Life After the Election: What Happens Now?

After a very tumultuous time in our country, the elections are over. So, what happens now?


Well, the election may not be as memorable as many have written—we tend to forget more easily than we remember.  It wasn’t that long ago when Ronald Reagan became a two-term president back in 1981.  But it was also an ugly and very contested election.  President Reagan won the Electoral College vote but the popular vote was still close, with President Reagan at around 51%.  

But this article isn’t about the election and politics as much as it’s about how the election may affect us as investors in the stock market, as well as what to expect with our stock markets.  I, for one, have learned to expect the unexpected.  

Our stock markets never cease to amaze me…at least in the short term.  But when you stand back, you can see the forest for the trees and it is easier to navigate.

While I probably sound like a broken record, it is true that to make and sustain real wealth over time, you don’t need to perfectly time the stock markets.  You also don’t need to come up with an asset allocation and forget about it.  Rather, create a long-term strategy—one that will allow you to capture and keep positive returns over an extended period of time. 

Here is what we know—“the facts” so to speak:  

•  Markets rise and fall over time but in an upward trend.  
• The average bull to bear market cycle is usually 4–6 years.  
• Bull markets are usually longer in duration than bear markets.  However, ugly bear markets, like in 2008, can erode a significant amount of your stock market investments.  
• If the value of your stock market account drops 35% you need 54% just to break even.  Even     worse, a 50% decline requires 100% increase to break even. 
• We are entering year 8 of a bull market.  
•  The 1929 Crash occurred after an 8-year bull market.

Okay…what else do we know?

In 1981, when Ronald Reagan began his presidency, the S&P 500 dropped 10%.  However, after his 8-year term, the S&P 500 had average growth of 12% per year.

In 2009, when Barack Obama began his presidency, the S&P 500 rose over 19%.  We aren’t quiet finished with his 8-year term, but through December 1, 2016 the S&P 500 had average growth of over 18% per year.

So, what does this mean?  In my opinion, it means nothing as far as the stock markets are concerned.  They will continue to rise and fall over time in an upward trend.  But we are entering year 8 of a bull market cycle, which simply means that the risks are much higher today than if you invested 8 years ago.  As I am a proponent of trying to avoid corrections of 20% or greater, I believe we should be cautious until our market risk is much lower.  You can invest in today’s stock market, but I personally would reduce my equity exposure and even bond market exposure.  

Not to sound like a politician and contradict myself—but, if you can remain invested during market corrections and create the correct asset allocation portfolio for your situation, this type of portfolio will most likely yield higher returns over long periods of time. 

So, what kind of investor are you?

If you would like more information or if you would like some help on how to evaluate and allocate your investment portfolio - Book an appointment today 

                         Your Team at Berson Money Management

                                            ...because money matters!

Investment advisory services are offered through Berson Money Management, Inc, a registered investment adviser offering advisory services in the State of California and in other jurisdictions where exempted.  The contents of the blog are not to be copied, quoted, excerpted or distributed without express written permission of the firm.  Any other use beyond its author's intent, distribution or copying of the contents of this e-mail is strictly prohibited.  Nothing in this document is intended as legal, accounting, or tax advice, and is for informational purposes only.

The Election and the Bull Market: A Tale of the Unloved

I believe most will agree this is a very unloved and unpopular presidential election. As Trevor Noah from The Daily Show summed up in his Show on July 6: both Senator Hillary Clinton and Donald Trump are running against the only candidate they could possibly beat. 

  

Laugh or cry but read what James Stack wrote in his recent newsletter about the U.S. stock market: from inception in March 2009, this has been one of the most unloved bull markets in Wall Street history.

Why would he say this? Our U.S. stock markets have gone sideways since December with a roller coaster of a ride.  The S&P has gone from 2092 (December 4, 2015) down 263 points to a low of 1829 (February 11, 2016).  Then up 361 points to a high of 2190 (August 15, 2016) and it is back retrenching at around 2088 this week (November 3, 2016).

