Inspire FP Blog

Stand Strong

20 Crisis

June, 2020. 

By Jeff Headrick, Financial Planner

"Preparation is key. It’s a lot easier to stand strong during adversity if you’ve done your homework beforehand."

Stand Strong

Whether I’m running the South End of Wrightsville Beach on a windy fall day, or facing a professional or personal adversity, the following holds true: stand strong.

During a crisis of any kind it is critical that we hold on to our values and core beliefs. In investing and in life, I have found that standing strong and remaining calm is a sound battle tactic.

Preparation is Key

I’ll never forget a guy asking me back in 2008 during the financial crisis— how was I doing? I remember his look of astonishment when I told him I was doing fine and that my clients were generally pretty happy. This was very hard for him to understand so he asked me for an explanation.

The best way I could explain it was this: you prepare for a storm before the storm arrives. Reacting to a storm during a storm may help, but the former is preferable.

While I didn’t realize it at the time, I was preparing for the 2008 crisis in 2005. I was reading books by William Bernstein and Richard Ferri. I was learning institutional styles of diversification based on thoughts by Economic PhDs such as Harry Markowitz. At the time, I was studying these diversification methodologies just to be good at my profession. I also had a love for investing. Looking back, I was just doing what I liked to do!

But when my clients’ portfolios held up better than I had expected, I realized that all this reading and learning was paying off not only for me but for my clients. If you’re going to be a great investor you need to drink deeply from great books. You need to learn the craft or hire somebody that is passionate about learning it for you.

Preparation is key. It’s a lot easier to stand strong during adversity if you’ve done your homework beforehand.

Stick with the Plan

In the world of investing it’s really easy to change your strategy. Actually, it is way too easy to change your strategy. If you have access to a computer and are literate, it is kind of scary realizing how quickly you can mess up a great plan. If your portfolio is diversified and you were comfortable with your stock to bond ratio pre-crisis, it may be advantageous for you to stick with that strategy. If you have just started working with a professional who has new ideas that he or she can substantiate, you may be better off to make some adjustments.

Either way, the books you read and the financial relationship with your financial planner that you had before today should play a huge role in helping you stay the course. If you are not doing your homework and do not work with a professional money manager then you may find it easier to entertain ideas of altering your original plan. This is why I believe wholeheartedly that just about everyone needs to work with a financial professional.

Summary

If you have prepared well and have a good plan, it is often more beneficial to stick with that and to stand strong in order to let things run their course. If you have not prepared well, now may be a wonderful time to find a professional that you respect and trust in order to help get you through the current Covid-19 crisis.

If we can be of service, please call us at (910)448-1450. Or, email us at jeff@inspirefp.net.

Additional Reading:

On the Importance of Budgeting

On the Importance of Employee Benefits

On the Importance of Bonds

On the Importance of Asset Allocation

On the Four Principles of Investing: Start Here!

 

About the Author

Jeff Headrick is an independent financial planner and wealth manager with Inspire Financial Planning. When Jeff was still in his teens his father died unexpectedly. While his father was a hard worker and a good provider, he did not have the best financial plan in place when he died. This left his family at a difficult  financial crossroad. This personal experience, coupled with being inspired by Sir John Templeton, Warren Buffett, Dave Ramsey, and the laws of compound interest, prompted Jeff to enter the financial services industry in 1999. He has been helping people with their financial planning ever since. Jeff lives in Wilmington, NC with his wife and two children. He spends most of his spare time just across the Intracoastal Waterway in Wrightsville Beach, enjoying the beauty of the NC Coast.

Charts and graphs contained herein should not serve as the sole determining factor for making investment decisions. All hypothetical scenarios are for illustrative purposes only. Investment Advisory Services offered through AlphaStar Capital Management, LLC a SEC Registered Investment Adviser. SEC registration does not constitute an endorsement of the firm by the Commission nor does it indicate that the adviser has attained a particular level of skill or ability. Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. Diversification does not guarantee profit nor is it guaranteed to protect assets. International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors. Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance. Past performance does not guarantee future results.

