Author: debrabrede

You’ve likely worked hard all year long to save and spend responsibly. But with the holidays right around the corner, you may notice that it’s not only the temperatures that are dipping—it’s also your bank account. Chances are, your heating bills aren’t solely to blame for those dwindling dollars. With so many opportunities to get into the spirit and celebrate, it’s not unusual to find oneself indulging—and expending—a bit too much. If that’s the case for you, you’re not alone. According to a recent Gallup poll, 33 percent of Americans expect to spend at least $1,000 on gifts—and those numbers continue to climb, with last year’s holiday spending projections exceeding every year prior. But just because the rest of the country is upping the ante on the most expensive time of the year doesn’t mean you have to.

In fact, to keep your household balance sheet in check, it’s essential to be conscientious about the last—but certainly not least important—quarter. But you don’t have to be a scrooge about it. There are plenty of ways to celebrate and enjoy without going wild. And when all is said and done, your wallet will thank you. Here are a handful of tips to come out of the fourth quarter on top:

1. Prioritize: What do you find most meaningful about the holidays? Beautiful meals? Time with family and friends? A big-ticket gift that will bring you joy all year round? When you identify what’s important to you, you can allocate your resources accordingly.
2. Set a budget: Determining how much you can afford to spend is always a good idea, no matter how much cash you’re working with. With a dollar amount in mind, you can avoid excessive purchasing and ultimately sail into January feeling gratified rather than guilty.
3. Make a list and check it twice: With advertising reaching a fever pitch as the holidays near, it’s a good idea to settle on whom you’ll be buying for and what you plan to get them. Having gifts—and corresponding prices—in mind can help prevent impulse buys and last minute dashes to the store (or a certain buy-with-one-click online retailer).
4. Treat yourself: Avoid feeling depleted financially or otherwise by doing your best to take care of yourself. Walks around the block, an hour alone with a book, and even a haircut are all free or low-cost ways to keep your sanity during an otherwise stressful time.

With a little bit of planning, you can conquer the holidays and win the fourth quarter, without losing an arm and a leg. For more information on managing your money anytime of year, visit debrabrede.com. 

Do you like roller coasters? Whether the thought of climbing steep inclines only to plummet to new depths is thrilling or terrifying to you, I can tell you one thing: the average investor certainly doesn’t like those death-defying drops when it comes to the market. Just ask anyone who worked in the markets—or had money in them—during the global financial crisis of 2008, the tech bubble burst of 2000, or the “Black Monday” crash of 1987.

I can still hear those coaster-induced screams, not because the events themselves were particularly devastating—they weren’t (at least not for those of us who stayed in the markets and owned companies that were fundamentally sound)—but because they caused such hysteria. During those years, clients called me panicking on a daily basis. It was hard not to buy into their alarm, but I kept faith that we would ratchet our way back up.

Why? I understood market cycles. What is a market cycle, exactly? A period measured not by dates, but by market conditions. A cycle is considered complete, or “full,” when the market in question has gone from bull—a market in which prices are expected to rise—to bear, when those prices fall due to widespread investor pessimism, and back again to bull.

Although past performance is no guarantee of future results, I believe studying the history of the stock markets’ uptrends and declines can help one to better understand why staying invested for the long term can be beneficial.

Since the inception of the S&P 500 Index back in 1926, the market has gone through cycles, with average bull markets lasting 9.1 years and producing an average cumulative return of 476 percent, and bear markets averaging 1.4 years with loses totaling around 41 percent. ^[1] Yet with all these expansions and contractions, today we stand with a stock market valuation higher than it was when it started.

We may be on a roller coaster, but that roller coaster is on a mountain. There may be peaks and valleys along the way, but ultimately—at least to date—we’re still heading up.

Of course, successful investing requires an awareness of those peaks and valleys and careful analysis of opportunities. That is exactly what I do—and have done—every day of my working life, since 1985.

^[1] Source: First Trust Advisors L.P, Morningstar. Returns from 1926-6/29/18. The S&P 500 index is an unmanaged index of 500 stocks used to measure large-cap U.S. stock market performance. Investors cannot invest directly in an index. Index returns do not reflect any fees, expenses, or sales charges. These returns were the result of certain market factors and events, which may not be repeated in the future. Past performance is no guarantee of future results.

