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Questions You Should Ask When Looking for a Financial Advisor

Questions You Should Ask When Looking for a Financial Advisor

Choosing a financial advisor is an essential step in taking control of your finances. You’ll want to complete your due diligence before you even start talking to an advisor you’ve selected as a possibility. 

Find a financial advisor


If you have friends or family who are happy with theirs, you can ask for an introduction. But don’t stop there. Look at their website and social media sites. Most financial advisors should have a profile on LinkedIn.

In most cases, advisors who manage money and make stock, bond, and mutual fund recommendations must register with the regulatory agency FINRA (which used to be the NASD). You can look them up by name on BrokerCheck and see if they have any violations or complaints. 

If there’s more than one, you should probably move on to another advisor in your search. Most financial professionals have none, but a disgruntled client can make a complaint. However, more than one charge (or violation) is a worrisome trend.

Once you have a name or two that appear to be a good fit, you can start meeting with them and asking them questions. Feel free to write the questions down and bring them with you, because you want to make sure that you’re comfortable with the person you’re entrusting with your money.

For most investors, having more than one advisor doesn’t make financial sense. People sometimes aren’t sure whether they can trust one advisor, so they split the difference with two. Using two advisors causes issues with your portfolio since neither advisor has a full view of your money. With an incomplete picture, they may not be able to make the right recommendations.

Find an advisor you trust, by checking their bona fides and getting satisfactory answers from them. You may not invest all your money with them at once, but give them a portion to manage for at least a few months, to determine your comfort level with giving them more.



The financial advisor fit for you

Before you meet, ask if they offer a free consultation or “get-to-know-you” meeting. Good advisors usually don’t take all the clients who come to them. They want to have long-term relationships with the people who entrust them with money. 


You want to have a good relationship with your advisor. You need to be comfortable calling them if you have questions. If you feel that they don’t take you seriously or talk down to you, you won’t be able to build that level of trust you need to consult with them when necessary.


Your financial advisor should assist you with different financial decisions: buying a home, choosing a retirement community, saving for college, etc. Make sure you have someone with who you feel comfortable discussing your finances.


The relationship may not be a good fit, and it’s best to find that out ahead of time. If the advisor doesn’t offer free initial consultations, scratch them off your list and move on to the next.


Many people prefer to meet in person, but with the current COVID-19 restrictions, that may not be possible. See if you can set up a video conference so that you can see them and with potentially other members of the team. Just bear in mind that web conferences are a new technology for many financial advisors, so there might be some technical glitches at first.

Look for a fee only fiduciary

You want an advisor who tells you they act as fiduciary. This ethical promise is common in firms that are Registered Investment Advisors (RIA) and financial advisors who are also CFP® professionals. They are fee-only and must abide by strict fiduciary guidelines. 


A fiduciary is someone who has the legal duty to put your interests above their own. That means they have to recommend an investment right for you, and cannot receive product incentive pay or product commissions.


Advisors who are not fiduciaries have less restrictive suitability standards. That means they only need to recommend suitable products. They can suggest a product that pays them better over an equivalent that might be cheaper for you, as long as it’s suitable for your portfolio.

Financial advisor investment approach

  • What is their investment philosophy?

Depending on your risk tolerance and what stage of life you’re in, the financial advisor’s philosophy may or may not match with your own. When you’re young and looking for growth from your investments, you don’t want an advisor who says they’re conservative and focuses on protecting investments. You want a financial advisor to build a custom portfolio for your life priorities, time horizon, and risk profile.



  • Do they perform a risk assessment with their clients?

The asset allocation, or how much money is in different kinds of stocks compared to bonds, is an important indicator of how much and how volatile your portfolio performance will be. The best financial advisors will match your portfolio to your risk tolerance, within reason, so they need to know what your risk tolerance is.


If they don’t use a risk assessment with you, they’re most likely to use a cookie-cutter allocation for everyone. You may not get the performance you need to achieve your goals or take on too much risk for your time horizon. 

How does the financial advisor get paid?

There are many different ways advisors get paid, some of which come with conflicts of interest. The advisor should disclose all fees and methods of payment to you.

Fee-only is an excellent way to align the advisor’s incentives with the client’s. The more your account grows, the more your advisor’s compensation grows too. Many advisors use the Assets Under Management (AUM) model and get paid a percentage of the assets under management, which should be well under 2%.  

Or you may be charged on a retainer basis. 

The other model is commission-based, and you should steer away from financial advisors who are either 100% commission or fee-based with some investments on commission. Here you’re charged a fee for each transaction. There’s little to no incentive for the advisor to grow your account, and they do have incentives to keep you buying and selling, which is known as churning.

  • How often will you contact me?
    • Meeting schedules vary widely, and it’s up to you to decide if that frequency works for you. Typically, for accounts that are less than six figures, you should expect less contact and fewer meetings.


    • Who will have custody of my assets?
      • You want the advisor to have a third-party custodian. TD Ameritrade and Schwab are popular ones, but there are others. Having a third-party custodian provides you the ability to look at your accounts and see your account statements. Advisors who offer custody can make their account statements, structuring them in a complicated or misleading format.


