Focus on the forest - not the trees

In a recent articlewritten by Warren Buffet, there is wisdom to be shared as he compares our financial plans with a forest.

Your financial plan is comprised of many parts. This would equate to what Buffett calls the “economic trees.” In other words, let’s not get to caught up on any one investment.

“A few of our trees are diseased and unlikely to be around a decade from now. Many others, though, are destined to grow in size and beauty,” Buffett writes.

He won’t get every investment right. Neither will we. Berkshire holds a substantial position in Kraft Heinz (KHC), whose shares recently tumbled after the company delivered poor results and slashed its dividend.

But, if we review the portfolio as we’d view the forest, we find a diversity of trees, wildlife, and plants. It’s a work of beauty. Your portfolio is built from the bottom up. Like the forest it’s very diversified, and it is created with your financial goals in mind.

As Buffett opines (and we agree), “I have no idea as to how stocks will behave next week or next year. Predictions of that sort have never been a part of our activities.”

That said, how did the 19.8% drop in the S&P 500 Index (September peak to Dec 24th trough) sit with you? With your input, we do our best to gauge your tolerance for risk. If you found yourself fretting over the volatility, let’s talk.

On the other hand, if you slept soundly, it would suggest your investment mix in relation to risk is on target. “The whole is greater– considerably greater–than the sum of the parts.” We feel the same way about your financial plan.

Let’s say that you had had theforesight to see the oncoming explosion in the federal deficit, one that is up 40,000% over the last 77 years.

“To ‘protect’ yourself,” Buffett said, “You might have eschewed stocks and opted instead to buy three ounces of gold with your $114.75. And what would that supposed protection have delivered? You would now have an asset worth about $4,200.” Compare that to the performance of the S&P 500!

What is this nation’s secret sauce? The answer is complex and difficult; yet, the overarching theme lies in front of us.

The experiment called the United States has birthed and attracted the best and the brightest. Freedom and opportunity are its calling cards. Today, we are the wealthiest nation on Earth, and we continue to ride the wave of innovation and enjoy the benefits.

But, is that wave about to crash on the shore?

A recent piece by Morgan Stanley entitled, Millennials, Gen Z and the Coming ‘Youth Boom’ Economy, complements Buffett’s optimistic viewpoint. The population of the Millennials will overtake the Baby Boomers this year, and “Gen Z, born between 1997 and 2012, will overtake the Millennials as the country's largest cohort by 2034,” it said. For the U.S. economy, “The demographic tailwinds created by these high-population cohorts could be significant, delivering the kind of ‘youth jolt’ that the Baby Boomers were famous for.”

Sure, we can’t know when the next recession will ensue or some of the challenges we’ll face as a nation in the coming years. Yet, as Buffett sums up his annual letter, “Over the next 77 years, the major source of our gains will almost certainly be provided by The American Tailwind. We are lucky–gloriously lucky–to have that force at our back.”

Bright start to the new year

First, let’s go back to December. A headline in the summed it up well: "Dow Gains on Last Day of Worst December Since the Depression." Even a 7% bounce in the final week of the year didn’t prevent a performance that was compared to the early 1930s.

When the S&P 500 Index touched its bottom on December 24, the broad-based index of 500 large U.S. companies had shed 19.8% from its September 20 peak. We were barely 0.2 percentage points from officially entering a bear market.

Market turmoil in the fall and December’s action were especially ugly. Steep market corrections are not something we look forward to; they are impossible to consistently predict, but they come with the territory.

As I’ve repeatedly said, your investment plan incorporates the unexpected detours. The disciplined investor, who divorces the emotional component from the investment plan, chooses the best path to meet his or her long-term financial goals.

That said, 2019 has been much better:

  • A flexible Federal Reserve has taken its finger off the rate-hike button,

  • The economy continues to expand, albeit the pace has slowed, and

  • We’ve been treated to headlines saying t he U.S. and China are making progress toward a trade agreement

There are no guarantees a deal will be inked, but a March 4 headline in the Wall Street Journal summed up recent sentiment:

"U.S., China Close In on Trade Deal"
Both countries could lift some tariffs imposed last year, and Beijing would agree to ease restrictions on American products.

A trade deal that pries open Chinese markets to U.S. products and services, protects U.S. intellectual property rights, and ends forced technology transfers (and one with strong enforcement provisions) would not only benefit the U.S. economy, but a deal between the world’s largest economies would sweep away one cloud of uncertainty that has plagued investors.

As always, I’m honored and humbled that you have given me the opportunity to serve as your financial advisory resource.

Source: Wall Street Journal,, Morningstar, MarketWatch MTD: returns: January 31, 2019—Feb 28, 2019 YTD returns: Dec 31, 2018—Feb 28, 2019 *Annualized **in US dollars

Source: Wall Street Journal,, Morningstar, MarketWatch MTD: returns: January 31, 2019—Feb 28, 2019 YTD returns: Dec 31, 2018—Feb 28, 2019 *Annualized **in US dollars

Don't bet against America - 10 Years After the Market Bottomed Out

On March 9, 2009, the Dow Jones Industrial Average closed at 6,547. It marked the bottom of the last bear market. Even with the December 2019 down-turn, on February 28, 2019 the Dow finished the day at 25,916, less than 1,000 points from its prior peak.

