Category: Investing

Mid Year Economic Perspective

August 26, 2021

by Ron Bare

It’s hard to believe we are nearing the end of August 2021. As you all are very aware, the past year and a half have presented never before seen challenges and uncertainty. We recognize that often fear and anxiety are the results of this uncertainty. We thought it would be appropriate as we head into the fall to share some important, time tested principles, as well as a few key thoughts on our economy.

GENERAL PRINCIPLES

  • As always, we recommend the best course of action is to be long-term, goal-focused, planning-driven investors. We’ve found that the best course for us is to formulate a financial plan—and to build portfolios—based not on a view of the economy or the markets, but on our most important lifetime financial goals.
  • We believe in following a plan with discipline — as opposed to reacting to current events. This offers us the best chance for long-term investment success. Simply stated: unless our goals change, we see little reason to alter our financial plan. And if our portfolio is well-suited to that plan, we don’t often make significant changes to that, either.
  • We do not believe the economy can be consistently forecast, nor the markets consistently timed. We are therefore convinced that the most reliable way to capture the long-term return of equities is to ride out their frequent but ultimately temporary declines.

PERSPECTIVE OF CURRENT SITUATION

  • The economy continues to struggle with supply chain imbalances, as well as with a historic mismatch between the number of job openings available and continued high (though rapidly declining) unemployment. Financial journalists continue to speculate on when these blockages will clear, but for long-term investors like us, the key is our belief that they will, in the fullness of time.
  • There is also the issue of the Biden administration’s drastic tax proposals with respect to capital gains and estates. The best that can be said on this subject is that, as the first half of the year ended, the momentum behind these initiatives seemed to be declining. But the political climate remains as detrimental to capital (and capitalists) as it’s been in quite a while.
  • Nonetheless, for investors like us, the most important economic report of this whole six-month period is the fact that household net worth in this country spiked 3.8% in the first quarter of 2021—to $136.9 trillion—propelled by broad gains in the equity market and in home prices. Even more important, perhaps, is the fact that the ratio of household debt to assets continued to fall, and is now back down to about where it was 50 years ago.
  • The consumer powers this economy, and the consumer has rarely carried more manageable debt levels relative to disposable income—and has simply never been holding more cash—than he/she does today. In June, the National Retail Foundation raised its outlook yet again; it now expects retail sales to grow 10.5% to 13.5% (that is, $4.44 trillion to $4.56 trillion) year over year. As a result, the retail giant Target raised its dividend by a whopping 32%.

As always, if your situation has changed, or if you would like to speak to one of our advisors, please give us a call. We thank you for your continued trust and confidence in the team at Bare Wealth Advisors and we look forward to speaking with you soon!

Keeping Your Eyes on the Goal

June 28, 2021

by David Denlinger

It is no secret that this past year created a significant amount of uncertainty, fear, and confusion. In times like these, it is very easy to allow the stress and weariness to get the best of us. All the negative headlines and conflicting news sources seem to shake our judgement. Instead of letting fear control our thoughts and decisions, 2 Timothy 1:7 is a good reminder to stand firm, “For God gave us a spirit not of fear but of power and love and self-control.” From a financial standpoint, staying disciplined during uncomfortable times is difficult but crucial to short-term financial wellness and long-term financial success. Here are several guidelines to help keep your eyes on the goal:

Don’t focus on market swings. It is important to have a financial plan and to stick to it through market volatility.  If there are changes to your financial situation, please let us know and we can review your accounts to see if we need to make changes, but it is important to not make decisions out of fear or emotion.  Additionally, trying to time the market often involves a lot of disappointment and very few find success.

Invest prudently. The natural human tendency is to buy lots of stock when prices are rising and to stop buying altogether when prices are on the down swing. But some stock prices may provide a good value if the market drops, and you will be able to buy more for the same amount of money. When you are in the accumulation phase, the best way to invest is to setup a monthly investment.  This removes the emotion from investing and is a proven long-term plan for successful investing.

