Wednesday, October 20, 2021

Good, Better, Best

Ask the CFP

“I’m not confused, I’m just well mixed.”

~ Robert Frost

Question: With current market activity, is it time to review my portfolio?

Answer: The unequivocal answer is yes. Here’s a personal example of why periodic monitoring is important. Until recently, our home decor was a mix of “contemporary cocker spaniel” and “early grandkids.” The kids are no longer toddlers and the dog is well past puppy stage. External circumstances changed and it was time to respond. We enlisted the help of a professional, choosing to work with a woman who understands our lifestyle and priorities. Establishing this sort of relationship was a little scary and made me think of how our clients may feel when they begin working with us.

The first meeting focused on what we liked and disliked, our expectations, fees, future meetings, and what we needed to do before she could work her magic. Then we reviewed the process and reaffirmed our commitment. At this point, I briefly reconsidered and thought, “Hey, things aren’t really that bad” and “we can wait until fall to tackle this.” Knowing that we truly required professional assistance we took the plunge and are thrilled with the results.

Just like changes in life lead to changes in living environments, changes in the overall economy, the market, and your financial situation are reasons to reassess and reprioritize your goals. In the home décor example, it was time to replace the crib with a trundle bed. Trends change. Much of our décor was outdated and not particularly functional. Adaptation to style changes wasn’t a priority. Similarly, technological changes, interest rate levels and tax rates affect the economy. Is it time to examine and reevaluate your portfolio to keep up with changes in your life? Do your investments match your current risk tolerance level?

In July 2013 the Bureau of Economic Analysis, the agency tasked with calculating our national GDP, changed how this data is measured. Gross Domestic Product (GDP) is the annual market value of all goods and services produced domestically by the U.S. The revised accounting structure gives more weight to intangible property (IP) and intellectual assets of companies which better reflect our evolving economy. Stock markets react to these modifications, financial data, economic news, and government policy, all which affect your portfolio.

Tax law changes may also impact your finances, perhaps not in dramatic ways, yet awareness could be significant. For instance, with the top 20 percent of income earners, modifications to tax rates or changes in consumer goods prices are unlikely to influence spending behavior. It is increases in the stock market and housing prices that tend to have positive effects. Changes in perceived wealth can have a significant impact on spending. For the other 80 percent, the impact of the tax changes does not suggest a recession, but a slower pace of consumer spending growth may be expected going forward. This could be valuable information as it relates to your planning.

According to Larry Adam, Raymond James Chief Investment Officer, there are five reasons that suggest economic strength rather than recession. 1) Slower and lower GDP growth is still growth. 2) The Federal Reserve has signaled that it will end its balance sheet run-off process in September and not hike interest rates in 2019. Lower interest rates should lead to higher multiples on equity prices and support their upward movement. 3) Earnings expectations have stabilized. 4) Dividends are expected to grow another 7% in 2019. 5) Merger and Acquisition (M&A) activity is on pace to post the strongest year on record. As a result, the number of publicly-listed U.S. companies is near the lowest level (~4,500) since the 1980s and is down ~50% from its mid-1990s peak. This means there are now fewer companies for investor to buy, providing upward pressure on U.S. equity prices. This is referred to as the “de-equalization” of the equity market.

By taking time to understand our family’s lifestyle, our interior designer carefully customized a plan to match our goals and budget. Wealth management is much the same in that it requires communication and trust for a CFP® Practitioner to design a personalized, comprehensive financial plan. Changes in the economy, housing, employment, and taxes are external factors that affect our financial security. Just as it was time to pass the crib along to someone with younger grandchildren, it may be appropriate to address new requirements for your financial life. Change is constant that’s why it’s strongly suggested that we review investments, monitor progress and make any necessary adjustments to match your current situation. Stay focused and invest accordingly.

The opinions expressed are those of the writer, but not necessarily those of Raymond James and Associates, and subject to change at any time. Information contained in this report was received from sources believed to be reliable, but accuracy is not guaranteed. All investments contain risk, including loss of principal. Views are as of April 15, 2019 and subject to change based on market conditions and other factors.

“Certified Financial Planner Board of Standards Inc. owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER™, CFP® (with plaque design) and CFP® (with flame design) in the U.S., which it awards to individuals who successfully complete CFP Board’s initial and ongoing certification requirements.”

This article provided by Darcie Guerin, CFP®, Vice President, Investments & Branch Manager of Raymond James & Associates, Inc. Member New York Stock Exchange/SIPC 606 Bald Eagle Dr. Suite 401, Marco Island, FL 34145. She may be reached at 239-389-1041, email Website:


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