Financial Planning

Does the SECURE 2.0 Act Make 529s More Attractive?

Does the SECURE 2.0 Act Make 529s More Attractive?

by | Nov 7, 2023 | Financial Advice, Financial Planning, Investment Management, Tax Strategies

Many of your have heard of the popular 529 savings plans that custodians can set up to fund their child or grandchild’s college education. Earlier this year, you likely also heard about the SECURE 2.0 Act which brought down some of the biggest changes to retirement and savings plans in recent years. But what does college planning have to do with retirement planning and how could the new legislation make 529s even more attractive than they were before?

 

Understanding the SECURE Act 2.0 and 529s

 

For those unfamiliar with the jargon, let’s get the basics out of the way. The SECURE Act 2.0, or the “Setting Every Community Up for Retirement Enhancement” Act, is legislation that primarily aims to help individuals increase and protect their retirement savings. But hidden within this big retirement package are some intriguing updates to 529 college savings plans.

 

A 529 plan, in simple words, is a tax-advantaged savings plan designed to encourage saving for future education costs. Typically, these plans allow families to invest after-tax dollars that grow tax-free. And, when the time comes, withdrawals for qualified education expenses are also tax-free.

 

Breaking Down the Benefits of SECURE 2.0 to 529s

 

But what does the SECURE Act 2.0 have to do with these 529s, you ask? Well, it broadens the definition of “qualified education expenses” and enhances the flexibility of these plans.

 

Thanks to SECURE 2.0, 529s now cover costs related to apprenticeships, and — here’s the big kicker — student loan repayments. Yes, you heard it right! You can now use the 529 plan to repay up to $10,000 in student loans. This new feature alone could make 529s far more appealing to many families.

 

Additionally, under SECURE 2.0, if your child gets a scholarship, you can now withdraw the amount of the scholarship without the usual 10% penalty. That means more flexibility to adapt to life’s surprises.

 

Balancing the Pros and Cons of 529 Plans

 

Now, does this make 529s more attractive? It’s not a simple “yes” or “no.” While these changes certainly sweeten the deal, they don’t fundamentally alter the nature of 529s.

529s remain an investment tool best suited for those quite certain about their children’s path to higher education. If your family’s situation matches this description, the expanded benefits under the SECURE 2.0 Act could indeed make the 529 plan more attractive.

 

However, if there’s considerable uncertainty about your child’s educational future, or if your family might not be able to take advantage of the new benefits (like the ability to pay off student loans), the enhanced 529 might not seem much more attractive than before.

 

The Risk? The Tax Costs of Overfunding a 529

 

The reason that we say 529s are an investment tool best suited for those “quite certain about their children’s path to higher education” is because a new J.P. Morgan study found that a 529 account is still the most tax-efficient way to save for a student’s education—but only if that account is actually used and depleted by the time the student completes their education.

 

That’s because removing the funds from the 529 for non-qualified expenses triggers a tax event. If the beneficiary does not go to school or does not finish school, the custodian has two choices:

 

  • Take back the money in the 529 account or give it to the student. However, in both cases, taxes and a 10% penalty must be paid on the earnings at the recipient’s ordinary income tax rate. If the student is in a lower tax bracket, it makes most sense for the student to receive the funds and pay taxes at the lower ordinary income rate.
  • Pass the account on to a lower generation (e.g., grandchildren). But there would be a tax liability for this option as well. The initial beneficiary might have to use some of the $12.92 million gift tax exclusion when a new beneficiary is named.

 

In other words, if you aren’t sure your child will attend college or may not complete a full four years, you’ll want to look at other options to avoid these tax implications. Other options include a pay-as-you-go approach, funding UTMA accounts, or setting up grantor trusts.

 

Choosing the Most Impactful Path

 

The SECURE 2.0 Act has brought some considerable enhancements to the 529 college savings plans, making them potentially more attractive to many families. However, whether these changes tip the scales in favor of a 529 plan for you and your family will largely depend on your specific situation and needs. A 529 account is the most tax-efficient education savings alternative, but only if the account is exhausted when the student’s education is completed.

 

As always, remember that financial planning is a personal journey. It’s essential to consult with a professional advisor who understands your financial goals and circumstances. If you’d like to discuss these changes and see how they impact your current financial strategy, don’t hesitate to get in touch!

