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Strong Valley is pleased to support the Clovis FFA, with its long tradition of excellence in Agriculture, Leadership and Citizenship. We brought together a table of clients to attend the recent FFA Booster Club Fundraiser Dinner and had a wonderful evening of celebrating this noteworthy local program.
The Clovis FFA Booster Club is an organization benefiting the members of the FFA. The club provides funding to assist students involved in many different activities and provides many of our seniors with scholarships.
The Mission of Clovis High School is to ensure that all students will be given every opportunity to maximize their potential in the areas of Mind, Body, and Spirit, enabling them to become productive, contributing members of our society. The Vision of Clovis High School is to connect today's students to tomorrow's opportunities.
The Clovis FFA was established in 1932 and has one of the top Agriculture Education programs in the State of California, along with the best high school agriculture facility.
Here is a statement that is bound to cause you to raise your eyebrows: Your long-term financial success depends less on the structure of your portfolio than on your ability to adapt your behavior to changing economic times.
At the very foundation of your financial well-being lies your behavior. In fact, one can plausibly argue that the dominate determinants of long term, real life, investment returns are not market behavior, but investment behavior.
Look at it this way: most of us would agree that, while meticulously constructed investment portfolios can probably weather almost any economic storm, none can withstand the fatal blow of an owner who panics and sells out.
So prevalent is such panic that an entire field – behavioral finance – studies how and why investors like you might make dumb money moves.
An increasing number of financial planners realize that their primary business isn’t just producing your financial plan or furnishing you with investment advice but caring for and transforming your emotional well-being.
In many respects, financial advisors are the antidote to investors’ panic. In theory, all financial advisors will try everything to keep a client from turning a temporary decline into a permanent loss.
But the tendency to sell low and buy high will not stop anytime soon – and it’s in all of us.
Supporting your financial and emotional well-being often requires that both you and your advisor learn from each other and work together over the long term. You both also must realize that antidotes to panic sometimes require more than one dose.
When managing personal finances and investments, people frequently exhibit irrational behavior for different reasons. If you’re one of these folks, be fair to yourself. It doesn’t even take a spate of market zigzags like what we saw in January of 2022 to prod you into questionable decisions.
Everyone makes choices about money nearly every day – how to earn, spend, save, invest and so on. Sometimes you pick wisely, sometimes harmfully. Some decisions, particularly those regarding when and where to invest, whipsaw from wise to harmful and back depending on when you reached your conclusion and when you took the plunge.
Supposedly, if you can learn more about the cause and effect of your money decisions, and what around you contributes to them, you will improve your financial security. Pinpointing behaviors as either rational or irrational in the middle of the storm comes hard though. The January 2022 market provided a convenient and timely case study to help explain why.
That month, the Standard & Poor’s 500 Index declined 5.3% and NASDAQ dropped 9.0%. If sensitive to market moves, maybe you are reading the declines and ready to sell – a flight that might be shown as irrational a few years from now.
If you wanted to sell after January’s declines you likely have loss aversion – one of many often-irrational money behaviors. Psychologically, people perceive losses (or declines in value of an investment) as much as 2½ times more impactful than gains of a similar size. Watch your investment drop $1,000 and you feel more than twice as bad as you might feel good about a gain of $1,000.
Most people are loss averse and it’s clear why many sell when market prices decline. Is loss aversion irrational? Or sometimes is it timely clairvoyance?
Let’s go back to the start of the pandemic. Let’s say you eliminated your market exposure on the same exact day that the CDC confirmed its first case of COVID on January 20th. And then you jumped back into the market exactly two months later, on March 20th.
Instead of irrational, you would have appeared brilliant. Because although January 20th was not precisely the high (it was February 14th, but you were really close), March 20th was exactly the bottom.
What-if situations such as these clearly show that sometimes irrational behavior produces good outcomes. But more often than not, well-trained (and often self-proclaimed) experts applying rational processes to money management wind up on the wrong side of the intended outcome, especially in the short term. This helps make investing fascinating and, at times, maddening.
Because investment markets are complex and potentially both irrational and efficient, understand well your tolerance for risk. Define what risk actually means in terms of your financial security and your willpower to handle markets when fear and greed influence decisions.
A written investment strategy can serve as a foundation for your long-term decisions. Your strategy – and your commitment – may also benefit from testing your strategy’s performance hypothetically in past crises.
Since we can’t predict outcomes that depend partially on luck, we plan according to probabilities. For example, rather than focus on the size of your expected returns, know the probability that your investment strategy can support your desired spending rate in retirement or make tuition payments, fund a wedding, cover health-care costs and so on. Your broader financial plan drives your investment strategy not the other way around.