        Without a third-party custodian, major crooks like Bernie Madoff got away with millions. He created fraudulent statements that showed the client making what he’d promised them.

      What are the financial advisors qualifications?

      There are websites where you can check what specific designations mean. If you’re starting out investing, you might be OK with someone else who has a bit less experience and is currently working on their qualifications, because they will likely charge you less.

      A financial advisor should have a minimum of five years’ experience, preferably through years of market volatility. Credentialed financial advisors, such as CFP Professionals must complete rigorous study and experience requirements. To keep their credentials active, they attend conferences and classes to stay informed and knowledgeable. CFA, CPWA and other credentials deepen an advisor’s knowledge and expertise to apply to complex planning and investing.

      Ideally, you want to see on the advisor’s website and hear from the advisor that they are familiar with your specific issue and that they’ve helped clients like you. 

      If you own your own business, you’re better off with an advisor who specializes in such clients because they know the typical problems and can help you solve them. 


      Interested in meeting with us for your initial consultation? Give us a call at 619.255.9554 or email us for an appointment.

      Operating in a Covid 19 Summer

      Operating in a Covid 19 Summer

      We at Platt Wealth Management hope that you enjoyed a safe and sane Fourth of July weekend. The dog days of summer are indeed upon us, and we thought it might be a good time to address some of the uncertainty that many of our clients and others are experiencing.


      Summer in the time of COVID-19


      Hanging out inside bars is one of the worst things you can do if you want to stay healthy and avoid infection. The good news is that being outside, especially on a neighborhood walk, is relatively low risk. See more details on what’s safe here

      If you’re outside and keeping a distance of six feet between your family and other people, you’ll probably be fine. Feel free to enjoy your outside activities, unless they involve packing into a small area where you can’t maintain the distance.

      What researchers have discovered about the novel coronavirus should guide your decisions about how you have fun this summer. The good news is that you don’t have to stay in lockdown! Being outside at a safe distance from others is healthy. 


      Enjoy your summer, stay healthy



      • You don’t have to show symptoms to infect other people. You could inadvertently spread the virus to anyone because you’re unaware that you have it. You might have come into contact with another asymptomatic person and received it from them. Unknowingly, you could give it to someone who has an underlying condition. 

      That’s why it’s still important to take precautions, even if you’re healthy and not in a high-risk group. Not only are you protecting yourself and your family, but everyone around you.


      • The virus is typically transmitted through droplets from an infected person within a radius of six feet.

      When you stay farther away, the virus has less chance of spreading.

      The droplets are why going to large venues is so dangerous, especially if you’re in a choir or cheering on a team. Singing increases the amount of virus that an infected person emits, as you’ve seen in all the news articles about people in choirs getting sick.

      Large venues that don’t practice social distancing also accelerate the spread of the virus, because talking also increases the volume of droplets and the volume of contagion from someone infected. The person may not know it, but they could create a lot of sickness.


      • Masks reduce transmission, and paper or fabric masks protect others from you.

      These types of masks are breathable because air molecules are much smaller than the water droplets you emit while breathing and talking. You can breathe in air and still prevent the spreading of disease if you happen to be infected.

      Some people are concerned about whether masks increase the amount of carbon dioxide that you breathe. Doctors and nurses wear masks for most of their working day, and they function just fine. You’ll wear the mask without any side effects when you need to go to the store.


      • The US is still in its first wave of infections, and there are still hotspots with significant transmission.

      It briefly appeared that the US was experiencing a decrease in transmission, but that was because New York City, which was one of the first places hit by the virus, get a handle on it, and their infection rate improved. However, the rest of the country is still getting sick, and rates of infection have increased in hotspots.

      Most of these are places where no distancing or masking is practiced, or where the temporary closure of stores and offices was lifted too early. We are not out of the woods yet. 


      • Though some places are open, it may not be safe for you to go there.

      The barbershop and hair salon requires people to be very close together, so think carefully about whether you can hold out for a little longer. 

      If you do go, make sure they sanitize surfaces often because the virus can survive on smooth surfaces for the duration of your visit (and longer).


       Spend time together, take care of each other



      • People with underlying health conditions are the ones who suffer the most.

      COVID-19 appears to target the lungs, particularly, so anyone with lung issues needs to be careful. However, they’re not the only ones. Anyone with heart disease, immune system issues and diabetes, among others, needs to be careful.


      • Younger people still spread the virus, are infected by it and can die from it.

      Although most of the people who get sick and die from the coronavirus are elderly and/or have underlying health conditions, that doesn’t mean that younger people are immune. Please don’t assume that because you or your kids are in their twenties that it’s safe to go to packed events where everyone squeezes in like sardines.


      • PWM continues to work remotely and offer virtual meetings to keep ourselves and our clients healthy.

      Although we love to see and visit with our clients, we’re still careful to ensure that we keep everyone as safe as we can. Here at Platt we look forward to long-term relationships, and we don’t want anything to stand in the way of that!