 

At Platt Wealth Management, our team of financial advisors are ready to understand your goals and dreams in order to present the right solutions to your needs and opportunities that will simplify your financial life. We would love to learn more about you with a complimentary Discovery Call. Contact us today to discuss your opportunities.

 

 

 

 

 

Are you on track for retirement?

 

Making sure you will be ready for retirement can be overwhelming. Funding your retirement accounts over the years is a critical part of your journey to the retirement of your dreams. An experienced Financial Advisor can help you navigate the complexities of investment management. Talk to a Financial Advisor>

Dream. Plan. Do.

Get Started

Platt Wealth Management offers financial plans to answer your important financial questions. Where are you? Where do you want to be? How can you get there? Our four-step financial planning process is designed to be a road map to get you where you want to go while providing flexibility to adapt to changes along the route. We offer stand alone plans or full wealth management plans that include our investment management services. Give us a call today to set up a complimentary review. 619-255-9554.

Your Ultimate Guide to Dividend Investing

Your Ultimate Guide to Dividend Investing

by | Oct 26, 2023 | Financial Advice, Financial Planning, Investment Management, Uncategorized

The best any expert can say about the stock market right now is that future returns will be uncertain, and volatility may be the new normal. Although there are slivers of light shining on some parts of the economy, many storm clouds darken the near to intermediate-term outlook on the stock market.

 

Make no mistake; this is not a gloom and doom stock forecast. Quite the contrary, investors should maintain a cautious optimism and remain invested in the stock market, albeit fully hedged against uncertainty and volatility.

 

One of the best strategies for accomplishing this is investing in dividend stocks as a portfolio stabilizer and a source of returns in an uncertain economy. In order to help you decide if dividend investing is right for you, we’ve put together this comprehensive guide. Of course, always consult with your financial advisor to understand what you’re buying and why you’re holding it in your portfolio.

 

What is Dividend Investing?

 

Dividend investing is a strategy focusing on investing in companies that regularly distribute a portion of their profit as dividends to shareholders. The most direct way a business can affect shareholder performance is through a cash dividend. A cash dividend is simply a return of investment to the shareholders. Each year, or each quarter, the board of directors announces a dividend that is paid in cash—sometimes in stock—directly to shareholders. 

 

The better-performing companies will periodically increase their dividends. Some companies have been paying dividends for decades, so it becomes an expectation and a way to attract new investors. Once a company starts paying a dividend, it will go to any length to continue to pay it because not doing so indicates the company may be in trouble. 

 

Creating Your Dividend Investing Strategy 

 

Not all dividend stocks are created equal. As with any investment class, it’s important to establish strict criteria for selecting the stocks that best match your profile and meet some standard of quality. Chasing the highest yields can be as risky as investing in junk bonds. Over the long term, companies with an established record of uninterrupted dividends, a clean balance sheet, and a positive earnings outlook will outperform the higher-yielding investments in terms of both dividend income and capital appreciation. 

 

When investing for the long term, diversification is always the key. With dividend stocks, you can invest across many sectors and among various dividend-paying investments, such as common stock, preferred stock, real estate investment trusts (REIT), ETFs, and mutual funds. 

 

What to Look for in a Dividend-Paying Company

 

With dividend stocks, investors need to apply the same due diligence they would use to purchase any stock, careful not to focus strictly on the dividend yield, which can be especially alluring after the stock price has fallen. It would be essential to know why the stock price fell and whether there may be the possibility of a dividend adjustment. 

 

One of the most important factors to consider is the company’s debt-to-equity ratio, which could put pressure on the dividend during a down economy if it is too high. Dividend payers that have no trouble generating excess cash flow can be relied upon to pay their debt and dividend in any economic environment. 

 

You also want to look at a company’s dividend payout ratio, calculated by dividing the annual dividends per share by earnings per share. The dividend payout ratio represents the portion of net income the company is paying out as cash dividends. Companies with a payout ratio of less than 50% are considered financially stable, with the potential to increase earnings over time. 

 

What to do with Cash Dividends

 

Investors need to decide what to do with their cash dividends. If the company is performing well and driving solid investment performance, you probably want to reinvest them back into the company. That drives investment performance further. However, if the multiples become unattractive over time, reinvesting in the company may not make sense. That should prompt a decision as to whether the stock is still attractive.