The serious money is wondering when we will see the next big fall. The funny money believes they are smarter than the rest of us and are trading every day. What I have is perspective. I have watched clients talk about the fish that got away. Their portfolio was up 80% at one point in their history. And then, like a Vegas gambler, they gave it all back and sometimes end up being down 30%. And that is if they were lucky.  That is one wild ride in my book.  Remember, it isn't about making all the money it is about making and keeping as much of it as possible.

What should you do? Much like our politicians, what we say has to do with whom we are talking to. For those that like the ride and can truly hold out through the high highs and low lows - well then hold if your overall allocation is correct and if you won't need to sell stocks at the wrong time. 

History does support that this will yield higher returns. But most of us are less robotic and more emotional. Therefore, would we be better off taking some (or a lot) of money off the table at this time? Where do we put it?  Cash? Why not? Sometimes a zero percent return is better than a negative 30% return.

During most election years, our U.S. stock markets end up higher for the year. It is the year after an election we need to keep an eye on. Again, quoting James Stack: the past 88 years, 9 of the 14 U.S. economic recessions began in the year following the election. Additionally, 3 others began during a presidential election year.

This isn't a prediction of what is to come. This is an 'a-ha' moment when we decide what kind of investor we are and whether our portfolio matches our intentions.  

For more on emotional investing take a look at what Meir Statman wrote in an article on June 14, 2015 in the Wall Street Journal titled "How Your Emotions Get in the way of Smart Investing."

Book an appointment today if you would like more information or if you would like some help on how to evaluate and allocate your investment portfolio.

                         Your Team at Berson Money Management

                                            ...because money matters!

Investment advisory services are offered through Berson Money Management, Inc, a registered investment adviser offering advisory services in the State of California and in other jurisdictions where exempted.  The contents of the blog are not to be copied, quoted, excerpted or distributed without express written permission of the firm.  Any other use beyond its author's intent, distribution or copying of the contents of this e-mail is strictly prohibited.  Nothing in this document is intended as legal, accounting, or tax advice, and is for informational purposes only.

Fiduciary: A Latin Word Meaning "Trust"

Something to make you smile: Watch this short, very funny YouTube video with John Oliver's thoughts on your retirement plan, followed by my thoughts on the major takeaways.

John Oliver's Retirement Plan 

1. As he points out, it is true that the title your financial professional uses may not hold any specific credential behind it. He brings to light that FINRA (Financial Industry Regulatory Authority) states, "...be aware that Financial Analyst, Financial Adviser, Financial Consultant, Financial Planner, Investment Consultant, or Wealth Manager... are generic terms or job titles, and may be used by investment professionals who may not hold any specific credential."

2. Another important point: Annuities are complicated and may be appropriate in a few circumstances, but if you're interested, keep the following in mind: (a) Your representative is a sales person who earns a high commission; (b) Annuities have very high fees; (c) It is hard to get money out of an annuity without paying a fee or fine.  

This is why he highlights Senator Elizabeth Warren's 2015 report showing the many conflicts of interest in the annuity industry.

3. He mentions a 60 Minutes Broadcast discussing the hidden fees in your 401k portfolio that include but are not limited to legal, transaction, trustee, bookkeeping, etc. Fees can have a huge impact on anyone's portfolio.

4. He addresses the ongoing debate over an actively managed investment strategy versus a low-fee indexed annuity, much like the debate over whether Democrats or Republicans are the better option.

 5. Also discussed is the importance of having an adviser that has a "fiduciary" responsibility, along with the new law requiring that your 401k advisor is a fiduciary.

I loved his take on the issues that are prevalent in our industry today. However, as a wise person once told me, "don't throw the baby out with the bathwater." 

Do your homework and ask the hard questions of your trusted adviser. If you don't understand what they are saying, head for the door. If this is this something that interests you and you will devote the time to it, then go it alone. If not, may I recommend you find the right "fiduciary" professional to help you.

If you need help, don't hesitate to reach out to us. We are committed to helping you achieve financial security in a changing world.