 You cannot invest directly in an index. Consult your financial professional before making any investment decision. Fixed income investments are subject to various risks including changes in interest rates, credit quality, inflation risk, market valuations, prepayments, corporate events, tax ramifications and other factors.

These are the views of Inspire Financial Planning and not necessarily those of AlphaStar Capital Management, LLC, and should not be construed as investment advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. Please consult your financial advisor for further information.

Follow the Leader

20 Hiker

May, 2020. 

By Jeff Headrick, Financial Planner

 

“Over the last few weeks, I have given some thought about what it means to be a leader. Not just a leader in business, politics, or the championship team, but about what it means to be a leader in my own home, in my interactions with friends old and new, and even how I’m leading myself. This post starts with the family, has the stock market at its core, and ends with a story about a U.S. Marine that is hoping to inspire us all.”

Follow the Leader 

As a kid I remember playing follow the leader. You may remember that this game required following the leader regardless of where they went. Certainly, a precarious place to be in— but then I guess it depends on the quality of the leadership.

My young son Jeff follows in my footsteps. I am often amazed, sometimes even startled, by the choices he makes based on what he sees me do. It makes me feel both honored and a little scared at the same time. I guess I better watch my step. We are playing a real-life version of follow the leader.

As a business professional I often lead as well. I’m in the business of rendering financial advice, and people tend to put a lot of stock in my ability to lead them. When people sign on with me as a client, they know that they are hiring me to work with them through good times and bad. And it’s during these times of crisis that I try even harder to lead in a way that is steady, consistent, and easy to follow.

Bonds, Bonds

Though I have had many clients debate with me over the years about the wisdom of holding bonds in their portfolio, I’m not hearing many arguments now. This is an area that we have led our clients in that has benefited them even during this current crisis. For example, from January 1, 2020 until April 26, 2020, the seven equity (stock) classes we track were all in the negative. US small caps were down most at -29.64%*. US large-cap growth stocks were down the least at -4.2%.*

On the other hand, of the seven fixed income (bond) asset classes we track, six of the seven were positive over the same timeframe. Long-term treasury bonds were up the most at +25.26%*. Muni bonds were down the least at a manageable -1.09%.

Downturn

We (Inspire Financial Planning) have also been proselytizing the inevitability of a market downturn during the previous two years (See articles below written in 2018 and 2019). While we did not see Covid-19 coming, we let our client base know repeatedly that the time is always “now” (bear market preparation has been conducted at Inspire by investing in a highly diversified global portfolio of stocks and bonds) to prepare for market downturns. Especially after the most recent 12 years of bliss in the stock market. Something just had to give. And it did.

Take this all with a grain of salt. While I have many years of experience in this industry, I can and do make mistakes. That’s why it’s critical for us all to question our leaders from time to time—we all need each other! We all make each other better.

God Isn’t Done with Me Yet

As a believer, my ultimate image of leadership is Jesus. Though I have to admit, this is such a lofty goal sometimes I just settle for using David as an example. Through reading the word it’s easy to get inspired to learn what so many before us have had to endure. And how so many rose above their circumstances to a brighter day.

And though I still make mistakes as I lead, and as God is still crafting me to become the man that he hopes me to be, I take quiet satisfaction in knowing that it’s all going to be okay. Whether it’s a time of harvest, or a time of struggle in the desert, it is all going to be okay.

God Isn’t Done with You Yet

At Inspire Financial Planning, we have clients who are in different seasons of life. Some are prospering right now-- and some may be facing battles that I know nothing about. But regardless of your situation always keep in mind that God is not done with you yet. This is most likely not the end, but simply a season of your life that will soon pass like all else does.