      Investing during this time


      As you’ve no doubt noticed, there’s a lot of uncertainty in the economy, and the stock market is subject to rollercoaster rides right now. Unemployment remains high, and the Fed agrees with many economists that the first round of stimulus was not enough to keep everyone afloat.

      However, nothing has fundamentally changed. Retail was already in decline, which has accelerated due to COVID-19. Although we don’t know when the infections will ease, we know that this is most likely a temporary situation. 

      The virus requires behavioral changes in how we live and work, but not in how we invest. Once the pandemic slows, we can expect an uptick in the economy and market. Staying invested in your designed allocation is the best way to weather the current uncertainty.

      We know this is a difficult time because there is so much unknown. We’re happy to talk to our clients, review their current situation with them, and their investments. 

      If you need a refresher on why we chose the investments we did or feel nervous about the ups and downs in the market, please let us know. 

      We’re all in this thing together, and we want to help you pull through so you can sleep at night.


      Give us a call at 619.255.9554 or email us if you’d like to set up an appointment.


      Midyear Economic Outlook

      Midyear Economic Outlook

      The decade-long economic expansion did not end with a whimper. The coronavirus brought it to a screeching halt.


      U.S. gross domestic product (GDP) fell 5% in the first quarter, and a steeper decline is likely in the second. Consumer spending, which accounts for about two-thirds of the U.S. economy, slid 13.6% in April, the steepest decline on record.


      More bad news lies ahead in the short term, starting with the tragic human cost. Historic unemployment will likely have a lasting impact on the economy, and many businesses are failing. The path to economic recovery will depend on the course of the virus and public health response, and stock markets may bounce around for an extended period until the economy finds firmer footing.


      With that said, our three-year view is very optimistic. We see a lot of long-term investment opportunities present themselves in this environment.


      The chart shows U.S. GDP growth from the first quarter of 2019 through the first quarter of 2020, then depicts three potential recovery scenarios based on estimates from Capital Group U.S. economist Jared Franz. The first scenario, labeled as “not likely,” depicts a V-shaped recovery with a sharp acceleration of growth from the recession in mid-2020 and strong growth in 2021. The second scenario, labeled as “likely,” depicts a U-shaped recovery with a longer period of time in recession before more modest growth in 2021. The third scenario, labeled as “possible,” depicts a W-shaped recovery with peaks and valleys. All three scenarios indicate positive growth in the fourth quarter of 2021. First quarter 2020 GDP growth is the advanced estimate released by the Bureau of Economic Analysis on May 31, 2020. Sources: Capital Group, Bureau of Economic Analysis, Refinitiv Datastream.

      Market recoveries have been longer and stronger than downturns


      There will certainly be ups and downs. Because the slowdown was the result of government policy — not economic imbalances or rising rates ― we can see what recovery can look like when policies are relaxed.


      Of course, when you’re in the middle of a downturn, it feels like it’s never going to end. But it’s important to remember that market recoveries have been longer and stronger than downturns. Over the past 70 years the average bear market has lasted 14 months and resulted in an average loss of 33%. By contrast, as measured by Standard & Poor’s 500 Composite Index, the average bull market has run for 72 months — or more than five times longer — and the average gain has been 279%.


      Moreover, returns have often been strongest right after the market bottoms. After the carnage of 2008, for example, U.S. stocks finished 2009 with a 23% gain. Missing a bounce back can cost you a lot, which is why it’s important to consider staying invested through even the most difficult periods.


      Long-term investors may take comfort in knowing that tough companies have often been born in tough times. Consider these examples: McDonald’s emerged in 1948 following a downturn caused by the U.S. government’s demobilization from a wartime economy. Walmart came along 14 years later, around the time of the “Flash Crash of 1962” — a period when the Standard & Poor’s 500 Composite Index declined more than 22%. Microsoft and Starbucks were founded during the stagflation era of the 1970s, a decade marked by two recessions and one of the worst bear markets in U.S. history.


      Companies that can adapt and grow in tough times often present attractive long-term investment opportunities. Bottom-up, fundamental research is the key to separating these resilient companies from those likely to be left behind.


      Chart showing a timeline of bull and bear markets from January 1945 through May 2020 with labels of notable companies that were founded near bear markets. The companies and year they were founded include McDonald’s, 1948; Medtronic, 1949; Hyatt, 1957; Walmart, 1962; Nike, 1964; Airbus, 1970; Starbucks, 1971; Microsoft, 1975; Apple, 1976; Adobe, 1982; AT&T, 1983; Gilead, 1987; Taiwan Semiconductor Manufacturing Company, 1987; Tesla, 2003; Facebook, 2004; Uber, 2009; and Zoom, 2011. Sources: Capital Group, Standard & Poor’s. As of 5/31/2020. The bear market is considered current as of 5/31/20. In all other periods, bear markets are peak to trough declines of at least 20%. Bull markets are all other periods.

      The post-COVID market presents opportunity for selective investors


      While the pain of the current downturn has been widespread, its impact has not been universal. With stores shuttered and consumers mostly sheltered at home, U.S. retail sales slid an unprecedented 16.4% in April, according to the U.S. Commerce Department. But that’s not the whole story.