                                                    Your Team at BMM

.....Because Money Matters

Investment advisory services are offered through Berson Money Management, a registered investment adviser offering advisory services in the State of California and in other jurisdictions where exempted.  This article was provided by courtesy of Dimensional Fund Advisor LP, an investment advisor registered with the SEC. This communication is not to be directly or indirectly interpreted as a solicitation of investment advisory services to residents of another jurisdiction unless otherwise permitted.   The contents of this email and any accompanying documents are confidential and for the sole use of the entity to whom they are addressed.   They are not to be copied, quoted, excerpted or distributed without express written permission of the firm.  Any other use beyond its author's intent, distribution or copying of the contents of this e‐mail is strictly prohibited.  Nothing in this document is intended as legal, accounting, or tax advice, and is for informational purposes only.

Helpful Tips for the New Year

It is that time of year when we reset our goals and get excited for the year ahead.  This is the time to be meeting with your strategy team. I’m always reminding my clients that a qualified team of specialists can help them reach their financial goals.

The purpose of this article is to help you start the year in a positive direction, with a few tips to help with your financial goals.

This is the time of year when most of us are preparing our 2015 information to share with our CPA, who is a much-needed part of our strategy team. One of the important items to report is mileage, yet many of us scratch our heads trying to make sense of this…until now.

If you have a smart phone, I discovered a useful little tool called MileIQ. You no longer need to keep a manual log, whether it be a digital log or a handwritten paper log. This program runs in the background every time we drive and allows us to swipe left or right to determine if it the miles were for business or personal reasons. And it’s as simple as that. I just found it, so I’m testing it out as I write this. But so far, it has proved to be very helpful. So check it out if this is something you need. 

Another tool that has assisted me for some time is having a way to manage my documents. We are supposed to be a paperless society and yet it often doesn’t seem that way. And many of us don’t realize that having multiple providers for utilities, bank statements, mortgage statements, credit cards, etc. means storing a million different user IDs and unique passwords. What we also may not realize is that these providers don’t store our documents indefinitely; in fact, if the IRS comes calling, we need a way to generate these statements easily and painlessly. So, check out FileThis.com. It has many useful features: it creates bill reminders so you are never late on a payment; it has a dashboard that allows you to find all balances in one place; it captures your receipts on the go; it helps with organization so you can easily find your account statements; and best of all—it is secure and 100% paperless.

Hope these two tools provide you with some much-needed help in organizing and keeping on top of your 2016 goals. Check them out!

If you need help in putting together a financial team so you can steer your ship to financial freedom, please reach out to us.  We are committed to helping you reach financial security in a changing world.

                                                    Your Team at BMM

.....Because Money Matters

Investment advisory services are offered through Berson Money Management, a registered investment adviser offering advisory services in the State of California and in other jurisdictions where exempted.  This article was provided by courtesy of Dimensional Fund Advisor LP, an investment advisor registered with the SEC. This communication is not to be directly or indirectly interpreted as a solicitation of investment advisory services to residents of another jurisdiction unless otherwise permitted.   The contents of this email and any accompanying documents are confidential and for the sole use of the entity to whom they are addressed.   They are not to be copied, quoted, excerpted or distributed without express written permission of the firm.  Any other use beyond its author's intent, distribution or copying of the contents of this e‐mail is strictly prohibited.  Nothing in this document is intended as legal, accounting, or tax advice, and is for informational purposes only.

Welcome to the Jungle - Things to Watch Out for in 2016

The Ostrich Effect 

Bean counters have actually done a study showing that nearly half of us don’t know how much money we will need in retirement. Is this myth or truth? What is a myth is that the ostrich doesn’t actually bury its head in the sand, but it may appear that it does. Either way, if you don’t know how to determine what you will need in retirement, seek the help of an investment professional.

Kiss Frogs 

Kiss a lot of frogs to find your prince (or princess). We all know why we don’t want to keep all our eggs in one basket. What you may not know is that some forms of insurance got started this way, by spreading the risk over many baskets (um, ships) and not just one. In the investment world, this is called diversification, and there are many ways to do it. Make sure you know how.

