I hope you are staying safe and healthy.
On Thursday, I hosted my latest “Ask Me Anything” webinar series. The primary topic: “Crazy, Low Interest Rates: What Should You Do Next?” Click here to watch the recording.
When deciding the appropriate asset allocation for a client’s portfolio, risk tolerance (RT) is an important topic. Understanding a client’s RT can make a difference. We want to avoid buying high (greed) and selling low (fear). This week’s first article shares some thoughts on how to fight behavioral biases.
Stocks were relatively flat since last week’s blog, falling less than 1%. Uncertainty abounds. No decisions have been made about additional stimulus payments. The outcome of the fast-approaching election weighs on investor’s minds as well. The rising number of new COVID cases is another concern.
Earnings season is underway. So far, results have been relatively uneventful. We can take some solace in today’s improvement in jobless claims. So far in October, the S&P 500 is up 2.7%. It is 6.9% higher year-to-date.
In general, you should not adjust your portfolio due to election-related concerns. As I discussed in this recent webinar, neither the president nor his party matters much to markets. Remaining focused on the long term makes the most sense.
Here are the links to this week’s articles as well as a brief description of each:
1. Four Behavioral Biases – and How to Fight Them. Our emotions often get in the way of good financial decisions. Our brains use shortcuts that can cause big problems. Academics have already named about 200 different cognitive biases. This article identifies four main categories of behavioral errors. Recognizing biases is only a start. We must figure out how to counteract them. Check this blog for more specific examples of biases that affect us as investors.
2. These Are the 5 Best Places to Retire in America. When talking to clients about their retirement goals, one topic that always comes up is where do you want to live in retirement. Some want to remain in place. Many want to relocate. Key factors to consider are proximity to family, climate, and taxes. It’s not surprising that four of the top five locations suggested in this article are in Florida. The number of airports makes travel relatively easy, the climate is warm, and you don’t have to worry about state taxes. Many of these cities also score well on healthcare and/or home affordability.
3. How Much Lifestyle Creep Is Okay. When you get a raise how do you celebrate? No matter how you use the newfound cash, you have fallen victim to lifestyle creep. In other words, your spending increased in conjunction with the bump in pay. It only seems fair that you spend more money when your income increases. What if spending too much delayed your retirement? How much can your spending increase? The answer varies depending on your savings rate. For most, the limit is around 50%. Spending more than 50% of future raises will likely delay your retirement.
4. The Real Reasons You Can’t Focus on Your Work. Getting things done requires our focus and attention. Many of us procrastinate. Some consider it necessary. It’s not. Procrastination steals gains. It serves as an obstacle between greatness and not quite making it. Why do we procrastinate rather than focus on our work? Here are some reasons (read the article for the rest):
· You fear success
· You haven’t even tried
· You’re making excuses
5. The Stock Market’s Strength Tells Us Less About the True State of the Economy Than at Almost Any Other Time Over the Last Five Decades. Repeat after me: “The stock market is not the economy.” According to a study cited in this article, the stock market has become more disconnected from the economy. In fact, this trend goes back at least five decades. The shift away from manufacturing toward a high-tech economy plays a key role in this disconnect. Why? Think about how many employees the two types of companies have.
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We hope you find the above posts valuable. If you would like to talk to us about financial topics including your investments, creating a financial plan, saving for college, or saving for retirement, please complete our contact form. We will be in touch. We can schedule a call or a virtual meeting via Apprise Wealth Management’s Zoom account.
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Phil Weiss founded Apprise Wealth Management. He started his financial services career in 1987 working as a tax professional for Deloitte & Touche. For the past 25+ years, he has worked extensively in the areas of financial planning and investment management. Phil is both a CFA charterholder and a CPA.
Located just north of Baltimore, Apprise works with clients face-to-face locally and can also work virtually regardless of location.