      A look beneath the surface of the U.S. stock market shows there has been a stark divide between winners and losers in this era of limited mobility. Not surprisingly, online retailers and grocers have enjoyed strong sales growth as consumers eat in and do their shopping in front of a screen. Providers of broadband, health care, home improvement materials and educational services have also benefited from healthy demand. Conversely, restaurants, travel and leisure companies, and aerospace companies have seen sales evaporate.


      We are witnessing a number of exciting themes emerge during this crisis. Within health care, for example, we are seeing telemedicine come to the forefront, as elements of the national health system go online, improving efficiency for many patients. To be sure, not all companies will equally tap into rising opportunity, so selective investing will be critical going forward.


      The line chart shows sales growth for industries in the U.S. retail sector from 2005 through April 30, 2020. One line on the chart tracks sales growth for retail industries identified as COVID-resilient; the second line tracks sales growth for all other retail industries. COVID-resilient retail industries include e-commerce, health & personal care, grocery, alcohol and home improvement. Sales growth for the two groups generally follow a similar pattern from 2005 through 2014, but sales growth for the COVID-resilient industries begins to outpace the other industries after 2014. Data in 2020 shows a sharp rise in growth for COVID-resilient industries and a sharp decline for all others. A table inset in the chart shows one-year sales growth through April 30, 2020, for select industries. They include the following COVID-resilient industries: E-commerce, 22%; grocery, 13%; home improvement, 0%; and health & personal care, down 10%. The bottom four other industries include the following: restaurants, down 49%; electronics, down 65%; furniture, down 66%; and clothing & accessories, down 89%. Top and bottom retail industries do not include those that had not reported April 30, 2020 sales growth, as of May 31, 2020. Sources: Refinitiv Datastream, U.S. Census Bureau.

      Digitization of daily life is here to stay


      Some of the recent demand activity reflects an amplification of already established trends. Cloud demand, for example, was sky-high before the COVID-19 outbreak. But the events of 2020 have kicked that theme into overdrive. In the stay-at-home era, e-commerce, mobile payments and video streaming services have soared in popularity, occasionally pushing the limits of technology. While the levels of online activity are likely to moderate, the pandemic could be a catalyst for even stronger e-commerce growth in the years ahead.


      The response to the COVID-19 crisis — keeping everyone at home — has accelerated this powerful trend of digitizing the world.


      Services that were already useful have in some cases become almost essential. Many people felt compelled to try grocery delivery for the first time, for example, and subscriptions to Netflix skyrocketed.


      There’s also room to advance. While e-commerce has grown in popularity, it still represents only about 11% of U.S. retail sales last year, and mobile payments stood at similarly low levels. Given where we are now in the consumer-technology space, the growth potential is truly exciting.


      The chart shows the penetration rate of “mobile wallet” transactions as of December 31, 2019, for four major markets. Rates are as follows: China, 35%; India, 30%; U.S., 9%; and U.K., 7%. “Mobile wallet” transactions refer to transactions at point-of-sale that are processed via smartphone applications and are estimates as of December 31, 2019. Sources: Statista, U.S. Census Bureau.

      Don’t forget: A presidential election is looming


      In an odd twist of political and economic fate, the event that everyone thought was going to be the biggest story of the year has been relegated to an afterthought. And maybe that’s the best way for investors to think about it.


      That’s because, historically speaking, presidential elections have essentially made no difference when it comes to long-term investment returns. The U.S. stock market has powered through every election since 1933, reaching new highs over time regardless of whether a Republican or a Democrat won the White House.


      What has mattered most is staying invested. Getting out of the market during election season has rarely paid off. It’s time, not timing, that makes the difference.


      By design, elections have winners and losers, but the real winners have been investors who avoided the temptation to time the market and stayed in it for the long haul.

      Chinese authorities deal with a rapidly spreading coronavirus, investors are raising questions about the potential impact on global economic growth and the financial markets. While much is still unknown about the extent of the outbreak — and, crucially, how long it may last — the initial drag on China and other emerging markets is starting to come into focus.


      China’s Economy and the Coronavirus Outbreak


      China’s economy was already growing at the slowest rate in 30 years before reports of the outbreak first emerged in the central China city of Wuhan. Since then, the Chinese government has placed a dozen cities under quarantine, shut down businesses and schools, and restricted travel in the affected regions. More than 7,700 infections have been reported as of January 30, including a small number in the U.S., Europe and other parts of Asia.


      Given the quarantine lockdowns, it’s highly likely that the numbers of infected people in mainland China are significantly underestimated especially in rural areas where medical facilities are limited.


      Depending on how long it takes to contain the coronavirus, there should be sizable declines in consumer spending and manufacturing activity at least through the end of February. 

      A Global Slowdown from the Coronavirus Outbreak

      Outside China, the biggest economic impact is expected to be in Thailand, which relies heavily on Chinese tourism. Among industries, travel and tourism throughout Asia will likely take a significant hit, along with sales of luxury goods. In addition, many events associated with China’s lunar new year have been canceled. Energy stocks also have fallen sharply as investors expect oil prices to decline further amid lower demand from China.


