve had. Give credit to corporate America for effective cost controls to maintain profitability. It seems as though it’s not just Meta (META) who has declared 2023 the year of efficiency. SLUGGISH MANUFACTURING SECTOR DOESN’T SEEM TO MATTER We know services are a bigger part of the U.S. economy today than goods. In this environment, because of pent-up demand for services, the economy is able to offset manufacturing weakness. Historically, the Institute for Supply Management (ISM) Manufacturing Index has been a decent predictor of earnings growth with a couple quarter lag. But in this economy, the weak ISM Manufacturing Index around 46 (below 50 signals contraction) has not mattered much for earnings. This economy continues to outpace most economists’ expectations, based on second quarter gross domestic product (GDP) growth at 2.4%, driven by services. SECTOR STANDOUTS Consistent with the strong services segment of the U.S. economy, strong results from the consumer discretionary sector maybe shouldn’t surprise us. But the magnitude of the upside surprise sure did, capped off by strong results from Amazon (AMZN) reported on August 3 after the market close. Companies in the sector have produced an average 26.6% upside earnings surprise and more than 52% earnings growth, both tops among all S&P sectors. Broadline retail, hotels, restaurants and leisure, homebuilders, and autos provided the biggest upside surprises in the sector, while hotels, restaurants and leisure, and autos delivered the fastest earnings growth. Communication services deserves honorable mention for the second fastest earnings growth (18.6%), though the sector’s average upside earnings surprise has slightly trailed the S&P 500. META and Alphabet (GOOG/L) each grew earnings at around 17% during a stronger-thanexpected quarter for digital advertising. On the flip side, the energy sector is projected to detract the most from earnings growth. The sector is tracking to a 52.6% year-over-year earnings decline in the second quarter amid sharply lower oil prices compared with the year-ago quarter. The sector’s average upside earnings surprise at 3% is the smallest among all S&P sectors. 4 Member FINRA/SIPC FOCUS ON GUIDANCE Looking forward always matters more than looking backward, so we always place greater importance on guidance and what happens to estimates than to the numbers for the prior quarter. We can assess guidance quantitatively by following estimate trends, or qualitatively by listening to what companies say and how upbeat they sound on their earnings calls. Quantitatively, we can see below that estimates have stabilized in recent weeks. The consensus S&P 500 EPS estimate has impressively held steady since April and remains near $218 per share (Figure 3). Relatively upbeat guidance has increased the chances that earnings grow in Q3 and end the earnings recession, and even pushed up estimates for Q1 2024. Qualitatively, we are not hearing a lot about recession risk from companies. Banking stresses have calmed, the economy has some momentum, and the jobs market remains healthy which has limited the number of layoff announcements accompanying earnings results. We’ve also seen several high-profile banks pull back their recession calls in recent weeks. Bottom line, guidance has been supportive. 5 Member FINRA/SIPC BUT ARE RESULTS GOOD ENOUGH TO FUEL FURTHER GAINS? With stock valuations elevated, the bar was set high coming into this earnings. The recent increase in interest rates raises the bar even further by adding to valuation headwinds. And looking at market reactions to results company by company, beats are not being rewarded as much as they have historically. According to JPMorgan data, earnings beats have been flattish one day post-earnings on average, outperforming by just 0.1%. The market’s negative reaction to Apple (AAPL) and Microsoft (MSFT) results are good examples of a bar that may be a bit too high, though certainly a number of high-profile companies, such as AMZN, META, and GOOG/L saw shares rally on results. So while Q2 earnings results have generally been better than we and most market-watchers anticipated, we do not think they have been good enough to push stocks higher over the next month or two. Estimates have held up well, but stocks likely priced in strong results with gains in June and July. The Federal Reserve (Fed) may be our next catalyst, with the central bank confab in Jackson Hole, WY, on August 24-26. ARE LPL RESEARCH ESTIMATES TOO LOW? As we noted in the Midyear Outlook 2023: The Path Toward Stability released mid-July, we expect S&P 500 earnings to decline slightly this year. But analysts have continued to underestimate corporate America’s profit potential, and the economy continues to outperform most expectations. For now, LPL Research maintains its $213 per share forecast for S&P 500 EPS in 2023, with an upside bias in the case of a soft landing for the U.S. economy and continued resilience in corporate profits through year end. If inflation continues to come down as we anticipate and revenue growth