“The future you shall know when it has come; before then, forget it. – Aeschylus
Elliott had a fairly easy tennis match during a recent high school tennis scrimmage. He won 0-1. When you are playing someone, who is much worse than you, it is a different kind of pressure. You are supposed to win. These are very good training opportunities. Why? You can work on your weakness in a match situation. If it is your backhand, work to hit more of backhands. If it is your volleys, hit more serve and volleys. Point is, when you pretty much know you are doing well, look for weakness and fill in those gaps.
Same can be true when investing over the past few years. You could have chosen the most volatile stocks and get rewarded. I hear of high school kids trading stocks and making money. It is times like these that we need to be looking at our weaknesses, our gaps. Let’s be really honest about what we are doing and what could happen. It is wise to think how different scenarios can affect you and your retirement, income, and investments. Use the good times as opportunities to plug holes in your plan. Look unintended risk you may be taking. Ask yourself some questions. How would your investments react if markets went down 10-20%? If interest rates rise? If taxes go up? Plan accordingly. Be prepared as best you can. Plug the holes where you can. Stay in line with your bigger plan. Unfortunately, I am afraid many people are picking up pennies in front of a freight train (taking risk with little reward). Like Warren Buffett has said many times, when the tide goes out, you see who is swimming naked.
If you want to know how any of these scenarios would affect you and your investments, let me know. I can run a risk and retirement analysis for you. No cost, of course. Click here to get started. Click here to setup a quick call.
So how do taxes affect markets?
Over the Decades, Markets Have Generally Performed Well in Different Tax Regimes
Notice the word DECADE. That is 10 years ladies and gentlemen. That is not next week, month or even next year. Keep this in mind, if you start to worry about what will happen next month, you may need to change your timeframe. Maybe you need to make sure you have a proper retirement income plan. Maybe you need to plug some holes in your investments perhaps?? Or maybe just maybe, you need to turn off the TV, go outside for a walk, call a loved one, exercise, meditate, schedule a vacation or call me to just vent frustration.
But Jeremy, what about the YEAR that taxes were increased???
Markets Have Historically Performed Well in Years in Which Tax Rates Have Increased
OF COURSE, Past performance does not guarantee future results.
What to do?
1) Plug your holes – Be mindful of the risk you are taking. If you lose in Russian roulette, make sure it does not kill your retirement as well. Have nor more than 10% of your investable assets in a “Mad Money” account.
2) Do strategic tax planning – Make sure you are using all available rules today to your advantage. Is the retirement planning you are contributing to the best one in the current tax environment? What about if things change? Are your withdrawals from your retirement being taken from the proper accounts? Are the assets in have in each account properly located? Have you considered asset location? Work hard to reduce the impact of tax obstacles in your financial future.
3) Review – Look back on the progress you have made and lessons learned. Always look for the lesson. Review is more technical and the mechanics. For clients, we do this in our annual reviews.
4) Rebalance – Adjust your sails for the current environment to maintain your course. Make sure you have a process in place to be able to make these timely adjustments regularly. This is why working with someone you trust, is so important. They can keep you on track, while you are enjoying the view. Ride the yacht instead of driving the boat.
5) Reflect – Look back then look ahead. Reflection is taking in the experience of the past, then looking forward into your future. Reflection is more about the feelings and experiences. Living live in F.L.O.W.
The Lighter Side, I had a small leak in an old water faucet outside of my house. I figured it was an easy fix. Buy a $10 replacement, turn water off to the house, unscrew the old one and replace with the new one. Easy peasy, right?? Well, I turned the water off to the house, but the faucet was still leaking. Hmmmm. Maybe it was residual water pressure, I was thinking. It was not. As soon as I took off old faucet, a FIREHOUSE amount of water blasted me in the face. Seem THIS faucet was well water connected to the sprinkler system, NOT the city water I turned off. I had to crawl under house and cut the power to sprinkler system to turn the water off. Since I was wet and it was sandy under the house, I was COVERED in sand. I looked like a dirty sugar cookie. I did fix the faucet though.
Hope all is well with you and your family,
Jeremy Finger, CFP®, CIMA®, CRPC®, CPFA
Founder & CEO
Wealth Management Advisor
Finger Financial Five – 5 points in 5 minutes or less – is to provide you with a weekly shot of useful financial information. My intention is to share principles, so that you will have more clarity and peace, that help you make better financial decisions.
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Investment advice offered through Stratos Wealth Advisors, LLC, a registered investment advisor; DBA Riverbend Wealth Management.
This content is developed from sources believed to be providing accurate information and provided by Riverbend Wealth Management. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. Stratos Wealth Partners and its affiliates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.