      Since news reports about the virus accelerated around January 17, emerging markets stocks have declined by about 4%, as measured by the MSCI Emerging Markets IMI. Chinese stocks are down more than 6% and Thai stocks slipped 7%. By comparison, the MSCI World Index declined 1.3% during the period through January 29. 

      If the economy and markets continue to deteriorate, Chinese authorities are likely to launch new stimulus measures, including potential tax cuts and interest rate cuts.


      How will the US economy be affected by the Coronavirus Outbreak?

      U.S. stocks, meanwhile, have lost about 2% on worries that the outbreak could have a spillover effect on the U.S. economy, including American companies that do business in China. Starbucks has closed about half of its 4,300 stores in China. Many U.S.-based airlines are also canceling flights to the country. And there are growing concerns about supply-chain disruptions for companies such as Apple that have significant manufacturing operations there.


      Coupled with Boeing’s recent troubles returning the 737 Max jet to service, the outlook for the U.S. economy now looks more uncertain than it did just a few weeks ago, says Capital Group U.S. economist Jared Franz. Fourth-quarter U.S. GDP growth came in at 2.1% on an annualized basis, according to Commerce Department figures released on Thursday.


      If 737 Max production remains grounded through July, then it’s estimated the impact on first-half GDP growth will be roughly –0.5 percentage points. The economic impact of the coronavirus on the U.S. is more difficult to calibrate, but expected to be modest and mostly felt through trade disruption and financial linkages.

      Assuming the outbreak is contained soon, it’s likely global economic growth will experience a V-shaped recovery characterized by slower growth in the first half and a significant acceleration in the second half of the year. The U.S. economy will probably follow the same course.

      U.S. economic fundamentals remain sound, labor markets are resilient and the Federal Reserve stands ready to take action as needed. The coronavirus looks to be a modest but temporary restraint on U.S. economic activity via secondary channels of impact, but should not derail growth expectations of roughly 2% in 2020.

      Coronavirus Outbreak Compared to SARS

      That’s similar to the pattern shown after the SARS outbreak that hit China in 2002 and 2003. Key indicators bounced back quickly after the virus was contained. Many investors are looking at the SARS event as a template for what might happen in the weeks and months ahead — although it’s important to note that there were many other factors during that time period, including the aftermath of the 9/11 attacks and the U.S. invasion of Iraq in 2003.


      In addition, the structure of the global economy was significantly different. The Chinese economy was largely investment-driven at that time. Consumer spending is a much larger percentage of total economic output today. Travel and tourism activity also was much lower than it is now, with Chinese tourism skyrocketing over the past decade. 


      Investment Implications

      That’s similar to the pattern shown after the SARS outbreak that hit China in 2002 and 2003. Key indicators bounced back quickly after the virus was contained. Many investors are looking at the SARS event as a template for what might happen in the weeks and months ahead — although it’s important to note that there were many other factors during that time period, including the aftermath of the 9/11 attacks and the U.S. invasion of Iraq in 2003.


      In addition, the structure of the global economy was significantly different. The Chinese economy was largely investment-driven at that time. Consumer spending is a much larger percentage of total economic output today. Travel and tourism activity also was much lower than it is now, with Chinese tourism skyrocketing over the past decade. 


      As with any large-scale crisis, long-term investors should look for select opportunities that may be generated by a near-term loss of confidence. This is when long-term thinking, on-the-ground research and a focus on value can make a meaningful difference.

      Investment management for volatile times


      At Platt Wealth Management we build your investment portfolio to support the future you envision for yourself. Reduce risk and see returns you can be comfortable with in volatile market conditions. Give us a call today to set up a complimentary review at 619-255-9554.


      Will the Stock Market Survive the Coronavirus?

      Will the Stock Market Survive the Coronavirus?

      Rising fears over the continued spread of the coronavirus have led to a sharp stock market decline as investors grapple with its impact on the global economy. On Monday, March 9, in reaction to news of the virus spread and the recent oil shock, Standard & Poor’s 500 Composite Index fell 7.6%, triggering a 15-minute trading halt. As of March 12th, the Dow closed down 2,352, 10 percent.


      How can we make sense of the coronavirus (COVID-19) outbreak and market reaction?


      Until January 2020, most of us had never heard of this virus. People are understandably frightened because this is a new disease, and there is much uncertainty over how it will all play out. In short order, we have grown increasingly concerned about the prospect of a global pandemic and its impact on the global economy. First and foremost, the virus has a real human cost. We don’t know how many people are going to get ill or, worse yet, how many may die. Of course, our first thoughts are with the people who have fallen ill and their families.


      While this disease is new, there have been many pandemics and other crises in the past, and markets have survived them all. Today, a fair amount of panic has taken hold around the world, and we expect in the coming weeks that a rising number of cases may alarm many people. Eventually, the spread of the virus will slow down and people will get back to normalcy, as will markets.


      What does this mean for the economy?

      We are already seeing signs of a slowdown in the U.S., not only on the supply side as businesses brace for the road ahead, but also on the demand side. By now we have all heard of large conferences and entertainment events being canceled, firms postponing large meetings, and consumers delaying vacations and seeking to reduce their social contact.


