We’ve crafted hundreds of financial plans over the years.

Here are some of the most overlooked opportunities we see during our financial planning meetings.

Not fully understanding different accounts/their roles

• Employee benefits – Your employer retirement plan is likely one of the best benefits you have access to during your working years. We often see people not fully understanding their plan or not fully utilizing the plan(s). This can also be said about Roth 401(k) options, Flexible Spending Accounts (FSAs) and Health Savings Accounts (HSAs).

• Tax implications – Your employer 401(k) is a tax-deferred account and is one of a few savings buckets you can utilize for big life goals like buying a second home or retiring. Would it make sense to funnel money into the taxable and/or tax-free buckets? From there, additional tax-planning may revolve around things like tax loss harvesting in the taxable bucket or making Qualified Charitable Contributions (QCDs) from the tax-deferred (IRA) bucket, when appropriate.

Not having a cohesive investment strategy

This is a big one. It’s why investment management is such a big part of our work.

• Asset allocation – Most often, we find people utilizing an approach that is too aggressive given their stage of life. Occasionally we’ll run into a family that is too conservative. Remember “Goldilocks and the Three Bears?” We’re looking to craft portfolios that aren’t too “hot” or too “cold”, but just right!

• Poor advice – You’d be amazed how often we run into poor investments because “their neighbor told them it was a good pick” or they’re chasing past performance!

• Ignoring fees – There are many investments (and advisors) that come with hidden fees. These fees can eat away at returns, and they can be very hard to find!

Some of the fees we look out for include: 12b-1 fees, front-end load, back-end load, annuity fees, etc. We push clients to ask outside advisors: “How do you get paid?” and “What are all of my fees?”

• Ask the question – When all else fails, it’s always a good idea to ask, “Does this account and its investments fit my long-term goals?”

Not fully understanding when (and how) to retire

• By far, the most common question we get – “Do I have enough to retire?” It’s understandable and there are a lot of factors to consider. Even those with large amounts of savings are asking this question – they may not have a good handle on how much their household is actually spending.

• Transitioning from saving to spending – We save, save, save, for so many years. People often struggle with the idea of flipping that switch from saving to spending (and how to do so tax efficiently).

Getting the family on the same page

• How do I balance retirement savings with helping my children? – Many people struggle with how to balance their own retirement savings/spending with sharing their wealth with children for things like college, cars, weddings, homes, etc.

• Only one family member knows about the finances – Oftentimes one person in the family handles the money, and that’s okay. But it’s important for multiple family members to be educated and aware of the financial situation, accounts, and planning information. This ensures your legacy wishes are adhered to and that there are no (burdensome) surprises for the survivors after your passing.

Of course, every person and family are different. These are simply some of the more commonly overlooked opportunities we see.

If you work with us, we may have talked about one (or multiple) of these items.

If you haven’t worked with us and you think you may be falling into one of these missed opportunities, reach out to us!

“What should we have for dinner tonight?”

Do you ever find yourself asking that question? It’s a dilemma that we face regularly, whether we’re cooking for ourselves, our families, or even planning a dinner party for friends.

In this article, we’re talking about cooking and investing. Why? We’ve found that most people are quite passionate about both food and money. Both require a blend of art and science, a touch of creativity, and a lot of planning.

Getting Started: Setting Your Goals

Before cooking can begin, you need to decide what you’re making. Are you in the mood for something quick and easy, or do you want to challenge yourself with a gourmet recipe? Do you have dietary restrictions or specific nutritional goals?

In the financial world, this is equivalent to deciding your goals. What do you hope to accomplish by investing? Are you saving for retirement, building an emergency fund, or aiming for a major purchase like a home? Just like in cooking, where the end goal determines the choice of dish, your investment goals will shape your financial strategy.

Selecting Ingredients: Asset Allocation

Once you’ve decided what you’re making, the next step in the kitchen is to gather the right ingredients in the right amounts. Are you baking a cake, roasting a chicken, or preparing a salad? Each requires a unique set of ingredients and proportions.

In investing, this step is called “asset allocation.” It’s one of the most important decisions an investor can make. Just as you wouldn’t want too much salt in your dish, you need to balance your investments appropriately. What combination of stocks, bonds, and cash makes sense for your situation?

Crafting the Recipe: Portfolio Construction

A recipe is a set of instructions for preparing a meal. It outlines the right ingredients in the right proportions, combined and cooked in a specific way. Similarly, portfolio construction involves selecting investments based on their expected return and risk characteristics and how they interact together.

Imagine you’re making a complex dish. Each ingredient needs to complement the others, creating a harmonious final product. Investments work the same way. A well-constructed portfolio is a blend of different assets that together aim to achieve your financial goals while managing risk.

Our US Stock Recipe: A Balanced Approach

When creating a US stock portfolio, one of Conrad Siegel’s main ingredients would be the S&P 500. This index represents a broad spectrum of large, established companies across various industries.

To add diversity and potential for higher returns, we might add a dash of smaller stocks (Mid Caps and Small Caps) and sprinkle in some Value stocks. Academic and financial market research has shown that there is a long-term premium associated with value and smaller stocks. These additions can enhance the flavor of your portfolio, much like how spices can elevate a dish.

The Influence of Culture: Global Diversification

One of the best parts about cooking is the influence that culture has on what ends up on our plates. Our culinary experiences are enriched by global ingredients, spices, and techniques. Similarly, your portfolio should have global exposure to benefit from opportunities outside your home market.

Our global portfolio follows a similar recipe. We add exposure to smaller stocks and value stocks and sprinkle in emerging markets. This diversification helps manage risk and can offer growth opportunities as different markets may perform well at different times.