Ideally, when your goals link directly to your plan you have a better foundation for dealing with investment uncertainty and Wall Street’s effect on your emotions and decisions.
Strong Valley Wealth & Pension is proud to be a supporter of Clovis High School Cougar Baseball. We are donating the following package to help kickstart a great 2022. Go Cougars!
Primary contact for this auction item – Chris Conner (559) 384-2400 or chris@adamstrongvalley-com
Valentine’s Day is of course an extremely popular day for marriage proposals. Regardless of which side of the engagement you’re on – or when your engagement occurred – consider how, when and where to wed not just each other, but also your finances.
Fights about money constitute one of the biggest frictions in marriage. While everyone sees financial well-being differently, you can minimize that potential friction many ways.
You would be surprised at how many people don’t discuss finances with life partners. While some simply prefer not to talk about money, others just don’t know how to go about it.
As with other parts of your relationship, keeping the financial lines of communication open is essential for success. An ongoing financial check-up appearing regularly on your calendar – weekly, weekly, monthly or even semi-annually – makes a great way to touch base on current money affairs. Call it your “financial roundtable.”
Sit down and discuss your financial situation, and identify short-term and long-term goals. Developing a clear understanding of where you are financially and where you want to be – in a month, in five years, anytime in the future – goes a long way toward ensuring that both of you work toward the same goals. Not to mention that it minimizes any miscommunication regarding everyday spending and saving.
Perhaps your idea of saving and your contributions to retirement plans and similar accounts differ from your partner’s. But putting a plan together on how to budget expenses and save for common goals reduces misunderstandings and, in turn, conflicts over money.
Creating a family budget (perhaps an eye-opening task for somebody who’s formerly single) starts with aggregating your incomes and writing down every possible expense, including savings and allowance for miscellaneous costs you don’t expect. Whether you allocate $10 or $1,000 to monthly savings as a start, the important thing is that you save and grow those contributions together.
Also, if you have big plans such as a (somebody else’s) wedding, a vacation or a new baby, you can create an additional savings account for that purpose. This allows you to avoid dipping into your core savings.
As you might soon learn from your new life mate, not everyone is born with a knack for managing finances. Even those who clearly understand what needs to be done regarding money are often too busy focusing on other important parts of life, such as making a living, taking care of kids, preserving good health or having a social life.
The good news: your financial advisor can offer technology that can help with personal finances, from mobile banking to organizing your cash flow. You no longer need to invest significant time and energy in understanding your current financial well-being.
Sure, it’s a lot easier to ignore your personal finances then tackle them head on. But as you plan to share your life with someone, set yourself up for success from the very beginning. The more you communicate and work for the same financial goals, the greater the chance for a happy union personally and financially.
Happy Valentine’s Day.
Lately it seems as if every client or potential client asks about the possibility of a looming market correction. Investors love good times, but they're smart -- they know the market runs in cycles, and the good times can't last forever. We're in the second-longest bull run in history. And yet there's uncertainty, too, globally and in this country. When people ask if a correction is coming and what they should do to prepare, the best answer for most is: stay the course.
Whether you're still working or already retired, consistency pays off. Especially in uncertain times, when a market correction is on many people's minds, it may be best to stick to your plan. If you don't, if you overreact, you could end up making financial decisions that may set you back in your strategy.
Of course, if you're worried that the plan you have in place is not the best, that's a different conversation. Then it may make sense to make some changes. If that's the case, here are a few steps to consider:
Perhaps you've been handling things just fine on your own with your 401(k) or 403(b). As you near retirement, however, it's time to speak to a specialist who can help you take the focus from accumulation and growth and put it on income planning and asset protection.
Many financial professionals will consult with a potential client once or twice with no obligation, so you can get a feel for whether you're a good fit. You should ask for an analysis to see if there are any redundancies in your current portfolio, if you are truly diversified and if you are paying any unnecessary fees.
You also should talk about risk -- how much you can stomach emotionally, how much you can afford and how much is in your current portfolio. Your financial professional has resources to help assess and align your risk. That is especially important if you're anticipating a market downturn and might be tempted to make trades based on your anxiety.
A lot of people have piles of statements from different accounts, but that doesn't always mean they have a strategy in place. In retirement, you need a detailed plan for your money -- and that plan should help give you more confidence that you'll be OK.
People tend to get out of the market when it's down, and by then they may have already lost money. Then they may get back in when it's coming around again . . . but by then, most of the gains could already have been made. That bad timing can be very costly.
