Category: Economy

Investing Perspective in an Election Year

October 6, 2020

by Curtis Burkholder

As we enter the fall season with changing leaves and weather, it is easy to feel the world around is changing as well.  However, as the writer of Ecclesiastes wrote, “There is nothing new under the sun”.  In light of all the changes, we can be paralyzed by feelings of fear as we consider the upcoming election, the nationwide racial unrest, and the ongoing Covid-19 concerns.  It is important to maintain a long-term perspective and look at the facts to confront some of our emotions and the pictures we paint in our own mind.  It is natural to want to react and wait to invest for a “better time” or when “things don’t seem as scary”.  However, as we will look at below, the facts tell a different story.

In looking at historical market averages, the S&P 500 Index has averaged approximately 11% over the past 75 years.  This is a time period that covers both Democratic and Republican administrations.  If you fast forward 2 months from now, the election will be over. Some people will be happy, and others will be fearful based on the winning candidate.  These emotions can lead us to make irrational investment decisions. We need to always remember that it is important to remain invested in the markets and not give in to fear.

A second fact to consider is that you don’t need to like who is President to do well in the market.  According to Invesco, some of the best returns historically came when the presidential approval rating was between 36-50%.  This occurs approximately 40% of the time.  Take a moment to stop and reflect on this – the best returns in the stock market have come when half or more of the country has not approved of the sitting president. 

A third fact to consider is that while we may feel this election is more divisive and contentious than in the past, we can look at our history as a nation and find another political disagreement that was more contentious.  In 1804, the sitting Vice President of the United States, Aaron Burr, engaged the former US Treasury Secretary Alexander Hamilton in a duel.  This duel led to the death of Hamilton.  While there are strong opinions on either side of the political spectrum today, none of us expect to see the Vice President (from either party) engage in a duel!  As a nation based on freedom, there will always be different opinions and perspectives.  We cannot let the political tensions impact our investing decisions.

As always, if there are significant changes to your personal situation, please contact us so we can relook at your plan and adjust accordingly.  We do not want to make emotional decisions in reaction to the news, markets, or presidential elections.  However, we will make changes as your goals and life situations change.

In conclusion, as we consider where we are as a nation and look to the future, none of us knows what today or tomorrow holds.  But we do know WHO holds our future – Jesus Christ. As we look at the past, we can gain helpful perspective.  We don’t know who is going to be elected, what the market is going to do, or if there will be a spike in COVID 19 cases this fall.  We can take courage and comfort in the words of Jesus from John 14:27 “I am leaving you with a gift—peace of mind and heart. And the peace I give is a gift the world cannot give. So don’t be troubled or afraid.” (NLT)

Market Update

May 22, 2020

by Ron Bare

In February of this year, I spent a week in Florida with my family as well as with some of our team from the office. Visiting colleges with our daughter, going to Disney’s Animal Kingdom, enjoying the beach, and attending the annual “Kingdom Advisor Conference” all seem like a distant memory. It is hard to believe that this was only three months ago! While we had heard a few “rumblings” of a new virus during our travels, we saw no masks or any cause for concern, even when boarding our plane on February 23rd.

The equity markets at the time were reaching new highs. The US economy was very strong, with record low unemployment and solid GDP growth rates. Although some were saying markets were beginning to look overvalued, the bottom line was that companies were profitable and were predicting even greater profits throughout 2020.

Then Covid-19 arrived and with it, full-blown panic. The market dropped 34% in 33 days, a record decline.  I discussed this in our video blog in late March (which you can find on our website.) Now, two months later, the dust has begun to settle and although the panic has subsided there is still uncertainty about where we go from here. The markets have since recovered much of their decline, however, a large amount of skepticism remains. With this in mind I thought it may be wise to pass on a few thoughts relating to investing success over time:

  1. When stock prices are going down, the enduring value of the underlying companies is going up. The lower prices go, the more value is to be had at those prices. You understand this in almost every other area of your economic life (we all love to purchase something on sale!) It is essential to apply this same principle to the stocks of American companies we invest in – or you may never become a successful investor.
  2. Staying fully invested during market declines is the only sure way to capture the entirety of the markets long term advance. It is not possible to consistently sell out of falling markets and buy back later at the “right” time. Most of the market driven news is geared toward market traders, NOT long-term goal and plan driven investors. To the latter, market fluctuations are just part of the process to be rewarded for the long term returns of some of the greatest companies of America and around the world.
  3. You should never try to make long-term investment strategies out of short to intermediate-term disruptions. We always advise to make investment decisions based on our values and financial plan, not short-term events or emotions. The past few months are a good example. Let’s assume you ignored the market downward collapse of 33 days in late February and March and woke up today, May 15th, and took a look at the markets. Yes, they are down 15-16% from earlier highs, but that is in the range of a typical market correction that happens about once every 12-18 months.

There is the ongoing chance that the markets will continue to drop back due to the uncertainty we still are facing with the Covid-19 virus and economic wake it will leave. If you adhere to the ideas presented above, then these fluctuations should not impact your long-term goal and plan driven investment strategy.  Perhaps when we focus on the long term, we not only will make much better investment decisions in the short term, but we also will rest better as we wait for time to pass.

The CARES Act

April 6, 2020

The CARES Act is an acronym for Coronavirus Aid, Relieve, and Economic Security Act.  Below are some thoughts specific to our industry that might be helpful to you:

  • 2019 IRA Contributions: The 2019 IRA contribution deadline has been extended with the tax-filing deadline until July 15th. Make sure that you communicate with us if your contributions are intended to be for prior-year.
  • Early Withdrawal Penalty Waiver: The CARES Act also waives the 10% early distribution on distribution of up $100,000 from IRAs and plans for individuals who meet the requirements of being affected by the coronavirus. The tax would still be due on pre-tax distributions, but could be spread evenly over three years, and the funds could be repaid anytime during the three years.
  • 2020 RMDs: The Act included a waiver for required minimum distributions (RMDs) for 2020. This waiver applies to company savings plans and Traditional and Inherited IRAs. If you would like to stop your 2020 RMDs, please contact our office.
  • Charitable deductions: The Act creates an above-the-line charitable deduction for 2020 (not to exceed $300) with a cash donation to charity, this particularly useful for those using the Standard Deduction on their tax return but still give. If you itemize your deductions, the bill also modifies the AGI limitations on charitable contributions for 2020, to 100% of AGI for individuals and 25% of taxable income for corporations. The bill also increases the food contribution limits to 25%.  The prior AGI limit was 60% for individuals.  Donor-Advised Fund Limits were unchanged, so if you are desiring to maximize the individual or corporate increases, the increased giving must be directly to a qualified charitable organization.

The Bill that was passed is over 800 pages long and covers many things from stimulus, to loan programs, to one-year changes in tax laws, and more.  Please stay close to your accountants, attorneys, and bankers for applicable opportunities this Act provides.  Feel free to reach out to us if you have questions as to how this Bill impacts you and if we don’t know the answer, we’ll point you to someone who does.

If you anticipate receiving a stimulus check, it would be a good time to prayerfully consider how best to use that money since it was not in anyone’s plans as the year started.  If you haven’t been financially impacted by the COVID-19, perhaps consider extra levels of generosity to help those who have needs.

Thank you again for trusting us to walk with you on your stewardship journey.

Market Update

March 12, 2020

by Ron Bare

As mentioned in our previous blog, the Bare Wealth Advisors team believe in helping our clients make financial decisions flowing out of a comprehensive financial plan based on your values and goals. However, we do understand that the current health situation with the virus and also the implications of how this effects your financial goals is probably on your mind. With that in mind, we wanted to share a few thoughts on fear and also a few principles we believe.

Since fear levels in our country (and world) are at high levels, we thought it would be good to share some thoughts and principles related to fear and finances. I have heard that the Bible says do not fear (or be afraid) somewhere close to 365 times, one for each day. This is clearly to remind us that our nature is to fear the unknown and the circumstance we may be faced with. I was reminded in our church service this past week to read Psalms 91 (too long to type in this blog – I suggest going to the YouVersion Bible app to read). Reading this and other scripture is a great way to actively combat fear in our lives and for those we care about.