 

Whether you hold or reinvest your cash dividends in the company, they are subject to income taxes. The advantage of dividend income over other forms of income is it is taxed at a maximum rate of 20% (plus a 3.8% surtax for the highest-earning taxpayers). The tax rate for taxpayers in the lower tax brackets is 15%. 

 

Why Now Is the Time to Invest in Dividend Stocks

 

While high-quality dividend stocks are not likely to generate market-leading returns in any given year, they will lose less money on the downside, which is the key to growing portfolio value over the long term. Investing in high-quality dividend stocks is not about generating outsized returns; instead, it is about generating a rate of return meaningfully greater than the inflation rate while preserving capital during protracted market declines. Dividends are always positive, so they are a counterweight in down markets.

 

Many investors are unaware that dividend yield and growth have accounted for approximately 40% of long-term stock returns since 1930. During decades when inflation averaged more than 5%, they accounted for 54%. 

 

Eventually, the U.S. economy will right itself, and sanity and stability will return to the markets with large-cap, dividend-paying companies leading the way. Until then, and even then, dividend stocks will provide an effective counterweight to most risks investors will encounter, including inflationary pressures (or stagflation), increased market volatility, interest rate fluctuations, or market declines. There has never been a better time to make dividend stocks an integral part of your investment portfolio.

 

Adding a dividend stock component to your portfolio will not only increase your tolerance for volatile markets, but it can also become an enduring source of income regardless of the movement of stock prices, inflation, and interest rates. 

 

Ready to find out if dividend investing could be the ballast you need in uncertain times? Or perhaps a source of income you could use to fund your future retirement?

 

No matter where you are in your investing or retirement journey, our team at Platt Wealth Management can help. Simply schedule an appointment with one of our trusted advisors to discuss your opportunities today.

 

 

 

 

Are you on track for retirement?

 

Making sure you will be ready for retirement can be overwhelming. Funding your retirement accounts over the years is a critical part of your journey to the retirement of your dreams. An experienced Financial Advisor can help you navigate the complexities of investment management. Talk to a Financial Advisor>

Dream. Plan. Do.

Get Started

Platt Wealth Management offers financial plans to answer your important financial questions. Where are you? Where do you want to be? How can you get there? Our four-step financial planning process is designed to be a road map to get you where you want to go while providing flexibility to adapt to changes along the route. We offer stand alone plans or full wealth management plans that include our investment management services. Give us a call today to set up a complimentary review. 619-255-9554.

10 Money-Saving Tips for Planning Your Next Vacation

10 Money-Saving Tips for Planning Your Next Vacation

by | Oct 24, 2023 | Financial Advice, Financial Planning, Lifestyle, Uncategorized

Vacation travel is on the rise, but so are travel costs. Increasing demand is driving up gas prices, hotel, and airline costs, making planning the perfect vacation challenging for most people. However, with some thoughtful planning using these cost-saving tips, you can stretch your travel bucks a lot further on a memorable vacation.

 

Set a Strict Budget

 

Don’t start booking travel until you determine how much you can afford to spend on your vacation. Allocate specific amounts for accommodations, transportation, food, activities, and souvenirs. It helps to get a baseline understanding of costs associated with where you’re going to see how realistic your budget is. 

 

Travel During Off-Peak Seasons

 

Traveling during peak season ensures you will pay higher prices. You’ll find more affordable options when you plan your travel during off-peak seasons or less popular months, and you’ll avoid crowds. Studies show that airfares for holiday season travel averaged 41% more than those booked for non-holiday season travel. They also show an average of 25% savings when booking flights six months out as opposed to one to two months out. 

 

Be Flexible with Dates

 

Flight and hotel prices can fluctuate significantly from one day to the next. So, be flexible with your travel dates and use fare comparison websites to find the lowest-priced travel days. For example, flying on Tuesdays, Wednesdays, and Saturdays is typically cheaper than flying on Mondays and Fridays, which are busy commute days.

 

Open a Travel-Friendly Bank Account

 

Whether you’re going on a big trip or a small one, it’s likely you’ve been putting money away to make the trip happen for some time. It’s often helpful to keep this money in a separate account so you can see how much you’ve accumulated in advance and track spending more easily while on the trip. It’s hard to see what you’ve blown through on a trip so far when you’re looking at your everyday bank account with bills and other reoccurring charges coming out.

 

Plus, you’ll want an account for traveling that allows for unlimited ATM withdrawals abroad and won’t charge you transaction fees. This is huge and can easily save you hundreds of dollars!