      That means businesses related to travel, leisure, entertainment and recreation are likely to be the most impacted, not to mention oil and other commodities where we have already seen a collapse in global demand. 


      On the positive side, the U.S. economy remains among the most resilient in the world. It has a history of bouncing back from adversity. Interest rates are low, and the decline in oil prices should further support the consumer. What’s more, in China the spread of the virus appears to have peaked. Given that, the peak of its spread globally will occur sooner than many people anticipate.


      What does it mean for markets?


      We are experiencing a market decline that we have not seen since the Great Recession. March 9, 2020 was the 11th anniversary of the market bottom during the Great Recession — and the market noted the anniversary by recording the largest single-day point decline we have ever seen. Three days later that was surpassed by the 2,250 drop in the Dow.


      With this latest dip markets, as measured by the S&P 500, were down more than 20% from their peak earlier in the year, and we are now in a bear market. This would be the first bear market after more than a decade of generally strong market returns. As a result, in general, equities appeared to be fully valued by most measures heading into this recent period, and markets could remain volatile for some time. In addition to the uncertainty resulting from the spread of the virus, the U.S. is in an election year.


      Turning to the bond market, we have seen a flight to safety that has pushed bond yields to unprecedented lows. The yield on the 10-year U.S. Treasury fell to 0.5%. Interest rates could go still lower as the U.S. Federal Reserve seeks to provide liquidity to markets through interest rate cuts and quantitative easing. Over time, low interest rates provide support to equities.


      While the pace and magnitude of the recent volatility can be unsettling it is not entirely surprising. Investor sentiment is fragile and will likely remain so until the spread of the virus slows. In times like these, resilient investors who can demonstrate patience can be rewarded over the long term.


      We take some comfort in seeing that the Federal Reserve has demonstrated its willingness to take aggressive action, cutting interest rates 50 basis points in an emergency meeting on March 3, which lowered its target range to between 1.00% and 1.25%. The Fed stated that it is “closely monitoring developments and their implications for the economic outlook, and will use its tools and act as appropriate to support the economy.” Markets are generally expecting an additional cut at the Fed’s next scheduled meeting, to be held on March 17 and 18.

      How does this compare with crises in the past?


      In the 25 years we have spent as fee-only financial advisors, we have experienced a number of unsettled markets, including the tech and telecom bubble in March 2000, and the Great Recession of 2008 and 2009. Each of these crises was very different, with very different underlying conditions. But in each case, the markets bounced back. We believe the markets, and great companies, will survive the current market decline and rebound.


      One significant reason why there is such an extreme degree of bearishness, pessimism, bewildering confusion and sheer terror in the minds of advisors and investors alike right now is that most people today have nothing in their own experience that they can relate to, which is similar to this market decline. Our message to you, therefore, is courage! We have been here before. Bear markets have lasted this long before. Well-managed mutual funds have gone down this much before. And shareholders in those funds and the industry survived and prospered.

      We have seen many turbulent markets and know how hard it is to avoid getting caught up in the here and now. This is especially true when the media bombards us hourly with news, speculation and rumor. We also know, though, that as long-term investors we must focus on the real world underneath the noise and mesmerizing flow of data.


      Should investors expect a quick recovery?


      Circumstances may very well get worse before they get better. But we believe eventually markets will rebound. This too shall pass. When it does, long-term investors who can tune out the daily white noise — and red numbers flashing across their screens — and focus on the long term should ultimately be rewarded.


      We take the view that we will deal with outbreaks like COVID-19 and eventually we will adjust to it. At Platt Wealth Management, we are taking every precaution to prepare for it. We are working closely with clients, monitoring accounts. We are offering video and phone based meetings and we are reviewing our business continuity plan. We expect that we will be dealing with the COVID-19 virus, and are planning our operations around possible longer term considerations.


      What is Platt Wealth Management doing to ensure continuity and care of client assets?


      Obviously our first concern is to ensure the health and safety of our associates and clients. But rest assured as this situation evolves, we are working hard to continue to do what we have always done: working with clients to achieve their financial goals, looking for opportunities and making sure clients are confident with their investments. In-depth, long-term view of markets is at the core of what we do. We will do our very best to provide clients with a smooth and less volatile experience than the broader markets.


      What should investors be doing?


      In periods of declining markets, emotions run high, and that’s natural and understandable. But it is exactly in times like this that a long-term orientation is important. Based on our prior experiences and what has historically occurred, we firmly believe markets will rebound and life will return to normal or what may be a new normal. Now more than ever, investors should be in close communication with their advisors, reaffirming their long-term objectives.

      3 Common Investor Mistakes During Election Years

      3 Common Investor Mistakes During Election Years

      Investing during an election year can be tough on the nerves. 2020 promises to be no different. Politics can bring out strong emotions and biases. Investors would be wise to put these aside when making investment decisions.


      Benjamin Graham, the father of value investing, famously noted that “In the short run, the market is a voting machine but in the long run, it is a weighing machine.” He wasn’t literally referring to the intersection of elections and investing, but he could have been. Markets can be especially choppy during election years. Sentiment often changes as quickly as candidates open their mouths.


