After taking a closer look at interest rates in part 1 and inflation in part 2, we come to the heart of the matter: When interest rates, inflation, or both are on the rise, what should an investor do?
The big picture overview is that the team at Great Lakes Investment Management is continuing to deploy the same core principles and values we use to help people invest across time and through various market conditions.
These core principles become even more important during increased geopolitical uncertainty and economic stress as they serve to guide you past any periods of doubt.
With so much...
In our last blog post, Understanding Interest Rates, we discussed how rising and falling interest rates can impact a healthy economy. In this post, we’re going to talk about inflation - what it is and how it’s affecting our financial plans. This is a question that many investors are asking themselves these days and it’s important to understand if and how inflation has been contemplated as part of your financial plan.
How Is Inflation Measured?
Inflation is the rate at which money loses its purchasing power over time. As you might guess, there are many ways to measure this. There are various economic sectors, such as energy, food, housing, and healthcare, which can complicate the equation by exhibiting wildly different inflation rates at different times. There is ongoing debate over which figures are most relevant under what conditions.
There’s also today’s inflation rate, versus the rate at which inflation has changed or is expected to change over...
Part One: Understanding Interest Rates
If you’ve been concerned about rising interest rates, you’re not alone. With rates at historically low levels for so long, it’s something we’ve been preparing for for a while now. Still, it’s something we will continue to keep a close eye on and we want you to have a solid understanding of what this means to you.
In March, The Federal Reserve raised its federal target funds rate by a quarter point. It was the first increase since December 2018, but it wasn’t a huge surprise. Fed Chair Jerome Powell had already said we should expect as much, with the potential for additional increases before the year-end.
Along with interest rates, inflation remains a related topic of conversation, not to mention the economic toll and humanitarian tragedy being wrought by Russia’s actions. Unfortunately, there is only so much we can do to alleviate the heartbreaking news coming out of Ukraine.
But as a...
Is it just me, or do you also feel like the last two years have flown by? It’s always a busy time of year with the holidays, but it’s important that we take some time to financially prepare for the end of the year and the beginning of a new year.
Here are some things to consider as you weigh potential tax moves before the end of the year.
Defer Income to Next Year
Consider opportunities to defer income to 2022, particularly if you think you may be in a lower tax bracket then. For example, you may be able to defer a year-end bonus or delay the collection of business debts, rents, and payments for services in order to postpone payment of tax on the income until next year.
Look for opportunities to accelerate deductions into the current tax year. If you itemize deductions, making payments for deductible expenses such as medical expenses, qualifying interest, and state taxes before the end of the year (instead of paying them in early 2022) could...
Balance is a universal principle that works wherever it is applied. For example, a balanced nutritional program is better than an unbalanced one; a balanced exercise program is better than an unbalanced one; and a balanced life is better than an unbalanced life.
This same investing principle of balance has historically worked in portfolio management. Adding diversity of style, geography, and asset class has historically mitigated volatility, and made it easier for our clients to remain “buckled in.”
Diversification across asset classes may keep investors from chasing last year’s performance. What works in one year doesn’t necessarily work in the subsequent years. Oftentimes, last year’s outperformer falls to the...
A historical perspective can help inform and guide investment decisions. In a recent blog post, I shared how this combined with the investing principle of consistency was the best way I’ve found to increase your returns. But it doesn’t stop there. Maintaining that disciplined perspective often requires that we exercise the principle of courage in investing, especially during times of uncertainty and fear.
Each generation faces challenges that often appear both unique and overwhelming, but when viewed through the sobering lens of history, we find they are neither. Today, we face any number of challenges which, while significant, are arguably no more daunting than: A global depression, two world wars, the Cold War, the assassination of one president and the resignation of another, 9/11.
And yet the market has continued its inexorable climb. After all, humans are remarkably resilient, as well as masterful...
When you listen to financial news commentators, it can feel as though financial markets and investment decisions are capricious and arbitrary. Over the short term, that might be accurate. However, over the long term, there are universal investment principles that may ultimately help govern your success and which guide all of our wealth management and investment decisions.
Adhering to principles like balance, consistency, and courage will help you stay on course and provide a buffer from the constant drone of crisis and fear promoted by some news and media outlets.
Humans are not fans of consistency, yet it’s one of the most powerful principles of investing. I cannot tell you how many clients I’ve worked with over...
A self-directed 401(k) or 403(b) is an additional investment option to the traditional retirement plans offered by your employer. It might be available to you and you don’t even realize it. In those traditional plans, your employer pre-approves funds you can invest in, whereas a self-directed 401(k) or 403(b) allows for a little more flexibility in choosing what you can invest in.
Whether it’s you or someone outside your company’s organization, the option of a self-directed 401(k) could be great for you if you like having a little more say in where your money goes. It’s important to note that not all employers offer this option, so check with your organization to see if you’re able to participate in a self-directed brokerage of your investments.
I can’t tell you how many people I’ve talked to who have no idea how their 401(k) is invested. It’s usually not managed well because...
Whether you are a relatively new investor or you've been at for a while, the recent market swings have not been for the faint of heart. Yes, it's common knowledge that what goes up, must come down. However, even if you view market volatility as a regular occurrence, it can be tough to handle when you're watching your account balance drop.
While there's no fool-proof way to handle the ups and downs of the stock market, the following common-sense investor tips can help.
Diversifying your investment portfolio is one of the key ways you can handle market volatility. Because asset classes often perform differently under different market conditions, spreading your assets across a...