 

Consider Alternative Accommodations

 

Look beyond traditional hotels. You can often find great vacation rentals through Airbnb and Vrbo, which can be more cost-effective, especially if you’re traveling with a group of people. Watch out for those extra fees, though. Make sure you know what you’re signing up for before you sign your entire entertainment budget away in exorbitant cleaning fees!

 

Save While You’re There

 

Travel budgets tend to blow up around all the small stuff, such as dining out, transportation, activities, and souvenirs. While it’s fun to splurge once or twice at a nice restaurant, you can save a substantial amount of money by dining in, which is why it’s essential to find accommodations with a kitchenette. 

 

You can also save by shopping for groceries and snacks so you can always have food on hand. Also, you won’t have to buy expensive bottled water at the airport or in tourist locations if you pack your own water canister. 

 

Research Free and Low-Cost Activities

 

The costs of activities and attractions can often exceed other travel costs. Get the most out of your vacation bucks by looking for free or low-cost activities like free walking tours, museums with free entry days, and outdoor activities like hiking or picnics to layer on top of a couple of well-chosen attractions. 

 

Pack Light

 

If possible, confine your packing to carry-on luggage. This will save you those annoying check-bagged fees and make it much easier to get around, especially if you’re using public transportation.

 

Use Public Transportation

 

Public transportation is often cheaper than renting a car or taking taxis. It’s also a great way to experience local culture. 

 

Sign Up for Travel Deals and Rewards Programs

 

If your travel plans are far enough ahead on the calendar, consider joining a loyalty or rewards travel program offered by airlines, hotels, and credit cards to accumulate points towards free air, car rental, and hotel accommodations. Some hotel credit cards offer free hotel night certificates. Plus, some cards offer additional benefits and perks, such as upgrades to elite status. 

 

Look for Bundled Deals

 

Some online booking websites offer bundled travel deals that can save you money by booking your flight, hotel, and car rental together. Shop and compare a few booking websites to see who offers the best deal. 

 

Happy Traveling!

 

We all love to travel, and we all love to save money. Unfortunately, the two don’t always go hand in hand. By incorporating these money-saving tips into your vacation planning, you can enjoy a memorable and budget-friendly trip without compromising the overall experience.

 

Happy traveling!

 

 

 

 

Are you on track for retirement?

 

Making sure you will be ready for retirement can be overwhelming. Funding your retirement accounts over the years is a critical part of your journey to the retirement of your dreams. An experienced Financial Advisor can help you navigate the complexities of investment management. Talk to a Financial Advisor>

Dream. Plan. Do.

Get Started

Platt Wealth Management offers financial plans to answer your important financial questions. Where are you? Where do you want to be? How can you get there? Our four-step financial planning process is designed to be a road map to get you where you want to go while providing flexibility to adapt to changes along the route. We offer stand alone plans or full wealth management plans that include our investment management services. Give us a call today to set up a complimentary review. 619-255-9554.

How Much Should I Have Saved for Retirement by Age 55

How Much Should I Have Saved for Retirement by Age 55

by | Aug 28, 2023 | Financial Advice, Financial Planning, Investment Management

“Am I on track to meeting my retirement goal?” That’s a burning question for many Americans, especially those whose retirement date is coming into view. For those nearing age 55, considered to be the start of the final glide path to retirement, it’s a critical milestone that could determine what, if any, steps need to be taken to get or stay on track to achieving their retirement goal. 

 

Financial planners often suggest that by age 55, you should have saved a substantial portion of your nest egg to ensure a comfortable retirement. However, in practice, there is no one-size-fits-all answer to how much, as individual circumstances vary significantly, including your current savings rate, lifestyle expectations, retirement goals, and expected expenses. 

 

Why It’s Risky to Use General Rules of Thumb

 

If you follow general rules of thumb, you have probably heard that you should aim to have saved somewhere between 10 to 15 times your annual income by the time you retire. That estimate is based on the widely used assumption that you’ll need to replace about 70 to 80% of your pre-retirement income to maintain a similar standard of living. 

 

Based on those guidelines, it’s suggested that you have at least eight times your annual income saved by age 55. 

 

However, today’s retirees are finding that rules based on decades-old averages and assumptions don’t necessarily account for 21st-Century realities, such as rising healthcare costs and expanding life expectancies. Of course, it also depends on exactly when you expect to retire, how much you have saved, and at what age you plan to start your Social Security benefits. 