accelerates over the next several quarters as natural resource sector comparisons get easier, then something closer to $220 per share is possible. The tough part will be growing revenue and maintaining pricing power amid disinflation. So with economic growth poised to slow in the second half, we’ll keep our estimate where it is for now, while acknowledging it may be a bit too low if the economy continues to exceed expectations. Looking to 2024, corporate America will likely still face economic growth headwinds, so we think it makes sense to be conservative with earnings forecasts, even as inflation likely comes down further. That said, high-single-digit earnings growth may still be achievable. Our estimated S&P 500 EPS for 2024 is $230, about 8% above our current 2023 estimate, but 6% below the current consensus estimate between $244 and $245 per share. 6 Member FINRA/SIPC INVESTMENT CONCLUSION LPL Research believes stocks have moved a bit past what is justified by fundamentals while acknowledging the impressive resilience of the U.S. economy and corporate America. The July jobs report fits the soft landing narrative, though a mild and short-lived recession beginning within the next six to nine months still appears more likely than not. A Fed pause is increasingly likely in September, which should be good for core bonds and supports the case for staying fully invested, though yields near fall 2022 highs present a headwind for stocks and are a big reason why markets have been so choppy in August. LPL’s Strategic and Tactical Asset Allocation Committee (STAAC) recommends a neutral tactical allocation to equities, with a modest overweight to fixed income funded from cash. The risk-reward trade-off between stocks and bonds looks relatively balanced to us, with core bonds providing a yield advantage over cash. The STAAC recommends being neutral on style, favors developed international equities over emerging markets and large caps over small, and maintains the industrials sector as its top overall sector pick. Within fixed income, the STAAC recommends an up-in-quality approach with benchmark-level interest rate sensitivity. We think core bond sectors (U.S. Treasuries, agency mortgage-backed securities (MBS), and short-maturity investment grade corporates) are currently more attractive than plus sectors (high-yield bonds and non-U.S. sectors) with the exception of preferred securities, which look attractive after having sold off due to stresses in the banking system. IMPORTANT DISCLOSURES This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes. Investing involves risks including possible loss of principal. Any economic forecasts set forth may not develop as predicted and are subject to change. References to markets, asset classes, and sectors are generally regarding the corresponding market index. Indexes are unmanaged statistical composites and cannot be invested into directly. Index performance is not indicative of the performance of any investment and do not reflect fees, expenses, or sales charges. All performance referenced is historical and is no guarantee of future results. Any company names noted herein are for educational purposes only and not an indication of trading intent or a solicitation of their products or services. LPL Financial doesn’t provide research on individual equities. All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy. US Treasuries may be considered “safe haven” investments but do carry some degree of risk including interest rate, credit, and market risk. Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise and bonds are subject to availability and change in price. Preferred stock dividends are paid at the discretion of the issuing company. Preferred stocks are subject to interest rate and credit risk. As interest rates rise, the price of the preferred falls (and vice versa). They may be subject to a call feature with changing interest rates or credit ratings. Mortgage backed securities are subject to credit, default, prepayment, extension, market and interest rate risk. Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise and bonds are subject to availability and change in price. The Standard & Poor’s 500 Index (S&P500) is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries. The PE ratio (price-to-earnings ratio) is a measure of the price paid for a share relative to the annual net income or profit earned by the firm per share. It is a financial ratio used for valuation: a higher PE ratio means that investors are paying more for each unit of net income, so the stock is more expensive compared to one with lower PE ratio. Earnings per share (EPS) is the portion of a company’s profit allocated to each outstanding share of common stock. EPS serves as an indicator of a company’s profitability. Earnings per share is generally considered to be the single most important variable in determining a share’s price. It is also a major component used to calculate the price-to-earnings valuation ratio. All index data from FactSet. Value investments can perform differently from the market as a whole. They can remain undervalued by the market for long periods of time. The prices of small cap stocks are generally more volatile than large cap stocks. International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors. These risks are often heightened for investments in emerging markets. LPL Financial does not provide investment banking services and does not engage in initial public offerings or merger and acquisition activities. 