In addition, as we make financial decisions, we believe reviewing a few basic principles can be effective when we live in times of uncertainty. Here are a few to consider:

  1. God is the owner of all things, including our money (Psalm 24:1). This reminds us we are stewards and should work hard to manage what has been entrusted to us; however, we are not expected to have a crystal ball based on future events that may or may not happen.
  2. Live within your means and be content with what we have (Hebrews 13:5)
  3. Minimize the use of debt
  4. Build liquidity and have some money put back in savings for the unexpected and for income that you may need in the short term (our planning process accounts for these items)
  5. Think long term – the longer term your perspective typically will help you make better financial decisions. (Think back to the financial crisis of 2008 – 12 years ago, we have recovered well)
  6. Give generously – personally I believe this to be a very important step in coming up against fear we may have. Fear causes us to hold tight to what we have rather than have an open hand, look to help someone in need or bless a cause or mission you believe in.

In summary, one of our core values at Bare Wealth is Biblical wisdom. We believe that when we manage our lives and finances according to Biblical principles we can experience:

  1. Contentment under all economic conditions
  2. Confidence in financial decision making
  3. Maximize the use of money, our talents and time for what matters most to us

As always feel free to contact our team with questions on your plan/investments or concerns related to what is happening in our world, we care about you and your family.

Also, please pass this on to any family or friends who may benefit from reading this.

Market Update

March 10, 2020

by Ron Bare

One thing I have learned, working in the financial services industry over the past 24 years, is by having your investment decisions flow out of a comprehensive personal financial plan, based on your values and goals, is essential to making wise decisions over time. The moment you separate your investment decisions and make them independently of a comprehensive financial plan is when those decisions are made based on emotions, news events, or other items that do not point back towards your values and goals.

If you have worked with Bare Wealth for any length of time, you know we believe in planning around our client’s purpose, values and goals and letting these items drive all decision making. However, we do understand when world events cause large movements in the financial markets, feelings of concern may arise regarding how these shifts may impact your objectives. With that in mind, we do not want to be silent when events, such as the coronavirus, influence the markets with an 11% drop in one week.

In case this has caused any concern (or fear) related to life or your finances, we want to assure you that unless your goals or short-term financial needs have changed, it is best not to react to these news events. Let your financial plan have the time it needs to properly help carry out your goals.  As always, we are here to take any questions or inquiries surrounding these events. In the meantime, lets pray for the families impacted by the virus and pray that a solution would be developed to stop the spread of the disease.

When Will This Bull Market End?

October 2, 2017

by Ryan Kurtz

Just in case you haven’t been paying attention the last 3127 calendar days, we are in a bull stock market (as of September 30 measured by the S&P 500).  That means stocks have been on a steady climb and have not had a 20% drop from its highest point since 2009.  So when will this bull market end?

Before answering that question, let’s start by looking at what has really happened in the last 3127 days.

Over the last 8 years investors around the world were willing to pay more to own companies like Walmart, Apple, and Exxon.  Even though the Federal  Government shutdown briefly, terrorists attacked different places around the world,  and  we had two Presidential elections during that time period, investors as a whole have felt confident in owning stocks.  The stock market is like an auction, when you have bidders that are willing to pay more for something, you have to bid higher to get it and that is what investors have been willing to do.

So when will this bull market end?

Many economists, financial advisors, and business writers have been more than happy to give their opinions and predictions on when this may occur.  The truth be told, nobody knows.

This bull could keep running for another 8 years or the market could begin its descent tomorrow.

To keep things in perspective, let’s look at history and what we can expect to be normal.

Dow Jones Industrial Average from 1900 – 2016 (information based on Capital Group research)

-5% decline about three times a year

-10% decline about once a year

-15% decline about once every two years

-20% decline about once every 3.75 years

What is the lesson in this?

We do not know how long this bull market will last but when it does end, it is not a tragic event.  It is normal for investing into the stock market.

So what can you do?

Review your financial plan regularly and make sure you are prepared if your investments in the stock market begin to lose value.  Historically, if you were able to hold them long enough, you would have been rewarded by enjoying the next bull market that came along.  Although past results are not a guarantee of the future, this can be a comforting fact to a long term investor.