Increase your savings. In times of stress, it is natural to buy something fun. But no matter how you feel, it is important to follow Biblical principles and spend less than you make.  Focus on adding to your savings instead of making large unnecessary purchases due to the stress you may be feeling.

Give Generously.  No matter what is happening around us, it is important to continue to give. There will always be people in need and as a nation we have been very blessed financially. Consider giving of your time, talent, or money to those around you. Furthermore, you can consider giving to local, national, and international organizations to increase the impact that you can have.

Hopefully, these guidelines are helpful as you face the challenges of today. The pandemic has touched each of our lives differently and as you continue to steward your finances, we at Bare Wealth Advisors encourage you to stay disciplined and in all things be grateful. Philippians 4:6-7 states, “Do not be anxious about anything, but in every situation, by prayer and petition, with thanksgiving, present your requests to God. And the peace of God, which transcends all understanding, will guard your hearts and your minds in Christ Jesus.”

 

National 529 Day!

May 28, 2021

by Curtis Burkholder

As we continue to discuss ways to have an “Impact” with our time, treasure, and talents, we wanted to highlight that tomorrow is “National 529 Day”! This day was established to focus on the importance of planning and saving for college – through what is known as the 529 plan.  By utilizing a 529 plan, you can help impact someone’s educational life. As you know, education can be expensive. The 529 plan is an excellent way to purposefully plan to save for an individual’s education – whether that be your child, grandchild, or another special child in your life.  If you do not know what a 529 plan is, you are not alone!  Keep reading to learn more about how these accounts can be a helpful and impactful tool when saving for college or K-12 private education.

The 529 plan received its name because it was authorized in section 529 of the Internal Revenue Code. It does not actually have anything to do with the May 29th other than it’s a great date to highlight this plan!  The 529 is a college savings plan that allows individuals to save for college on a tax-advantaged basis without paying federal taxes on its growth – but only if it is used for qualified higher-education expenses.  A few years ago, the tax laws were updated to allow families to use funds toward a private elementary or secondary education-up to $10,000/year per beneficiary.

If you contribute funds into a 529 account and the original beneficiary does not need the funds for their education, the beneficiary can be changed to another family member.  This provides flexibility in funding and planning for education expenses as funds can be transferred between different siblings as well as down their family line.

It is also important to understand the tax treatment of 529 accounts. There are tax advantages for contributions into a 529 account.  Each state has established their own plan with an investment company so you will receive a state tax deduction for any amount that you contribute into a 529 account.  However, if you live in Pennsylvania, you may claim a deduction for a contribution to any state’s 529 plan.  This means that you have a wide range of investment providers to choose from for the 529 account.   This also means that you can contribute to 529 accounts for your grandchildren even if they live out of state.

Another important element to consider is how 529 distributions are treated from a tax perspective.  If the funds are used for qualified education expenses, there are NO taxes due on the distributions.  However, if the funds are not used for qualified education expenses, the earnings of the non-qualified distributions will be subject to income tax and a 10% federal penalty tax.

Almost anyone can open a 529 account including parents or grandparents.  No matter who opens a 529 account, anyone can contribute to the account for the student.  If you have grandchildren, you can contribute to their college education by establishing a 529 plan for their benefit or using one that is already established. This can also be useful if your grandchildren attend private school, as you can help cover the cost of their education and get a state tax deduction for any contributions made into a 529 account.  The funds in the 529 account can then be withdrawn to be used to pay for the private school tuition.

Hopefully, you have gained a better understanding about 529 plans, as well as the advantages to using them. If you wish to learn more about 529 accounts and how they can be used for your children or grandchildren with great impact, please contact our office and we would be happy to discuss this with you in greater detail. Happy National 529 Day!

Securities America and its representatives do not provide tax advice; therefore, is is important to coordinate with your tax advisor regarding your specific situation.