During this season of crisis, I challenge you to examine how you are leading. Sometimes it’s under this lens that we can more clearly see the path we are walking. Start by leading yourself well, then on to those you love, and so on. If you are more prone to follow—and we all are on occasion---examine if you do this with an attitude of grace or resentment. Leading well, and following well are both critical during any season, and particularly so during times of adversity.

Leading and Inspiring Semper Fidelis Style

Finally, you might look to my neighbor if you need inspiration leading or following with grace. His name is Russell Larkins and he just set out to run across America for a worthy cause. Russell is a former U.S. Marine (once a Marine always a Marine), and certainly an inspiration to us all. For more on this story see the video below.

Russell Larkins U.S. Marine, Wilmingtonian, and Runner of many miles

If we can be of service in any way, please give us a call at (910) 448-1450. We are here to serve.

*Investment Sources:

AlphaStar Market Monitor

Previous Inspire Financial Planning Market Downturn/ Bear Market Posts

Three Ways to Prepare for a Market Crash

Bear Market on The Horizon

Stock Market Deja Vu

 

About the Author

Jeff Headrick is an independent financial planner and wealth manager with Inspire Financial Planning. When Jeff was still in his teens his father died unexpectedly. While his father was a hard worker and a good provider, he did not have a solid financial plan in place when he died. This left Jeff’s family at a difficult  financial crossroad.

This personal experience, coupled with being inspired by Sir John Templeton, Warren Buffett, Dave Ramsey, and the laws of compound interest, prompted Jeff to enter the financial services industry in 1999. He has been helping people with their financial planning ever since.

Jeff lives in Wilmington, NC with his wife and two children. He spends most of his spare time just across the Intracoastal Waterway in Wrightsville Beach, enjoying the beauty of the NC Coast.


Charts and graphs contained herein should not serve as the sole determining factor for making investment decisions. All hypothetical scenarios are for illustrative purposes only. Investment Advisory Services offered through AlphaStar Capital Management, LLC a SEC Registered Investment Adviser. SEC registration does not constitute an endorsement of the firm by the Commission nor does it indicate that the adviser has attained a particular level of skill or ability. Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. Diversification does not guarantee profit nor is it guaranteed to protect assets. International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors. Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance. Past performance does not guarantee future results.

 You cannot invest directly in an index. Consult your financial professional before making any investment decision. Fixed income investments are subject to various risks including changes in interest rates, credit quality, inflation risk, market valuations, prepayments, corporate events, tax ramifications and other factors.

These are the views of Inspire Financial Planning and not necessarily those of AlphaStar Capital Management, LLC, and should not be construed as investment advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. Please consult your financial advisor for further information.

 

 

Buy Low, Sell High

Coronavirus Market Correlation

By Jeff Headrick, Financial Planner

 

First and foremost, our thoughts and prayers go out to everyone during this historic time.

That being said, as financial advisors, my team must still be vigilant for mitigating financial loss as well  as seeking new and present opportunity to take advantage of the current market situation.

Buy Low, Sell High

You may have heard the saying before that the “time to buy is when there is blood in the streets”. Another favorite of mine is “Be fearful when others are greedy, and greedy when others are fearful.”

At Inspire Financial Planning, we espouse these types of contrarian investing philosophies. In addition, we try to acquire clients who share the same vision. Buy low, sell high.

Last year we wrote a piece on how financial advisors prepare for these sort of dire market swings. Another was written called Stock Market Déjà Vu when the market started behaving reminiscent of 2008. We have been preparing for this current opportunity for some time.

There are many ways to prepare for a stock market crash, and we believe that by working with your financial advisor, remaining patient, and having cash at the ready one can make advancements during turbulent times.  

If you are of the same mindset, you may already be preparing to move some cash into equities. See below for some of our preferred asset classes. Of the six asset classes we track in our Vanguard equity portfolios, all are priced much more attractively than they were just a few weeks ago.

 

Coronavirus Asset Class Effect

Bear Market Duration

While some bear markets have lasted years, there have been other bear markets that corrected within a period of months, or even weeks. These more short-lived bear markets are often referred to as “V” shaped. While we cannot say for sure, we are of the belief that this bear market will be shorter than average.  