 

To get a more accurate idea of how much you should have saved by age 55, consider the following steps:

 

  1. Crystalize Your Vision of Retirement

 

It begins with knowing what it is you want to have happen. The more clearly defined your goal, the more motivation you will have for achieving it. To ensure you save enough, your goal needs to be clear, and your planning assumptions must be realistic. Although your time horizon may be off in the distance, your vision needs to be tangible with defined lifestyle needs. Your vision will likely change over time, which is why it is essential to review your retirement plan regularly. When you lose sight of your target, you are less likely to hit it.

 

  1. Determine What it Will Cost

 

With a clear vision and well-defined goals, you can then attach a price tag. The mistake many people make is that they try to use some general rule of thumb, such as calculating their retirement income need as some percentage of their current income. Your income calculation should be more deliberate, based on a realistic spending plan.

 

It’s also risky to assume that your expenses will decline in retirement. That’s not necessarily true anymore. When you consider the increasing costs of health care, long-term care, and even the possibility that you may be caring for your aging parents for a while, these can throw any budget out of whack. Plan for a cushion and factor in the increasing cost of living. With an average inflation rate of 3%, your cost of living will double in 20 years. You will also want to factor in an expanding life expectancy. People who reach age 65 today have a 50% chance of living past age 90.

 

  1. Know Where you are Today

 

In addition to a clear vision, you need a clear picture of where you are today in relation to your goals. A thorough assessment of your financial situation, including your current savings, future savings capability, risk tolerance, and other priorities, will determine your retirement savings requirement.  

 

Don’t Set It and Forget It

 

Another significant mistake people make is not checking to see that they are still on track to meeting their retirement goal. If there is one thing we have learned over the last decade, it’s that the economy and the markets can change very quickly. If you experienced the pandemic-induced shutdown of the economy and the steep market crash of 2020, you also know your financial circumstances can change rapidly. For many people, their retirement targets moved, but they didn’t make the necessary adjustments. That’s why you can’t set and forget your retirement plan. Instead, you should take frequent snapshots of your financial circumstances and where you stand in relation to your goals. 

 

Your retirement plan should be adjusted based on your evolving needs and priorities. When done regularly, the adjustments are typically small, just enough to keep you on track. When you always know where the target is, you’ll know if your aim is true.

 

By following these steps, you will have the vision, the goal, the cost, and the motivation to get your plan on track. Determining the actual amount you need to save will require some calculations that can be done using a retirement income calculator. However, it’s highly recommended that you work with a financial advisor with the tools, resources, and objectivity to guide you to your retirement goal.

 

Partner with an Expert Financial Advisor to Guide You Into and Beyond Retirement 

 

Ready to see how your savings measures up to your goals?

 

Platt Wealth Management can help. Our team is made up of only the best financial advisors–those who are ready to understand your goals and dreams in order to present the right solutions to your retirement planning needs. We also help identify opportunities that will simplify your financial life, boosting confidence in your path forward. Ready to learn more? Schedule a call with our team today.

 

 

 

 

 

Are you on track for retirement?

 

Making sure you will be ready for retirement can be overwhelming. Funding your retirement accounts over the years is a critical part of your journey to the retirement of your dreams. An experienced Financial Advisor can help you navigate the complexities of investment management. Talk to a Financial Advisor>

Dream. Plan. Do.

Get Started

Platt Wealth Management offers financial plans to answer your important financial questions. Where are you? Where do you want to be? How can you get there? Our four-step financial planning process is designed to be a road map to get you where you want to go while providing flexibility to adapt to changes along the route. We offer stand alone plans or full wealth management plans that include our investment management services. Give us a call today to set up a complimentary review. 619-255-9554.

How to Increase Revenue in Your Business (without New Sales)

How to Increase Revenue in Your Business (without New Sales)

by | Aug 24, 2023 | Business Advisor, Financial Advice, Financial Planning

For most businesses, one of the overarching objectives is to increase profits, which can lead to business growth—and more profits. That invariably requires strategies to increase revenues, lower costs, or both. For many businesses, growth strategies tend to focus on adding more customers to generate new sales. However, if profitability is the core objective, that may not be the best strategy. Let’s dive into some ways you can increase revenue in your business without necessarily bringing in new business.