Multiply like Rabbits 

Multiply like rabbits, but not in the way you might think! I am actually talking about the power of compounding. A little-known fact about compounding: all money is not created equal if invested over different time periods. Tell your college grad that investing $4,000 at age 20 and earning 10% a year until age 60 would give him a nice retirement fund of $181,037—but if he were to wait to invest the $4,000 at age 30 and earn the same 10% a year until age 60, he will only have $69,798. Now that is nothing to sneeze at, but wouldn't you rather have bucket one? That is a simplistic example of the power of compounding.

Counting Sheep

Don’t be a sheep and follow the herd—they may be going in the wrong direction. If you are investing in a good strategy, know that every good strategy still has its issues. So, be aware of the normal fluctuations of your strategy and hold the course. If you can’t, you may be in the wrong strategy. But course correction is often the reason why many of us don’t get the same returns over time, because we didn't hold the course during the normal fluctuations of our investment and see it through. Working with your financial advisor may help you overcome your fears and make the right move.


Just as successful athletes rely on coaches and trainers to help them achieve their goals, most investors can probably benefit from having a "financial coach" to remind them about their New Year's resolutions and keep them on track toward a more prosperous future.

Wishing you and your family good health and good wealth in 2016!


                                                    Your Team at BMM

.....Because Money Matters

Investment advisory services are offered through Berson Money Management, a registered investment adviser offering advisory services in the State of California and in other jurisdictions where exempted.  This article was provided by courtesy of Dimensional Fund Advisor LP, an investment advisor registered with the SEC. This communication is not to be directly or indirectly interpreted as a solicitation of investment advisory services to residents of another jurisdiction unless otherwise permitted.   The contents of this email and any accompanying documents are confidential and for the sole use of the entity to whom they are addressed.   They are not to be copied, quoted, excerpted or distributed without express written permission of the firm.  Any other use beyond its author's intent, distribution or copying of the contents of this e‐mail is strictly prohibited.  Nothing in this document is intended as legal, accounting, or tax advice, and is for informational purposes only.

Divorce American Style—Important milestones

Divorce is painful for most of us no matter the duration of the marriage.  It probably doesn't occur to you to think about it, but it should-because how long you were married may affect how your State's Divorce Court considers alimony and other issues.

Knowing what your state considers a “long duration” marriage will affect the payout of alimony.  Interestingly, in New York, no spousal support is usually ordered until the couple has been married for at least twenty years. While in California and Texas the duration of your marriage is 10 years. If you have been married for a shorter duration, then any alimony payout will usually be calculated over a much shorter time period.

How about splitting retirement accounts? Many couples know that the spouse usually gets a payout from the other person's retirement account. However, I have found that most don’t realize that the payout doesn't have to go directly to the spouse in their name-but can go into a retirement account in their name, savings on taxes.  You accomplish this with a court ordered QDRO, which will allow the payout to be made directly into the recipient’s retirement account.

This is true of a pension plan as well.  Usually there is no distribution from a Defined Benefit Pension Plan until that person retires.  However, the spouse is eligible for a portion of that payout.  You also need the QDRO and it needs to be recorded with the Defined Benefit Pension Plan.  With a Defined Contribution Pension Plan, usually known as a 401k, there can be a court-ordered QDRO which will allow for a tax-free distribution to the recipient’s retirement account.

As with most things, these decisions are based on your state’s divorce and tax laws, so always seek the advice of your financial team. At Berson Money Management, your financial team usually consists of your attorney, CPA, and advisor. Often it will include your mortgage broker, insurance broker, and banker so that your team is working for you on all of your financial needs.

Investment advisory services are offered through Berson Money Management, a registered investment adviser offering advisory services in the State of California and in other jurisdictions where exempted.  This communication is not to be directly or indirectly interpreted as a solicitation of investment advisory services to residents of another jurisdiction unless otherwise permitted.   The contents of this email and any accompanying documents are confidential and for the sole use of the entity to whom they are addressed.   They are not to be copied, quoted, excerpted or distributed without express written permission of the firm.  Any other use beyond its author's intent, distribution or copying of the contents of this e‐mail is strictly prohibited.  Nothing in this document is intended as legal, accounting, or tax advice, and is for informational purposes only.