7 Member FINRA/SIPC This research material has been prepared by LPL Financial LLC. Securities and advisory services offered through LPL Financial (LPL), a registered investment advisor and broker-dealer (member FINRA/SIPC). Insurance products are offered through LPL or its licensed affiliates. To the extent you are receiving investment advice from a separately registered independent investment advisor that is not an LPL affiliate, please note LPL makes no representation with respect to such entity. Not Insured by FDIC/NCUA or Any Other Government Agency Not Bank/Credit Union Guaranteed Not Bank/Credit Union Deposits or Obligations May Lose Value RES-1606901-0723 | For Public Use | Tracking # 1-05376901 (Exp. 08/2024) For a list of descriptions of the indexes referenced in this publication, please visit our website at lplresearch.com/definitions Investing your money for the future might be one of the quickest ways to grow your wealth, whether saving for retirement or making a large purchase. While most people know investing is a potential way toward a more manageable financial future, some may find investing challenging and somewhat scary. Here are a few simple steps to help overcome your investing fears. Step 1: Start SmallDon't get caught up thinking you must invest a lot of money to get started. Start with the amount of money you are comfortable risking, and once you feel more confident with the investing process, revise your investing plan to include more significant investments.1 Step 2: Get EducatedOnce you decide you are ready to invest and how much to risk, take the time to educate yourself on the available investment options. You may feel less anxious if you understand how an investment works and what to expect. If you don't understand how an investment works, consider avoiding it.2 Step 3: Set Realistic Investing GoalsMake a list of goals that you want to accomplish with your investment. This may include where you want to be financially in the next five to 10 years and how much you need to save to accomplish those goals. During the research phase, you should determine how each investment works and should set target dates for specific goals. Just manage your goals to be realistic and attainable, or you may end up frustrated down the road.1 Step 4: Come Up With an Investment StrategyOnce you set your goals, you need to develop strategies to work toward obtaining them. Having an investment plan in place may make the process and decisions easier. Remember that your strategy is changeable. You may change your method and refine it over the length of the investment. When choosing a strategy, it is always a good idea to keep it simple, as more complicated strategies may lead to higher stress levels.1 Step 5: Pick Your Investments and Get StartedAfter researching and choosing the investments that may work with your financial desires and risk tolerance level, it is time to jump in and start. In the beginning, be sure to stick with your original investment strategy, as you may “tweak” it along the way if needed. If you are anxious about getting started, you may want to consider more conservative investments such as a 401(k) or individual retirement account (IRA) held in certificates of deposits (CDs) at an FDIC-insured bank.2 Step 6: Stay the CourseOnce your investments are made, be prepared to stay the course, and avoid getting discouraged over setbacks. Avoid panicking in the short-term, and try not to change your investments too often. Understand that investing may have ups and downs. You may need to get through the downs to reap the financial rewards of the up-cycles.1 Important Disclosures: The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial professional prior to investing. Investing involves risks including possible loss of principal. Contributions to a traditional IRA may be tax deductible in the contribution year, with current income tax due at withdrawal. Withdrawals prior to age 59 ½ may result in a 10% IRS penalty tax in addition to current income tax. CD’s are FDIC Insured and offer a fixed rate of return if held to maturity. All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy. This article was prepared by WriterAccess. LPL Tracking #1-05376140 Footnotes1 Removing the Barriers for Successful Investing https://www.investopedia.com/articles/stocks/07/barriers.asp 2 Don’t Panic! 