 

Retaining and Pleasing Existing Customers Far More Profitable than Acquiring New Ones

 

Studies have shown that selling to current customers is the most cost-effective strategy for increasing revenues and profits. According to a Bain & Company study, acquiring a new customer costs 5X to 25X more than retaining an existing one. It’s not surprising then that the same study found it is up to 65% easier to sell to existing customers than first-time customers.

 

The study also found that companies that focus on customer retention experience a significant increase in profits, finding that a mere 5% increase in customer retention can boost a business’s profits by up to 95%.

 

Finally, a study by Motista found that customers with a loyal connection to a brand are worth 306% more in lifetime value than non-loyal customers.

 

These statistics should erase any doubt that businesses focusing on strategies to retain and leverage customer relationships can achieve higher revenue growth more profitably than those focusing on generating new customers.

 

Many businesses fight their way to the top by offering the best products or reducing pricing. However, whatever advantage that creates is typically fleeting. True business leaders provide something that most competitors can’t match—a genuine and deep connection with their customers. They do that by making customer loyalty and increasing the value of their relationships their top priority.

 

 Superior Customer Service Increases Revenue…

 

You’ve probably heard the adage that customers remember the service much longer than they remember the price they pay. According to the American Express study, 70 percent of consumers say they’ve spent more money with a business that provides excellent service. The same survey found that 86 percent of consumers would be willing to pay higher prices for better customer service and that, on average, consumers are willing to spend 17 percent more with a business that delivers exceptional service. 

 

…And Grows Profits

 

It shouldn’t surprise anyone that superior customer service increases customer loyalty and lowers the churn rate (the rate customers move on). Over time, the lifetime value of a customer includes everything they will ever purchase—today and in the future. 

 

If, on average, 65% of a company’s revenue comes from existing customers, at five to 25 times less cost than it takes to acquire a new customer, companies interested in increasing their profit margins must focus on strengthening customer relationships. 

 

Customer Service is the New Marketing

 

Word of mouth is still the best way to market your business, and digital channels such as social media can amplify its effect exponentially. According to a Temkin Group study, more than three-quarters of consumers would recommend a business after having a positive experience with a business. Businesses can leverage their marketing and advertising dollars by creating superior customer service as a key marketing initiative.

 

Customer Service Delivers Exceptional ROI

 

Small businesses that treat customer service as merely a cost center are missing out on the tremendous ROI a focused strategy can deliver. That’s why providing a great customer experience is now a top strategic initiative for 75 percent of larger companies because of the ROI it delivers. Now, an increasing number of small businesses recognize that providing excellent customer service is not just for larger companies and can directly impact their bottom line. 

 

 

How to Create a Superior Customer Service Initiative

 

Develop a clear customer experience vision. With input from up and down the organization, develop a clear customer-focused vision to communicate with all employees. The vision can be in the form of a mission statement and core values that will be embedded in all training and development to drive your organization’s behavior. 

 

Hire and train the right people. In addition to a well-trained customer service team, each member of the organization should have or acquire a skill set that enables them to communicate effectively with customers.

 

Build the right culture. Providing superior customer service must be a top-down, bottom-up initiative with an all-consuming focus on creating happy customers. 

 

Know your customers. All employees need to understand your customers—their demographics, preferences, needs, and what they value most in a relationship with your business. 

 

Buy the right technology. The right technology can improve efficiency and lower the cost of providing excellent customer service. Investing in an email marketing program with personalized content while increasing your social media presence can build your brand, increase customer loyalty, expand word-of-mouth, and increase cross-sell opportunities. 

 

Capture customer feedback. You need to ask your customers how you’re doing in serving their needs. Send follow-up emails to every customer using post-interaction surveys. Make outbound calls to customers asking for feedback. Encourage Yelp reviews. Then review the information with members of your organization who interact with customers. 

 

Measure ROI. Nothing reinforces an initiative like solid business results. Collecting data, such as the average sales and average sales revenue per customer, can provide immediate ROI feedback. 

 

The Bottom Line

 

The challenge for businesses is customer expectations are rising faster than the pace of improving customer experience. Customers expect every touchpoint in their interactions with your business—from their first impression, throughout the buying process, and with all communications—to be the best they’ve ever encountered. The sooner your business makes customer service its top priority, the sooner you’ll see improvements to your bottom line. 

 

 

 

 

Are you on track for retirement?