Legacy Planning: Passing Your Wealth to the Next Generations

For years, the Family Living Trust was an important tool used in legacy planning by your financial team.  One of the purposes of this Family Living Trust was to help you transfer as much of your wealth to your heirs by saving on estate taxes (a.k.a. transfer tax—transferring your wealth to the government).

However, when the estate tax law changed it became less of an issue for estates valued below $10.6 million for a couple or $5.3 million for an individual because there was no estate tax.  So, do you still need a financial team in legacy planning?

Absolutely.

There are areas that are often missed and can cause issues for many families if not addressed.  This article will shed light on a few of those areas, and I recommend you reach out to your trusted advisor and advisory team for more details on what to do and how to protect your family and your legacy.

Let’s start with why you need legacy planning.  Legacy planning is used to pass as much of your wealth as possible to your heirs and to continue to create financial security for your spouse and your family (heirs) after you die. I have found that often only one person in a family will handle the financial affairs and planning.  If he/she is the first to die, then any planning that may have be done over the years usually goes awry.  Why?

A recent article in Investment News by Liz Skinner states that statistics show that 70% of family wealth disappears by the end of the second generation and 90% by the end of the third generation.

The article went on to highlight one of the reasons for this, and the example made me smile: A financial advisor had helped his client with legacy planning because the client wanted to make sure his son was financially secure.  He never had any discussion about his planning with his son.  Then, the week that the client passed away, the advisor got a call from the son wanting to know how soon he could have the money.  He was building a pool and the contractor needed to be paid.  So much for dynasty planning.

Not surprising, as many of us don’t include our grown kids in these discussions. And often it isn't a two sided conversation.  It seems that talking about money has always been such a difficult conversation.

Many of us will say that we never had these conversations with our parents when we were younger.  However, we don’t have to make this the norm.  I encourage clients to begin talking to their kids and teaching them what they know about money, as well as learning what their kids already know about money—and then planning as a family.

I have a client who inherited money, along with his 3 adult children, when the last of his parents passed away.  But his parents’ planning and what they had hoped for their heirs wasn’t clear.  While they wanted to honor the parent/grandparent, they didn’t know what that meant.

Proper contingency planning is often overlooked and can cause havoc with your estate.  Retirement accounts should have a designated beneficiary but often don’t.  Many clients don’t realize that naming their trust to be the beneficiary of their retirement plan isn’t a good idea, as it will cause a distribution from the IRA, and then taxes will be due immediately, eroding the value of the account.

A retirement account must name your spouse as your beneficiary.  However, the spouse is allowed to sign and acknowledge you are naming someone else as beneficiary (such as your child or grandchild).

Name a contingent beneficiary(s) in the event a primary beneficiary has passed.  Review the beneficiary information regularly, as death or divorce may change what is best in the legacy plan.  The paperwork should be as complete as possible, so you usually need their name, date of birth, relationship to you, and social security number.

When a spouse dies, it isn’t unusual for the other to remarry.  In fact, 61% of male widowers are in a new romantic relationship within 25 months of a wife's death. These new relationships can create issues later for the combined families.  One area of trouble can be spousal sharing rules and homestead rights, which in some states can trump wills. You definitely want to have a discussion with the estate attorney and your financial advisor about this.

Planning involves discussing the pros and cons to determine the right decision for your family. Talk to your team of financial experts, the estate attorney, CPA, and your financial advisor to decide what’s best for you.

I hope this stirs some thoughts and discussions to aid you and your loved ones.  Your financial team of experts working with your trusted advisor at Berson Money Management would be happy to discuss this or any other financial matters with you.

Investment advisory services are offered through Berson Money Management, a registered investment adviser offering advisory services in the State of California and in other jurisdictions where exempted.  This communication is not to be directly or indirectly interpreted as a solicitation of investment advisory services to residents of another jurisdiction unless otherwise permitted.   The contents of this email and any accompanying documents are confidential and for the sole use of the entity to whom they are addressed.   They are not to be copied, quoted, excerpted or distributed without express written permission of the firm.  Any other use beyond its author's intent, distribution or copying of the contents of this e‐mail is strictly prohibited.  Nothing in this document is intended as legal, accounting, or tax advice, and is for informational purposes only.