The bull market turns ten years old this month. How much life is left in the bull? We are in the latter stages of the cycle, but much will depend on the economic fundamentals going forward. With the Fed on hold, inflation contained, and the economy moving forward, the fundamentals are currently sound. But never discount volatility. Stocks seem to take the stairs up and the elevator down. In the spirit of the celebrating the last ten years, let’s look at a partial list of the worries that temporarily sidelined the bull, but didn’t sideline those with a long-term view:

The European debt growth worries... U.S. growth is slowing... China is slowing... the dollar is too strong...Japan earthquake/tsunami/nuclear disaster... U.S. debt downgrade... fiscal cliff... Obama will be re-elected...Trump will get elected... Hillary will get elected... the Fed will end bond buys... Fed will start hiking interest rates...falling oil prices... Ebola scare... Russia invades Ukraine...North Korea... ISIS... Syria... Brexit... trade tensions... acrimony in D.C.... and stocks have risen too quickly.

Shorter-term risks never completely abate. But Warren Buffett’s message has been consistent. Don’t bet against America.

Let me emphasize again that it is my job to assist you! If you have any questions or would like to discuss any matters, please feel free to give me a call.

10 RMD Mistakes to Avoid

10 RMD Mistakes to Avoid

Turning 70 is a big milestone in anyone's life, and gives reason to celebrate a lifetime of experiences, changes, and most likely a long career now giving way for retirement. The IRS, however, is more concerned about your turning 70 ½. This is the age when you are required to begin withdrawing from your 401k, IRA, or other tax-deferred retirement plan.

Required Minimum Distributions, or RMDs, are amounts of money you are required to withdraw annually. If you miss the minimum distribution, you may be required to pay a fee of up to 50% of the amount that should have been withdrawn. It’s easy to make errors when figuring out the timing of RMDs, That’s why I’ve put together this helpful guide to ensure you can avoid these 10 common mistakes.

DOL Fiduciary Rule is Dead.

DOL Fiduciary Rule is Dead.

In a 2-1 decision on June 21st, the Fifth Circuit Court of Appeals sided with a group of financial industry plaintiffs to effectively put an end to the Department of Labor's fiduciary rule, which would require all financial advisors to act in clients' best interests with regard to retirement accounts.

Did the Stock Market Drop Rattle You?

Did the Stock Market Drop Rattle You?

We have seen some uneasy times lately.

This past Monday the DOW dropped 1,175 points - a record single day point decline. Uneasiness impacts the financial markets. When it does, we all need to keep some long-term perspective in mind. Those who race to the sidelines and exit equities may regret the choice when crises pass.

Wall Street loves calm. Traders literally want “business as usual,” every day. If breaking news disrupts that calm, it can rattle the market – but every investor must realize that these disruptive events are exceptions to the norm. (If the major Wall Street indices rollercoastered dramatically every day, who would invest in stocks to begin with?) 

Mind Over Money

When we go to the grocery store, we seldom shop on logic alone. We may not even buy on price. We buy one type of yogurt over another because of brand loyalty, or because one brand has more appealing packaging than another. We buy five bananas because they are on sale for 29 cents this week – the bargain is right there; why not seize the opportunity? We pick up that gourmet ice cream that everyone gets – if everyone buys it, it must be a winner.

As casual and arbitrary as these decisions may be, they are remarkably like the decisions many investors make in the financial markets.

What You Need to Know About the Fiduciary Rule and When It May or May Not Protect You

What You Need to Know About the Fiduciary Rule and When It May or May Not Protect You

Rules have been changed concerning investment professionals and retirement accounts. In the eyes of many, the change is good.

The “fiduciary rule” went into effect June 9th. This Department of Labor rule stipulates that any financial industry professional who makes investment recommendations to participants in qualified retirement plans in exchange for compensation will be considered a fiduciary.

What does all that mean?

Focus on the Forest, Not the Trees

It's a message worth repeating. Investing is a matter of focus. Despite recent disappointments in stock market performance, investors who are willing to assess the whole universe of investment choices may find that the market continues to offer new possibilities. And those who keep their sights set on long-term investment goals may find that a "forest, not trees" approach to investing offers the greatest potential for success.

How Millennials Can Get a Good Start on Retirement Planning

If you are younger than 35, saving for retirement may not feel like a priority. After all, retirement may be 30 years away; if your employer does not sponsor a retirement plan, there may be less incentive for you to start.
Even so, you must save and invest for retirement as soon as you can. Time is your greatest ally. The earlier you begin, the more years your invested assets have to grow and compound. If you put off retirement planning until your fifties, you may end up having to devote huge chunks of your income just to catch up, at a time when you may have to care for elderly parents, fund college educations, and pay off a mortgage.