“The market is the most efficient mechanism anywhere in the world for transferring wealth from impatient people to patient people.” — Warren Buffett

If you are wondering if you are prepared for this bull market to end, contact us at Bare Wealth Advisors.  We would be happy to review your plan with you.

Preparing for Misfortune

September 30, 2016

by Ryan Kurtz

Right in middle of the Bible, there is a book called Ecclesiastes written by one of the wisest and wealthiest men that ever lived.  His name is Solomon.  In Ecclesiastes 11:2 Solomon gives us a very useful verse that is sometimes overlooked.  It says;

Divide your portion to seven, or even to eight, for you do not know what misfortune may occur on the earth.   

It is interesting to me that Solomon says that we do not know what misfortune will happen.  You mean we can’t predict it or see it coming?   Sometimes, we can’t.  How many people saw the dot com bubble burst coming in the late 90’s or the financial meltdown coming in 2008?  Those and a number of other times of “misfortune” are current examples of why Solomon tells us to divide our portion.

The word that is often used in the financial industry for divide is diversifying.

Let’s take a look at some of the places that people currently diversify their wealth.  None of these investments are bad places to invest, but as Solomon warns us, too much of your assets into any of these may be putting you at increased risk when “misfortune” occurs on the earth.

  • Money in the Bank – It is good to have some cash available. If your car breaks down or an unexpected expense arises, it is good to have money safe and available.

The risk to having too much cash is that you are constantly losing purchasing power to inflation.  We estimate that each year there is around a 3% increase in expenses due to inflation.  If you make 0.25% in a bank account, you are losing 2.75% of your money to inflation.  Having too much in cash sometimes can be a bad thing.

Most financial advisors recommend having 3 to 6 months of living or operating expenses in cash.  It is also advisable to have cash set aside for any purchases you may need to make in the next 3 years.

  • Real estate – Real estate has been a great long term investment. Not only can you collect income from owning real estate that someone else is using, you can increase the value of investment by the property growing in value over time.

The risk to owning real estate is the potential of the real estate market contracting or collapsing.  This has happened before and could happen sometime again.  Another risk to real estate is lack of liquidity.  If you need money and it is tied up in real estate, it could take several months or even years before you can sell it depending on the current state of the market.

Owning real estate should be done with resources that you can keep invested for the long term.  Avoid excessive amounts of debt when buying real estate and, if possible, don’t buy it all in the same location.

  • Stocks – Owning stocks has been a great investment for future growth. The risk to owning too much of one company is the potential to lose a lot of your money quickly.  A company could lose ½ of its value or more over short periods of time.

Buying stocks is often best done within mutual funds.  This way you can invest into stocks while not owning too much of any one company.

  • Mutual Funds – A great and relatively inexpensive way to invest is in a mutual fund. A mutual fund is where a number of investors pool their money together and pay someone to manage it for them.  You can use mutual funds to invest in different assets like stocks or bonds with someone else doing the work of looking for good investments for you.

A risk to owning a mutual fund is the potential loss of value of the investments that it is invested in and therefore, a loss to the investor.  Most mutual funds are not good short term investments for this reason.

  • Business – One of the places people often invest their wealth is into a business that they run or manage. Most people like investing into their business because it is what they understand and they can see firsthand how their money is being used. Sometimes they are forced to invest into their business because investing into the business may be what keeps the business going.

When possible, it is advisable to take money out of the business to invest in other businesses or real estate.  Since an income or salary often will come from a business they own or operate, it may make sense to make it a priority not to have all of your assets invested here.

So, what is the best investment to prepare for misfortune?  The best investment you can make may be to put some time and resources into putting together your own financial plan.  A financial plan will tell you which investment or combination of investments is best for you.  All of the investments listed are good ones.  A good financial plan will tell you how much you should invest into each so you are prepared when misfortune does occur on the earth.

If you need help putting together a financial plan for yourself, you are welcome to contact the Bare Wealth Advisor office to set up a meeting with one of our advisors.  We would be happy to help you.

  • 1
  • 2
  • 11-17 of 17 results