The Importance of Fresh Ingredients

Just as fresher ingredients typically result in a better entrée, high-quality investments can enhance your portfolio’s performance. Staying informed about market trends, economic conditions, and company performance can help you make better investment choices.

Conclusion: The Art and Science of Cooking and Investing

Cooking and investing share many parallels. Both require careful planning, thoughtful selection of ingredients, and a balanced approach to achieve the desired outcome. Whether you’re crafting a delicious meal or building a robust portfolio, the right recipe can make all the difference.

So, next time you find yourself asking, “What should we have for dinner tonight?” remember that the principles you apply in the kitchen can also guide you in the financial world.

The internet is all abuzz about Artificial Intelligence (AI). If you’ve tuned into any news show, website, or podcast in the last few months, chances are you’ve heard a story about AI. The clickbait titles range the gamut from the negative to the positive:

“AI Will Take Your Job!”

“AI: The Future of Healthcare”

“AI Could Be Humanity’s Last Invention”

“How AI is Revolutionizing Education”

This hot topic seems to have captured our collective imagination in a big way. But is AI going to save us or destroy us?

It shouldn’t surprise you to hear that our answer is “neither.” As with most issues the media blows up into larger stories, the answer is somewhere in the middle. No question, AI has some positive applications, and these are surely going to be a game-changer in certain fields. For example, AI-driven medical diagnostics have the potential to catch diseases earlier and more accurately than human doctors. In the realm of climate science, AI can help model and predict changes more precisely, aiding in the fight against global warming.

On the other hand, there are risks involved with AI. Concerns range from job displacement due to automation to ethical issues surrounding surveillance and privacy. High-profile voices in tech, such as Elon Musk and the late Stephen Hawking, have warned about the existential risks AI could pose if not properly managed. But that doesn’t mean it will sound the death knell for humanity.

What about AI and investing? One area where AI has not shown incredible promise is that of picking stocks. Don’t believe us? David Booth, from Dimensional Advisors, asked ChatGPT about investing, and the answer was basically “Do Not Trust ChatGPT.” This highlights a crucial point: while AI can process vast amounts of data and identify patterns that humans might miss, it doesn’t possess the intuitive judgment and foresight that experienced investors bring to the table.

Additionally, the stock market is influenced by a multitude of factors that are often unpredictable and driven by human emotions. AI, despite its advanced algorithms, can’t account for the whims and irrational behaviors of human investors. This is why, despite the potential of AI in many areas, it hasn’t revolutionized stock picking as some might have hoped.

How should we feel about AI and the future? Whatever your feelings are on AI, we believe it’s neither a reason to panic nor a reason to go all-in on an untested technology. There is an old saying in the investment world that the four most dangerous words are “This Time Is Different.” All the hype surrounding AI includes claims along those lines. It usually does not behoove investors to make big bets on the latest trends but rather to stay the course with one’s well-diversified portfolio, incorporating an overall asset allocation that matches their risk tolerance and time horizon.

AI represents a significant technological advancement with the potential to transform many aspects of our lives. Its impact will likely be complex, with both positive and negative elements. As we navigate this new landscape, it is crucial to approach AI with a balanced perspective, recognizing its capabilities while remaining vigilant about its risks. Just as with any other major innovation, the key lies in thoughtful and measured integration rather than succumbing to hype or fear.

Investing during an election year can be a source of anxiety for many investors. The potential for significant policy changes and the uncertainty surrounding election outcomes often lead to questions about how markets will react and what investors should do to prepare. Understanding historical trends and maintaining a disciplined approach can help alleviate some of these concerns.

Historical Market Performance During Election Years

Historically, markets have demonstrated resilience and even strength during election years. Since 1926, the S&P 500 index has averaged an annual return of just over 10%. Notably, during election years, this average return has been slightly higher at 11.6%. The year following an election also tends to perform well, with an average return of 10.7%. These figures suggest that while elections introduce a degree of uncertainty, markets often continue to perform robustly.

Volatility and Election Outcomes 

Contrary to what might be expected, historical data does not show a significant increase in market volatility during election years. Analyzing the standard deviation of the S&P 500, which measures market volatility, reveals that volatility is actually lower during election years compared to non-election years. The only period where increased volatility is evident is the month following the election. This suggests that while markets do react to election outcomes, the reaction is relatively short-lived.

Political Parties and Market Performance 

A common question is whether the market favors one political party over another. Historical data indicates that there is no clear pattern to suggest that markets perform better under Democratic or Republican presidencies. Various factors, including economic policies, global events, and broader economic conditions, have a more substantial impact on market performance than the political party in power.

Investor Behavior and Market Timing 

One of the most crucial points for investors to remember is the importance of staying invested and avoiding the temptation to time the market based on election outcomes. Trying to move investments in and out of the market in response to political events can be detrimental. Studies have shown that investors who attempt to time the market often end up underperforming due to selling low during downturns and buying high during recoveries.

Focus on Long-Term Goals and Asset Allocation 

Investors should focus on what they can control, such as their asset allocation and risk tolerance. Younger investors with a longer time horizon can afford to take on more risk, while those closer to retirement should consider reducing exposure to volatile assets like stocks. Ensuring a well-diversified portfolio that includes both domestic and international investments can also help mitigate risks. 

Elections undoubtedly introduce a layer of uncertainty into the market, but historical data suggests that maintaining a disciplined, long-term investment strategy is the best approach. By focusing on asset allocation, diversification, and staying invested, investors can navigate the volatility and continue to work towards their financial goals regardless of the political landscape.