      Graham first made his analogy in 1934, in his seminal book, “Security Analysis.” Since then there have been 22 election cycles. We’ve analyzed them all to help you prepare for investing in these potentially volatile periods. Below we highlight three common mistakes made by investors in election years and offer ways to avoid these pitfalls and invest with confidence in 2020.



      Mistake #1: Investors worry too much about which party wins the election



      There’s nothing wrong with wanting your candidate to win. Investors run into trouble when they place too much importance on election results. That’s because elections have, historically speaking, made essentially no difference when it comes to long-term investment returns. 


      “Presidents get far too much credit, and far too much blame, for the health of the U.S. economy and the state of the financial markets,” says economist Darrell Spence. “There are many other variables that determine economic growth and market returns and, frankly, presidents have very little influence over them.”





      What should matter more to investors is staying invested. Although past results are not predictive of future returns, a $1,000 investment in the S&P 500 made when Franklin D. Roosevelt took office would have been worth over $14 million today. During this time there have been exactly seven Democratic and seven Republican presidents. Getting out of the market to avoid a certain party or candidate in office could have severely detracted from an investor’s long-term returns.



      By design, elections have clear winners and losers. But the real winners were investors who avoided the temptation to base their decisions around election results and stayed invested for the long haul.



      Mistake #2: Investors get spooked by primary season volatility



      Markets hate uncertainty, and what’s more uncertain than primary season of an election year? With so many candidates on the campaign trail — 11 Democrats were still running when primaries kicked off in early February — the range of outcomes can feel daunting.



      But volatility caused by this uncertainty is often short-lived. After the primaries are over and each party has selected its candidate, markets have tended to return to their normal upward trajectory. 





      Election year volatility can also bring select buying opportunities. Policy proposals during primaries often target specific industries, putting pressure on share prices. This cycle, it’s the health care sector that’s in the spotlight as several candidates have proposed overhauls to drug pricing and the health care system.



      Does that mean you should avoid this sector altogether? Not according to Rob Lovelace, an equity manager with 34 years of experience investing through many election cycles. “When everyone is worried that a new government policy is going to come along and destroy a sector, that concern is usually overblown,” Lovelace says. “Companies with good drugs that are really helping people will be able to get into the market, and they will get paid for it.” 



      In the past, those targeted sectors have often rallied after the campaign spotlight dimmed. It happened with health care following the 2016 presidential and 2018 midterm elections. This has happened with other sectors in the past. This can create buying opportunities for investors with a contrarian point of view and the ability to withstand short-term volatility.



      Mistake #3: Investors try to time the markets around politics



      If you’re nervous about the markets in 2020, you’re not alone. Presidential candidates often draw attention to the country’s problems, and campaigns regularly amplify negative messages. So maybe it should be no surprise that investors have tended to be more conservative with their portfolios ahead of elections.



      Since 1992, investors have poured assets into money market funds — traditionally one of the lowest risk investment vehicles — much more often leading up to elections. By contrast, equity funds have seen the highest net inflows in the year immediately after an election. This suggests that investors may prefer to minimize risk during election years and wait until after uncertainty has subsided to revisit riskier assets like stocks.



      But market timing is rarely a winning long-term investment strategy. It can pose a major problem for portfolio returns. To verify this, we analyzed investment returns over the last 22 election cycles to compare three hypothetical investment approaches: being fully invested in equities, making monthly contributions to equities, or staying in cash until after the election. We then calculated the portfolio returns after each cycle, assuming a four-year holding period.





      The hypothetical investor who stayed in cash until after the election had the worst outcome of the three portfolios in 16 of 22 periods. Meanwhile, investors who were fully invested or made monthly contributions during election years came out on top. These investors had higher average portfolio balances over the full period and more often outpaced the investor who stayed on the sidelines longer.



      Sticking with a sound long-term investment plan based on individual investment objectives is usually the best course of action. Whether that strategy is to be fully invested throughout the year or to consistently invest through a vehicle such as a 401(k) plan, the bottom line is that investors should avoid market timing around politics. As is often the case with investing, the key is to put aside short-term noise and focus on long-term goals.



      How can investors avoid these mistakes?

      • Don’t allow election predictions and outcomes to influence investment decisions. History shows that election results have very little impact on long-term returns.
      • Expect volatility, especially during primary season, but don’t fear it. View it as a potential opportunity. 
      • Stick to a long-term investment strategy instead of trying to time markets around elections. Investors who were fully invested or made regular, monthly investments did better than those who stayed in cash in election years. 
      What Your Daughter Needs to Know About Personal Finance

      What Your Daughter Needs to Know About Personal Finance

      Despite our best efforts, people still think of finance as being the man’s domain. The truth is that everyone needs to understand personal finance, so they can manage their money the right way. Even those who choose a wealth manager or financial planner to handle their investments still need to know the basics.

      We all know that women tend to live longer than men. It’s likely that at least one point in her life, a woman will not have a partner to rely on to handle her money for her. She needs to be able to do it herself. Even if she eventually chooses to have a company, or a spouse or someone else, take over the money management.