That being said, if you have always wanted to get in on the market when there was “blood in the streets”, that time may well be now. I believe, at a very minimum, the time to start the conversation with your financial advisor is now.   

Quotes:

Buy when there is blood in the streets. Baron Rothschild

Be fearful when others are greedy, and greedy when others are fearful. Warren Buffett

 

Related Posts:

https://inspirefp.net/bear-market-on-the-horizon/

https://inspirefp.net/stock-market-deja-vu/

https://inspirefp.net/three-ways-to-prepare-stock-market-crash/

 

About the Author

Jeff Headrick is an independent financial planner and wealth manager with Inspire Financial Planning. When Jeff was still in his teens his father died unexpectedly. While his father was a hard worker and a good provider, he did not have the best financial plan in place when he died. This left his family at a difficult  financial crossroad. This personal experience, coupled with being inspired by Sir John Templeton, Warren Buffett, Dave Ramsey, and the laws of compound interest, prompted Jeff to enter the financial services industry in 1999. He has been helping people with their financial planning ever since. Jeff lives in Wilmington, NC with his wife and two children. He spends most of his spare time just across the Intracoastal Waterway in Wrightsville Beach, enjoying the beauty of the NC Coast.

Charts and graphs contained herein should not serve as the sole determining factor for making investment decisions. All hypothetical scenarios are for illustrative purposes only. Investment Advisory Services offered through AlphaStar Capital Management, LLC a SEC Registered Investment Adviser. SEC registration does not constitute an endorsement of the firm by the Commission nor does it indicate that the adviser has attained a particular level of skill or ability. Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. Diversification does not guarantee profit nor is it guaranteed to protect assets. International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors. Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance. Past performance does not guarantee future results.

 You cannot invest directly in an index. Consult your financial professional before making any investment decision. Fixed income investments are subject to various risks including changes in interest rates, credit quality, inflation risk, market valuations, prepayments, corporate events, tax ramifications and other factors.

These are the views of Inspire Financial Planning and not necessarily those of AlphaStar Capital Management, LLC, and should not be construed as investment advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. Please consult your financial advisor for further information.

Coronavirus Havoc: Strategies for an Election Year

Coronavirus Research

Coronavirus Havoc: Strategies for an Election Year

By Jeff Headrick, Financial Planner

 

When the AIDS epidemic broke out in June 1981, the 12 month change on the S&P 500 was -16.5%. When the pneumonic plague broke out in September 1994, the 12 month change on the S&P 500 was +26.3%. During the SARS epidemic which broke out in April 2003, the 12 month change on the S&P 500 was +20.76%.

When the Swine Flu broke out in April 2009 the following 12 months  resulted with an S&P 500 return of  +35.9%. When the Ebola virus broke out in March 2014 the following 12 months produced +10.44% on the S&P 500.

Over the last 50 years there have been many epidemics, and, over time, the market has traditionally kept marching on. Bear in mind, many of us have been wondering if some sort of market correction wasn’t already long overdue, so the market gyrations of late should not bring much insecurity to the educated investor.

Inspire Financial Planning’s mission is to educate and inspire people from all walks of life to become great investors. We believe one of the best ways to become a great investor is to study the past as well as to be hopeful for the future. Without doing a little of both it will be hard to keep your perspective when the seas get rough. And they will, occasionally, get very rough.

Recent Stock Market Returns

When studying January and February returns for the year, it looks like most equity (stock)  total returns are -10%. This includes large caps, mid-caps, small caps, internationals, and emerging markets. During the same timeframe, most fixed income (bond) returns are +4%. This includes aggregate bonds, high quality corporates, short and long-term government, mortgage-backed, tips, and cash. If we throw all this into a soup with equally weighted ingredients, we will end up about -7% in the red. After an incredibly strong 2019 this should not be too hard to absorb given the circumstances.