Everyone is talking about a coming correction, but what exactly does that mean? It isn't the same as a pullback -- typically defined as a short-term decline of 5% to 9% from a recent high. And it isn't as menacing as a bear market, which is a downturn of 20% or more that can last for months.
A correction is the middle ground -- a 10% to 19% drop from recent highs. It's a little scarier than a pullback, but it's still temporary. It is sometimes an indicator that we're going to have a bear market, but that's not always the case. It can be an opportunity for investors hoping to get discounted prices. Unfortunately, it's also when some people go wrong based on their emotions. Fight the instinct to flee.
The old-school equation for diversification is a 60-40 split between equities and bonds -- and that's not always a bad scenario. But these days, there are so many more options, both for protection and growth.
If interest rates continue to rise, it could have a ripple effect, and the bond market likely will suffer. In retirement, that may not help you as an inflation hedge, so it's important to look at alternatives such as annuities. A good annuity can be a valuable piece of your plan. It's a long-term financial vehicle -- the insurance company gets to use your money for a pre-determined number of years -- but that's not a bad thing for someone who is 60 years old. Annuities aren't for everyone, though, so ask your financial professional if they would be a fit for you.
If you're ready to make a change or create your first real retirement plan, find a financial professional who is focused on informing and enabling you, not selling you products. And be careful about what you read and hear. It's good to have information, but what you see in the media isn't necessarily tailored to your specific needs. Find a financial professional who is focused on assessing your individual situation.
An experienced and knowledgeable financial professional can help equip you to work toward your goals -- while considering uncertainty in the market.
Let’s be honest for a second: the DJIA, the S&P 500, NASDAQ and the Russell 2000 all delivered one of the most surprising years in recent history. And while many are happy to see 2021 in the rear-view mirror, the 2021 performance for the major U.S. indices was nothing short of impressive, especially given the headwinds of COVID-19.
Who could have predicted that:
As we enter 2022, there will be no shortage of talking-heads trying to scare investors that we might be in a stock market bubble. And they might be right.
But the flip-side is that there are just as many talking-heads suggesting that stock markets still have plenty of room to grow, and that this time it really is different. The reality is that it’s a topic that divides some of the brightest minds in finance.
So, rather than jump down that rabbit hole, let’s instead listen to what the stock markets are telling us. Are trends developing that might shape the next few years? Has COVID-19 forever shifted the landscape of some industries at the expense of others?
Maybe 2021’s 5 best- and worst-performing stocks from the DJIA and S&P 500 (and the best performer from the S&P 400 Mid Cap Index) can inform?
Within the 30-stock DJIA, 2021 saw 25 record positive performance and the gap between the best and the worst performer was wide.
| Company | 2021 Total Return |
| Home Depot | +59.5% |
| Microsoft Corporation | +52.5% |
| Goldman Sachs Group | +47.6% |
| Chevron Corp. | +46.3% |
| Cisco Systems | +45.8% |
| Honeywell International | -0.3% |
| Visa Inc. Class A | -0.3% |
| Boeing Co. | -6.0% |
| Verizon Communications | -7.5% |
| Walt Disney | -14.5% |
The S&P 500 is weighted by market capitalization and the five largest companies – Apple, Microsoft, Amazon, Alphabet (Google) and Tesla – make up 23% of the Index as of December 31st. That being said, the gains for S&P 500 companies were plentiful in 2021, with 88% of companies in the S&P 500 ending the year in positive territory.
Among the top 20 best-performers in the S&P 500, the top 2 and 6 of the top 20 were oil producers and that in itself speaks volumes. And last year’s top stock Tesla was “only” up 49.8% this year – a far cry from 2020’s eye-popping 743% return.
But as the table below demonstrates, the gap between the best and the worst performers in the S&P 500 was obscenely wide. Some might argue that the gap defies logic altogether.
| Company | 2021 Total Return |
| Devon Energy Corp. | 196.1% |
| Marathon Oil Corp. | 149.7% |
| Moderna Inc. | 143.1% |
| Fortinet | 142.0% |
| Signature Bank | 141.5% |
| MarketAxess | -26.9% |
| Activision Blizzard | -28.0% |
| Las Vegas Sands | -36.6% |
| Global Payments | -36.9% |
| Penn National Gaming | -42.9% |
Remember the GameStop craziness to start the year? Here’s a refresher: from January 1st through January 27th, shares of GameStop were up 1,744.5%. Then the stock took a dive.