      When she’s learned the fundamentals, she can tell if it’s being handled appropriately. What if she never learns how to manage her money? Not only will she be in trouble when she has to handle it by herself, but she won’t know if the person she’s delegated to is knowledgeable and capable of doing the job right!

      Of course your sons need to know how to handle their finances too, and the advice below goes for both men and women. However, some issues such as longevity are harder on women and their money than they are on men, generally speaking.

      The four cornerstone questions of personal finance

      Briefly, the key things to know are: How much comes in? How much goes out? What do I (or we) own, and what do we owe? Both partners in a marriage need to be clear about the answers to these key questions.

      How much income, from whatever sources, is coming in? Millennials and younger generations may have side hustles or more than one income stream for each spouse. Even if there’s been an agreement that the separate income streams are (essentially) separate property, both should know approximately how much each is earning. If one spouse tries to hide or minimize it, that’s a red flag to the other spouse.

      How much is being spent? Couples may designate “play money” that each spouse can spend on whatever pleases them. It’s important to make sure that the expenses are not exceeding income. Whether or not there’s play money involved.

      What’s owned? As we noted in the earlier article, tasks including dealing with the money are usually split between bother spouses. Sometimes one spouse handles daily money management activities like grocery shopping, and the other handles the investments. Either way, both spouses need to know how much is in the investment and retirement accounts.

      What’s owed? Both jointly and separately. How much credit card debt is outstanding, and how much of that has both your names on it? How much in student loans? Loans on vehicles, lines of credit, including HELOC?

      What’s the current mortgage balance? Whatever the appraised value of the house, the amount actually owned (equity) is the value less the outstanding mortgage balance.

      Neither spouse should sign any kind of agreement unless they know what they’re signing. And they’re OK with having their name on it.

      For example, if your spouse can’t get a loan without you co-signing, do you know why? And are you comfortable with having your name on that debt? Creditors will come after you for payment, if your spouse falls behind on payments they agreed to make. You could very well see your own credit score drop as a result.

      How to create a spending plan


      In olden times this was known as a “budget”, but no one likes that word anymore! Each dollar of income should have a job. Savings, debt repayments, and fixed expenses must be covered first before dollars can go to things like entertainment.

      Anyone with a household to run needs to know how important it is to keep expenses lower than income. It’s the only way to save money and avoid living paycheck to paycheck. The wider the gap between income and expenses, the more money that can be saved and invested.

      You need the analysis skills to look at your current spending and determine where you can cut back, if you’re currently living on credit cards because your income isn’t enough. Also brainstorm ideas for making more money.

      The more money saved and invested, the sooner the household is financially independent.


      How to invest money

      Most people have financial goals, such as retirement. Workers in the US typically no longer have pensions. They’ll rely on Social Security, and their own savings, when they reach the point where they can’t or don’t want to work any more. Which means the retirement bucket needs to be sizeable!

      As a rule of thumb (known as the 4% withdrawal rule), a million-dollar portfolio invested 60% in stocks or stock funds and 40% in bonds will generate about $40,000 per year for a retirement period of 30 years without running out of money.

      In addition, many people may have other goals, such as buying a house or rental property. Or owning their own business. Etc. Understanding and using the power of compounding is key to achieving all these goals.

      As Einstein said, compounding is the eighth wonder of the world! Money doubles in about twelve years, given a return of 6% when simply left alone to grow. It takes eighteen years if the return is 4% (rule of 72). Start with $10,000 and end up with $20,000 by doing nothing (except investing it correctly.)

      Investing is dependent on risk tolerance but also on how soon the money’s needed. Longer timeframes, such as retirement for those in their 20s, 30s and 40s, require more stocks in the portfolio. When you don’t have to take the money out for a long time, you can afford to ride out the inevitable dips. No risk, no reward!

      Money kept in cash (and lately, bonds) lose ground due to inflation. They’re poor investments for long-term goals. By contrast, when you need the money in five years or less, a stock market drop is bad for the portfolio. Those short-term goals need more bonds and cash to protect against drops.

      It’s key for women particularly to understand that even after they retire, they still have a long term timeframe (10+ years). Their money needs to last past retirement. Therefore, they still need a fair amount of stocks in their portfolios to hedge against inflation after they stop working.

      Matching the investment to the risk that’s being faced is key. Many investors are afraid of stock market drops, but that’s not the actual risk on a long term timeframe. Inflation is.

      Conversely, inflation is not an issue when you need the money within a year. A stock market drop is.

      Good news for women investors

      When looking at equity investing, women on average outperform men. (Though too many women don’t take enough risk in their portfolios.) Women don’t tend to trade as much, and are better at leaving their portfolios alone to grow and compound. They generally don’t do as much short-term trading. Which tends to generate fees, but not returns.

      Women’s style is very well-suited for long-term investing. All women should embrace themselves as investors, and start earning some rewards by taking on more risk.


      Want to invite your daughter to your next financial planning meeting with your Platt Wealth Management advisor? Send us an email or call 619.255.9554 to schedule your next appointment.



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