We do not know what the future holds for the coronavirus and how this may specifically affect the stock market. But we do believe that a well-diversified global portfolio is one of the best ways to stay prepared for events just like this. Our prayers go out to all those that have lost loved ones across the globe, more prayers for the ones that are currently fighting this terrible virus, and a few more for those that are either researching cures or trying to prevent contagion.

Coronavirus: Educated Investor Perspective

To keep a healthy perspective, please enjoy some hopeful articles linked below regarding investment strategy. If you want to become a great investor, stay hopeful, stay diversified, work with a professional, and stay up-to-date with your reading as it pertains to this fascinating world, the global economy, and the global stock market.

Investment Data Sources:

Dow Jones Market Data

AlphaStar Market Monitor, Dow Jones

Related Investment Articles/Blogs

https://inspirefp.net/portfolio-stress-test/

https://inspirefp.net/dave-ramsey-millennial-six-characteristics-millennials-rich/

https://inspirefp.net/preparing-market-downturn/

https://inspirefp.net/four-principles-successful-investor/

https://inspirefp.net/401k-efficacy-asset-allocation/

https://inspirefp.net/disagree-warren-buffett-argument-bonds/

About the Author

Jeff Headrick is an independent financial planner and wealth manager with Inspire Financial Planning. When Jeff was still in his teens his father died unexpectedly. While his father was a hard worker and a good provider, he did not have the best financial plan in place when he died.

This left his family at a tough financial crossroad. This personal experience, coupled with being inspired by Sir John Templeton, Warren Buffett, Dave Ramsey, and the laws of compound interest, prompted Jeff to enter the financial services industry in 1999. He has been helping people with their financial planning ever since.

Jeff lives in Wilmington, NC with his wife and two children. He spends most of his spare time just across the Intracoastal Waterway in Wrightsville Beach, enjoying the beauty of the NC Coast.


Charts and graphs contained herein should not serve as the sole determining factor for making investment decisions. All hypothetical scenarios are for illustrative purposes only. Investment Advisory Services offered through AlphaStar Capital Management, LLC a SEC Registered Investment Adviser. SEC registration does not constitute an endorsement of the firm by the Commission nor does it indicate that the adviser has attained a particular level of skill or ability. Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.

Diversification does not guarantee profit nor is it guaranteed to protect assets. International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors. Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance. Past performance does not guarantee future results.

You cannot invest directly in an index. Consult your financial professional before making any investment decision. Fixed income investments are subject to various risks including changes in interest rates, credit quality, inflation risk, market valuations, prepayments, corporate events, tax ramifications and other factors.

These are the views of Inspire Financial Planning and not necessarily those of AlphaStar Capital Management, LLC, and should not be construed as investment advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. Please consult your financial advisor for further information.

Quarterly Stock Market Update. Staying the Course: Strategies for an Election Year

The Capitol Building in Washington DC

By Jeff Headrick, Financial Planner

 

February 2020

 

“But divide your investments among many places, for you do not know what risks might lie ahead.”

Ecclesiastes 11:2 NLT

 

It appears from the verse above, that the idea of diversification is not necessarily a new one. Those of us who consider ourselves creative people sometimes forget the reality that most times—both good and bad— have been lived through before by people far wiser than us.

But with that headwinds that I believe we may face over the next year, and in fact decade, it may take more than just good old-fashioned diversification to sail steadily through the season(s) ahead.

Evaluate the Past

We have to steady our ship. And to do this we have to steady our minds. With some of the metrics shown below you might be tempted to be lulled to sleep by recent returns. But the past will not keep you steady when market winds below. In addition to reading blogs like this and other quantitative writings on stock market investing, you might want to consider reading up on behavioral finance. Such research might help you keep your emotions in check.

But since this quarterly stock market update usually looks back before it looks forward. Let’s look at some numbers from 2019.