2021 – Year of Impact

March 22, 2021

by Ron Bare

Who or what are you impacting? This is the question we are asking at Bare Wealth Advisors in 2021. Each of us has an impact on someone or something, either in a positive or in a negative manner. Our mission at Bare is to help our clients “intentionally manage wealth that aligns with their God given purpose for maximum impact.” Our desire is to assist you in having the maximum impact with the wealth you are stewarding. What I (Ron) have learned over the past 25 years as a wealth advisor is that most of us aspire to having impact, but many things (both good and bad) easily get in the way of accomplishing this goal.

I recently heard a speaker say, “whenever we have excess it is easy to be wasteful.” It’s easy to think of this in terms of food, or time, but what about wealth? If you have more than enough, do you easily find yourself investing the extra into relationships or causes to help create impact? Or do you spend it on more temporal or short-term fun?

At Bare, we believe God has given us complete freedom to use wealth for enjoyment and for blessing our families, but also for SO much more! We believe in being intentional with excess wealth decisions so we can leave an impact and legacy. The end goal of managing wealth should not be endless accumulation. You have probably heard the saying, “you never see a hearse pulling a U-Haul full of our stuff.”  When we die, only what has been invested into people and impact will last. That is what we are passionate about. Imagine a world where we took the excess resources we have and intentionally invested these funds into causes or people for positive impact.

Let’s dream together about a few areas of possible impact:

Family – have we purposely invested into our families’ dreams, whether that be education, launching a business, or helping to fund a passion?

Local communities – how can we improve the community we live in? Do we know our neighbors and their struggles? Are we involved in local ministries? What other ways can we help our community?

World problems – what problem around the world do you wish to see positive change in? Clean water for all? Elimination of hunger? End of human slavery? Value of human life? I am sure we could name so many more.

Let me leave you with a simple formula for intentional money management so you can have meaningful impact:

  1. Work hard to earn a living and bring increase to your business. We were made to work and improve the earth. (Genesis 2:15)
  2. Learn to be content. Not an easy task but the more we learn contentment the more we can focus on the needs of others. (Philippians 4:12)
  3. Set long term financial goals – college, family, retirement, or other. When you know your goals, it is much easier to calculate how much you will need to accomplish those goals.
  4. Set a financial finish line. This can be an annual cap on your living expenses or a cap on your net worth. When this is set, work hard to grow your income or net worth (increase is good), but commit to using the increase for impact on others.

Following this four-step formula can help you intentionally have an impact in your family, local community, and the world. We look forward to working with you in 2021 to help you set and accomplish your goals and to begin discussions on what kind of impact you wish to leave this world!

What is going on with GameStop and how should I respond as an investor?

February 9, 2021

As many of you have seen in the financial news within the last week(s), social media forums are having an increased influence on specific shares of companies or precious metals.  We have had several of our clients as well as friends and family members ask us to explain what is happening.

For those who have not heard about it, here is a quick background: Hedge funds often have large short positions on companies they expect to decline in share price. To “short a stock”, means to sell it with plans to buy it back later; hopefully, at a lower price. These positions are public as large hedge funds are required to make their holdings known. Recently, forums on some social media platforms have taken notice and leaders of these are encouraging people to buy stocks of a few of these companies to run up the price and cause large losses for the hedge fund managers.

A few thoughts and reminders:

  • When you are buying a stock of a company, that company does not receive any money. Stocks (after the IPO – Initial Public Offering) are traded on the secondary market.  So, when you are buying a stock, it is like buying a used vehicle – the manufacturer does not get a dime.
  • Use caution if your heart is attracted due to a quick gain or fast profit. Proverbs 13:11 says, “Wealth gained hastily will dwindle, but whoever gathers little by little will increase it”.
  • Understand how your investment creates wealth. If you are going to buy an investment, make sure you or your advisor knows how it works.  In this case, with companies like GameStop, look at the underlying company you are buying, in this case GameStop had 3 years of declining income, increasing debt, and the increasing use of borrowing to fund cash flow.  Proverbs 14:15 says “The simple believes everything, but the prudent gives thought to his steps.”
  • Consider the ethical side of an investment decision not just the financial side. Contemplate questions like “Am I making the right investment choice if I’m hoping for the demise of another for the sake of personal gain”? Proverbs 24:17 says, “Do not gloat when your enemy falls; when he stumbles, do not let your heart rejoice.”
  • Just like joining in partnership with someone in business – know what your exit strategy is. If you plan to get in on trends or investing in individual companies, know what your exit plan is.  Do not buy based off excitement with no plan of when to sell after gains or losses occur.
  • Seek the counsel of those whom you trust. Be cautious trusting your investment decisions to those you do not know.