 

Making sure you will be ready for retirement can be overwhelming. Funding your retirement accounts over the years is a critical part of your journey to the retirement of your dreams. An experienced Financial Advisor can help you navigate the complexities of investment management. Talk to a Financial Advisor>

Dream. Plan. Do.

Get Started

Platt Wealth Management offers financial plans to answer your important financial questions. Where are you? Where do you want to be? How can you get there? Our four-step financial planning process is designed to be a road map to get you where you want to go while providing flexibility to adapt to changes along the route. We offer stand alone plans or full wealth management plans that include our investment management services. Give us a call today to set up a complimentary review. 619-255-9554.

How to Get Started with Environmental, Social and Governance (ESG) Investing

How to Get Started with Environmental, Social and Governance (ESG) Investing

by | Aug 16, 2023 | Financial Advice, Financial Planning, Investment Management

As of 2022, there were $8.4 trillion in sustainable investing assets. Investors from all walks of life leverage sustainable investments as part of their wealth management plan. If you’re someone whose life decisions are often driven by how your choices impact the environment, your community, and society as a whole, it’s time to look into ESG investments. Environmental, social, and governance (ESG) investments consider how the companies you invest in help safeguard the environment and community—helping you earn money and build a more ethical portfolio.

Plus, a company’s commitment to environmental, social, and corporate governance can also positively impact its performance, offering lucrative opportunities for investors. Here’s how you can get started with ESG investing as part of your investment management strategy.

 

What is Environmental, Social and Governance Investing (ESG) Investing?

 

ESG investing is a form of sustainable investing that considers environmental, social and governance factors to judge an investment’s financial returns and its overall impact. Environmental, social and governance factors (ESG) are used to evaluate a company or investment’s sustainability.

  1. Environmental Factors such as:
  • Carbon footprint
  • Air and water pollution
  • Deforestation
  • Green energy initiatives
  • Waste management
  • Water usage
  1. Social Factors such as:
  • Employee gender and diversity
  • Data security measures
  • Commitment to customer satisfaction
  • Sexual harassment policies
  • Human rights
  1. Governance such as:
  • Board diversity
  • Political contributions
  • Level of executive pay
  • Large-scale lawsuits against the company
  • Internal corruption cases
  • Lobbying practices

Investors use ESG scores ranging from 0 to 100 to measure the sustainability of an investment. Scores below 50 are poor, while scores over 70 are highly desirable.

 

Benefits of ESG Investments

 

Building a sustainable investment portfolio can help increase your potential for high returns. According to the Morgan Stanley Institute for Sustainable Investing, the returns of sustainable mutual and exchange-traded funds were similar to traditional funds and, in some cases, actually outperformed traditional investments between 2004 and 2018. Also, the JUST U.S. Large Cap Diversified Index (JULCD) has returned 15.94% since its inception on an annualized basis compared with the Russell 1000’s 14.76% return. 

Morgan Stanley also noted that sustainable funds showed a lower downside risk than traditional funds. Even during turbulent markets when traditional funds showed more significant downside deviation with a higher potential for loss, sustainable funds experienced a 20% smaller downside. Morningstar, an investment research company, also found that in the first quarter of 2020, 25 of 26 sustainable index funds outperformed comparable traditional funds despite the pandemic.

 

What Types of ESG Investments are Available?

 

Although there are several ESG investment options available for your financial planning strategy, the two most common options include:

  1. ESG stocks: Although investing in a single stock type isn’t the best strategy, finding a few individual ESG stocks offers an opportunity to gain from their performance over time.
  2. ESG mutual funds: Almost 600 open-end and exchange-traded ESG funds are available. Mutual funds create instant diversification, and with ESF mutual funds, you can create a more personalized portfolio, so your investment will have the most impact on the issues you care about.

When considering ESG investments, reviewing the prospectus and considering the company’s ESG score are both equally important.

Plus, ESG investments can be broken down by an even more detailed scoring systems, which make it easier to focus on investments that mean the most to you.

  1. Issue-specific ESG scores measuring performance based on a single issue.
  2. Category-specific ESG scores based on either environmental or social or governance issues.
  3. General ESG scores focused on all three categories.

Consult with your financial advisor to find the best investments for your portfolio.

If you want to explore the possibilities of adding ESG investments into your financial planning strategy, speak to the experts at Platt Wealth Management today. We can help align your investment choices with your environmental, social, and governance values today.

 

 

 

 

 

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