My approach to wealth management rests on something called strategic diversification. I know—we hear “diversify!” all the time. But what does that really mean? In my experience, it means a lot more than what many of my new clients have done up to the point of our first meeting. That matters because, done properly, strategic diversification has the potential to grow wealth not just as retirement nears, but throughout retirement.

The strategy hinges on active management of a portfolio’s investment allocation. If that sounds like a lot of work, it is. But I love doing it; it keeps me at the top of my game, and assures that I’m constantly fine-tuning my approach to helping clients pursue their dreams. At the core of strategic diversification is one question, which I ask of every client: “What can I do to give you confidence?”

Some want an annual phone call assuring them they are on track. Others take it (much) further. One guy said, “If you think I’m spending too much and at risk of running out of money, call me, AND follow up with a letter, in big red type, that says ‘DO NOT SPEND ONE DIME OVER THIS AMOUNT!’” And I’m fine with that. Sometimes the biggest threat to our wealth is us!

I’ve also had clients that I’ve spent a lot of time educating on the markets’ cycles, explaining that big single-day or multi-day losses are nothing to worry about, and the reasons why. I’ve built them a beautifully balanced portfolio, one I was confident would meet their retirement goals—only to have it decimated when they called my office and demanded I sell their holdings. Why? Because the financial news channels were having a doom-and-gloom field day over the latest downturn in the stock market. Which is just silly.

“Invest for the long haul,” like “diversify!,” is a mantra we hear all the time. Strategic diversification makes the daily swings of the market non-issues. It places your capital in positions that enable you to buy on weakness and sell on strength—not only while you’re still earning, but in retirement, too. I can always tell when a client really “gets” this: he no longer calls when one of his holdings drops.

Now understand, there’s nothing wrong with watching the markets, just like there’s nothing wrong with watching a football game. The risk is in reacting to them, and it makes no difference whether the news on Wall Street is “good” or “bad.” Either way, many individual investors tend to sell when their stocks are dropping or buy when they’re on the rise: the opposite, in either case, of what they should do. But strategic diversification—coupled with active portfolio management, enacted by a trusted advisor who works in your best interest—can leverage market cycles to your benefit. It can be a great way to protect and grow wealth.

Many self-directed investors like to buy blue-chip issues: high-value stocks that regularly pay dividends, and whose companies are so integral to the global economy that holding them seems as safe as putting money in the bank, with much better returns practically guaranteed.

         Not so fast.

         In 1999, we got a stark reminder of the fallacy of such assumptions. It took down a company whose divisions were so ubiquitous across the American landscape that they conjured a sense of permanence rivaled only by major geographic features. There was the Mississippi River. The Rocky Mountains. The Grand Canyon.

         And there was General Electric.

         For 111 years, GE was one of the several companies whose performance was gauged by the Dow Jones Industrial Average (DJIA). It practically defined the term “blue-chip stock.” Yet in June of 2018, it was removed from the DJIA, and as I write, GE stock sits at less than 25 percent of its August 2000 high. Some are now wondering if the company itself will survive.

         What happened?

         Across those years on the Dow, GE successfully diversified into smaller sub-companies within the (much) larger parent organization. Those multiple business lines touched, quite literally, every sector of the global economy. GE’s wide range of markets was a primary reason it kept its place on the Dow.

         It was also why many saw GE as a no-lose investment. In one company, they reasoned, they could achieve the kind of diversification that assures stability in bad times and growth when times are good. Those who work for a titan of industry like GE, and acquire company stock regularly as part of their 401(k), can be even more susceptible to notions of “their” company’s invincibility.

         And thus the trap is set. I refer, of course, to the all-your-eggs-in-one-basket trap.

         General Electric stock began a steady climb in the mid-90s, topping out in August 2000 at $58.17 a share—a more than threefold increase in just over three and a half years. But what the average self-directed investor did not know was that the majority of GE’s profits were coming from just two of its divisions. It only took the failure of only one, its financial services side, for GE’s share value to plummet.

         Those heavily invested in the company paid dearly. I share the story of one such investor in my book, “You’re Retired. Now What?” It also details the contrarian approach I take to structuring strategic investment portfolios which are truly diversified. It is no easy job, but I do it with one objective in mind: protecting and growing my clients’ wealth.

         You can learn more about the book here.