There is nothing inherently right or wrong about purchasing stock in a company.  However, we do know that every financial decision has more than just financial implications and it is good for each of our hearts to pause and consider the above thoughts before making any investment decision.

Generosity – For it is better to give than to receive

December 9, 2020

At Bare Wealth Advisors, one of our core values is Generosity.

We believe that cheerful and generous giving inspires others in their purpose, enriches relationships, and expands the influence of the resources we manage.  All year long we love to lead our clients in conversations regarding generosity and strategic giving.  But certainly, something happens between Thanksgiving and year end that ramps up those conversations.  There is a clear connection between gratitude and generosity.  A connection between heart and function.   So here are some thoughts below about how you give in heart and in function.

How in our hearts:

  • As Jesus is sending out His disciples part of His instructions were “Freely you have received, freely give.” (Matthew 10:8b) As we recognize God as the owner and we as the stewards it positions our hearts in gratitude to give freely with no strings attached.
  • “God loves a cheerful giver” (2 Cor 9:7) This is a great chapter packed with why we should sow generously and give what is decided in our hearts.
  • “Each person is to give what has been decided in their heart to give.” (2 Cor 9:7) Giving is to be strategic, prayerfully considered, and is different for each person/family/business.
  • By Faith. “Out of the most severe trial, their overflowing joy and their extreme poverty welled up in rich generosity. For I testify that they gave as much as they were able, and even beyond their ability.” (2 Cor 8:2-3)

How in our function:

  • Donor-Advised Funds (DAFs). These are great tools that make giving easier in so many ways. A DAF is basically a savings account for giving that provides the tax deduction the year you place money in the DAF.  It can be directed out immediately to charities of your choice or wait until you decide to give it later.  It simplifies giving record-keeping to one place, provides ability to give anonymously, can be used to maximize bunching strategies with the current itemized/standard deduction tax law, and so much more.
  • Giving 100% of Adjusted Gross Income (AGI). For 2020 only! You can deduct up to 100% of your AGI using charitable gifts of cash. These donations must go to an operating nonprofit. You can not use a DAF for the increased amount.  (Though a single charity fund is an option)
  • Out of Assets not only Income. We often only think of giving based on income and out of cash.  However, there are lots of ways to give the same amounts but in a more tax advantaged way.  Several examples would be: charitable SWAP donating appreciated stock and using cash then to buy back the stock to improve basis, gifting portions of business ownership, giving of grain or other commodities, Real estate, and more.
  • Qualified Charitable Distributions (QCDs) – IRA accounts have no required minimum distribution (RMD) in 2020. But those age 70½ or older can still make gifts directly from an IRA to a nonprofit up to $100,000. This gift donates pre-tax dollars. The earned income is not once taxed because it goes directly to the charitable organization.

 Please reach out to us with questions as you consider your generosity goals!  We would encourage you as Ron Blue says,  to consider “doing your givin’ while you’re livin’, so you’re knowing where it’s goin’.”  For it is better to give than to receive.

(We have recently completed a new video sharing more about our roots of generosity – please check it out! (www.barewealthadvisors.com/about/values/givingroots/)

 

Securities America and its representatives do not provide tax advice; therefore it is important to coordinate with your tax advisor regarding your specific situation.

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.

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.

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