5 Strategies For Controlling Your Fear About Stock Market Turbulence https://www.forbes.com/sites/johnjennings/2020/03/11/dont-panic-5-strategies-for-controlling-your-fear-about-stock-market-turbulence/?sh=2b2d34733a53 You often hear people discuss "saving for retirement,” but in many cases, they're actually referring to their investing. The adage "you can't save your way to wealth" is simplistic, but has a kernel of truth; putting your money in a savings account often won't be enough to outpace the rate of inflation, which can erode the value of your savings over time. Below, we discuss some of the key differences between investing and saving and how to choose the most optimal course of option for you. Saving: A Low-Risk Way to Set Aside Funds for the FutureSaving is just a method to set aside money for future use, whether you're putting it into a general "emergency fund" or earmarking it for a new vehicle, a home down payment, or medical expenses. You can keep savings in a checking account, a regular or high-yield savings account, a certificate of deposit (CD), or even certain types of government bonds. Investing: Putting Your Money to Work for YouInvesting, on the other hand, involves putting your money into financial instruments like stocks, bonds, exchange-traded funds (ETFs), and mutual funds. Investing is riskier than saving, but can also earn higher returns over the long term. Even accounting for recessions and depressions, the S&P 500 (composed of the U.S.'s 500 largest companies) has averaged just over 11 percent per year in returns since 1980.1 Investing can be one of the most efficient ways to reach your long-term financial goals like paying for a child's college education, purchasing a home, or retiring. For example, if you're saving $100 per week toward your retirement and keeping it in a savings account earning a minimal amount of interest, you'll have about $52,000 in 10 years. If you instead invested this money and achieved an average 10 percent annual rate of return, you'd have around $82,500 in a decade. This is more than a $30,000 increase in value over regular savings.2 Differences Between Saving and InvestingOne of the key differences between saving and investing is the security of your funds. Savings is low-risk and low-reward, meaning that over time, you won't earn enough in interest to overcome inflation, but you also won't risk losing your initial funds. With an investment, you have the opportunity to have a double-digit rate of return over time; but if you're investing in an individual stock and the company goes bankrupt, your funds are gone. This means it's a good idea to seek some degree of balance. You'll want to keep an emergency fund or any money you expect to use over the next couple of years in a low-risk account, like a savings account or CD. This will ensure the money is there and accessible whenever you need it. But for longer-term funds, like retirement funds, it can be helpful to try and get ahead of inflation by investing these funds in the stock market. You can invest in whatever you'd like, from conservative bond funds to an aggressive growth portfolio. A financial professional can work with you to assess the best investments based on your risk tolerance, desired asset allocation, and retirement timeline. Important Disclosures: The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial professional prior to investing. Investing involves risks including possible loss of principal. No investment strategy or risk management technique can guarantee return or eliminate risk in all market environments. All indexes are unmanaged and cannot be invested into directly. Investing in stock includes numerous specific risks including: the fluctuation of dividend, loss of principal and potential illiquidity of the investment in a falling market. An investment in Exchange Traded Funds (ETF), structured as a mutual fund or unit investment trust, involves the risk of losing money and should be considered as part of an overall program, not a complete investment program. An investment in ETFs involves additional risks such as not diversified, price volatility, competitive industry pressure, international political and economic developments, possible trading halts, and index tracking errors. Investing in mutual funds involves risk, including possible loss of principal. The funds value will fluctuate with market conditions and may not achieve its investment objective. Upon redemption, the value of fund shares may be worth more or less than their original cost. Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise and bonds are subject to availability and change in price. CD’s are FDIC Insured and offer a fixed rate of return if held to maturity. S&P 500 Index: The Standard & Poor's (S&P) 500 Index tracks the performance of 500 widely held, large-capitalization US stocks. All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy. This article was prepared by WriterAccess. LPL Tracking #1-05376140 Sources:1 “Stock Market S&P 500 Returns Since 1980,” https://www.officialdata.org/us/stocks/s-p-500/1980 2 “Compound Interest Calculator,” https://www.investor.gov/financial-tools-calculators/calculators/compound-interest-calculator |
AuthorRich Hilow Archives
March 2024
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