May 2017 Newsletter to ClientsSubmitted by Moneywatch Advisors on May 3rd, 2017
Enjoy this month’s edition that features an overview on President Trump’s tax plan, stock market performance and our updated Privacy Notice.
Tax Planning: Late last month President Trump unveiled his recommendations for a framework for tax reform. As you know, our federal tax system has become extremely complicated and unnecessarily cumbersome. We can all agree that taxes are a necessary evil that allow our government to provide the services we depend on. As the tax system has grown more and more complicated, however, it has morphed into a morass of regulations that few other than the people who deal with them daily can understand. That’s where Moneywatch Advisors comes in.
Although we are not tax preparers, we help our clients with tax planning and tax strategies every day. We not only design portfolios to support your financial plans, we employ tax strategies within your plans to ensure you are gaining all the advantages to which you are entitled. Whether your objective is saving and investing for financial freedom or preserving your investment assets to last you throughout retirement, by helping you to save taxes, we help you achieve your dreams.
The process by which ideas become law will take many months to wind through Congress and no one knows for sure what the end result of that process will be. So, if you may benefit from one of the changes proposed last month, now is not the time to get too excited. Similarly, if you are worried about the impact of the proposal, don’t panic. The important thing to remember is that, when the outcome is clear, Moneywatch will thoroughly review and determine the impact of the changes on each of you. Then we will evaluate whether your current strategy should change and, if so, adjust so you can receive the most advantage. Rest assured, our reason for being is to help you reach your goals and, if a new tax strategy helps get you there faster, we will recommend every legal action we can in order to help.
Stock Market: The market, as defined by the S&P 500, is up over 6.5% since the first of the year – and that’s before dividends are factored in. Considering we assume a 7% compounded annual growth rate for clients building toward financial freedom and 5% for clients who have retired, that’s extremely good news. Right?
Yes, it is good news. Now, let’s move back a step and look at the broader view.
The stock market, not unlike an airplane, goes up and down many times over our lifetimes. The general direction of the market is up and we at Moneywatch agree with Warren Buffett who is bullish on the market long-term. But, we also agree with him when he said “[T]he years ahead will occasionally deliver major market declines — even panics — that will affect virtually all stocks. No one can tell you when these traumas will occur.”
Don’t panic. Why not? We are not market-timers – we are goals-based investors. That is why we take such care when developing financial plans for our clients and why we match your portfolios to the goals in your plan. Your portfolio is diversified among asset classes such as funds that provide short-term income, long-term income, or growth; or invest in real estate or international companies. Ideally, when funds in one asset class decline, the others usually balance that decline. For instance, when the stock market loses value, our short-term and long-term income funds will still provide income in the form of dividends, keeping our investments marching toward our individual goals.
We also diversify the funds within each asset class to take advantage of the fund managers we choose, as they will assess risk and measure reward for the companies they select to hold within their fund. Recently a client inquired about the wisdom of purchasing Disney stock. Although he knew we invest in funds rather than individual stocks he had been told it was poised for growth. Fidelity Contrafund, a common holding of our clients, holds over $1.25 Billion of Disney stock. Furthermore, using a common measurement of sensitivity to movements in the stock market, called Beta, Disney stock is much more volatile than Fidelity Contrafund. So, by holding this fund rather than the stock itself, our client can experience the rewards it provides, with much less risk. So, what’s the message? We are focused like lasers on each of your personalized goals and we have designed your portfolio, and chosen the funds within that portfolio, in order to get you to your destination with as little turbulence as possible.
Privacy Notice: Our updated privacy notice is available here, please do not hesitate to contact us with questions or concerns.
Thank you for your continuing confidence.
Past performance is no guarantee of future results. The opinions expressed are those of Moneywatch Advisors, Inc. and are no guarantee of the future performance of any particular fund. This information is for educational purposes only and is not intended as investment advice. Please consult your financial advisor for more detailed information or for advice regarding your individual situation.