But for those who held on all year, GameStop shares were up 687.6% for 2021, on its way to becoming the top performer among companies in the S&P 400 Mid Cap Index. Kind of crazy.
The answer to that question is, of course, very personal. And depending on your perspective, your course of action will be personal too. But as your financial advisor, I would encourage you to think beyond just investing.
Think about things like:
Finally, if you are thinking of altering your asset allocations due to what you think might be longer-term trends, let’s discuss.
*Source for tables: Yahoo Finance
There is a lot of speculation going on in the news lately about the feds raising the interest rates in 2022 or 2023. Whether you are a lender, a borrower or both, carefully consider how interest rates may affect your financial decisions.
When discussing bank accounts, investments, loans, and mortgages, it is important to understand the concept of interest rates. Interest is the price you pay for the temporary use of someone else’s funds; an interest rate is the percentage of a borrowed amount that is attributable to interest.
Although borrowing money can help you accomplish a variety of financial goals, the cost of borrowing is interest. When you take out a loan, you receive a lump sum of money up front and are obligated to pay it back over time, generally with interest. Due to the interest charges, you end up owing more than you actually borrowed. The trade-off, however, is that you receive the funds you need to achieve your goal, such as buying a house, obtaining a college education, or starting a business. Given the extra cost of interest, which can add up significantly over time, be sure that any debt you assume is affordable and worth the expense over the long term.
To a lender, interest represents compensation for the service and risk of lending money. In addition to giving up the opportunity to spend the money right away, a lender assumes certain risks. One obvious risk is that the borrower will not pay back the loan in a timely manner, if ever. Inflation creates another risk. Typically, prices tend to rise over time; therefore, goods and services will likely cost more by the time a lender is paid back. In effect, the future spending power of the money borrowed is reduced by inflation because more dollars are needed to purchase the same amount of goods and services. Interest paid on a loan helps to cushion the effects of inflation for the lender.
Interest rates often fluctuate, according to the supply and demand of credit, which is the money available to be loaned and borrowed. In general, one person’s financial habits, such as carrying a loan or saving money in fixed-interest accounts, will not affect the amount of credit available to borrowers enough to change interest rates. However, an overall trend in consumer banking, investing, and debt can have an effect on interest rates. Businesses, governments, and foreign entities also impact the supply and demand of credit according to their lending and borrowing patterns. An increase in the supply of credit, often associated with a decrease in demand for credit, tends to lower interest rates. Conversely, a decrease in supply of credit, often coupled with an increase in demand for it, tends to raise interest rates.
As a part of the U.S. government’s monetary policy, the Federal Reserve Board (the Fed) manipulates interest rates in an effort to control money and credit conditions in the economy. Consequently, lenders and borrowers can look to the Fed for an indication of how interest rates may change in the future.
In order to influence the economy, the Fed buys or sells previously issued government securities, which affects the Federal funds rate. This is the interest rate that institutions charge each other for very short-term loans, as well as the interest rate banks use for commercial lending. For example, when the Fed sells securities, money from banks is used for these transactions; this lowers the amount available for lending, which raises interest rates.
By contrast, when the Fed buys government securities, banks are left with more money than is needed for lending; this increase in the supply of credit, in turn, lowers interest rates. Lower interest rates tend to make it easier for individuals to borrow. Since less money is spent on interest, more funds may be available to spend on other goods and services. Higher interest rates are often an incentive for individuals to save and invest, in order to take advantage of the greater amount of interest to be earned.
As a lender or borrower, it is important to understand how changing interest rates may affect your saving or borrowing habits. This knowledge can help with your decision-making as you pursue your financial objectives.
As a busy executive or business owner, your personal financial and estate planning needs may be different from other individuals. Your current compensation package probably contains a variety of benefits, some of which may not be portable. Some benefits may also place restrictions on present enjoyment, while other benefits may become available only upon retirement or death.
Because much of your estate may be tied up in the stock of your company, you may have liquidity problems. In addition to business concerns, personal finance requires careful planning. You may need to plan for children who need or will need educating, often in private schools, long before applications are made to expensive colleges and universities. Or, you may already have a child in college or graduate school.
Juggling the responsibilities of your business and your personal affairs is a challenging task. However, it’s important to take some time out of your busy schedule to review your personal financial plan. Here are a few simple suggestions to help you keep your personal finances on firm ground:
Make a commitment now to put your personal planning process in motion. Call today and make an appointment with your Financial Planner. They have the experience, resources and strategic partnerships to help you pull together all of these needs in your personal finances, freeing you up to focus on your business.