Vanguard CRSP Model Portfolios

If you’ll recall 2018 ended dismally. It was the worst quarter in quite a while and most equities finished the year in the red. A lot of intelligent people moved money to the sidelines. However, this decision left them not only scratching their heads but missing some amazing opportunities to make a very respectable profit.

An opportunity missed in the large cap arena would have been Vanguard’s Growth ETF. Ticker symbol VUG, this fund finished the year at +37%.

From a more diversified perspective, Vanguard’s 60/40 portfolio returned +19%. Even a very conservative investor with 80% of his money in bonds and 20% of his money in stocks, would finish the year at +11%. These numbers do not include advisor fees, expenses, etc.

*Source: Vanguard ETF Strategic Model Portfolios/ December 31st, 2019.

Understand the Present

Presently we find ourselves in another election year. We are also in a trade war with China. If that’s not enough we are experiencing continued historically low interest rates, and the coronavirus outbreak. .

I recently attended a webinar from AlphaStar Capital management titled: 2020: The Year of Paradox. One example of paradox is the fact that stock prices continue to rise as earnings continue to fall. It’s almost as unnerving as the inverted yield curve we began flirting with last year. Some of this just doesn’t feel right.

I also attended a live webinar recently with “Global Chief Economist and Head of Investment Strategy Group Joe Davis at Vanguard.” Anyone with a title that long has to be pretty smart, right? His outlook for 2020, as well as the next decade can be summed up in one word: subdued.

10-Year Investment Outlook

Vanguard’s 10-year annualized nominal return projections, based on market conditions as of September 30, 2019, are as follows:

Vanguard 10 Year Stock Market Outlook

Please bear in mind that these are just assumptions. They are best guesses from very intelligent people.

However, I can tell you from past experience that they are wrong—a lot. The biggest example I can give of this is how those in the know have touted international stocks over the past five years verses US stocks. They were wrong about this assumption. US stocks have continued to show their teeth over the last five years, so please know that even the best minds in the business don’t always get it right.

Stay the Course: Optimally Allocated Global Portfolio

So, what do we do now? I believe the best thing to do is to lean back on fundamentals.

“Invest in seven ventures, yes, in eight; you do not know what disaster may come upon the land.”

Ecclesiastes 11: 2 NIV

I am a strong believer in optimal global diversification. That means investing in US large-cap stocks, US small-cap stocks, internationals, emerging markets, short, medium, and long-term bonds, global bonds, global emerging bonds, as well as fixed indexed annuities when bonds are underperforming. Diversify, diversify, diversify.

My opinion is that it is always an appropriate time to be invested in a highly diversified portfolio of stocks, bonds, and fixed indexed annuities. Given enough time, the risk should be worth the reward. Even during an election year.

 

Sources:

Vanguard 2020 Outlook at a Glance

Vanguard CRSP Model Portfolios

 

About the Author

Jeff Headrick is an independent financial planner and wealth manager with Inspire Financial Planning. When Jeff was still in his teens his father died unexpectedly. While his father was a hard worker and a good provider, he did not have the best financial plan in place when he died.

This left his family at a tough financial crossroad. This personal experience, coupled with being inspired by Sir John Templeton, Warren Buffett, Dave Ramsey, and the laws of compound interest, prompted Jeff to enter the financial services industry in 1999. He has been helping people with their financial planning ever since.

Jeff lives in Wilmington, NC with his wife and two children. He spends most of his spare time just across the Intracoastal Waterway in Wrightsville Beach, enjoying the beauty of the NC Coast.

Charts and graphs contained herein should not serve as the sole determining factor for making investment decisions. All hypothetical scenarios are for illustrative purposes only. Investment Advisory Services offered through AlphaStar Capital Management, LLC a SEC Registered Investment Adviser. SEC registration does not constitute an endorsement of the firm by the Commission nor does it indicate that the adviser has attained a particular level of skill or ability. Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. 

Diversification does not guarantee profit nor is it guaranteed to protect assets. International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors. Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance. Past performance does not guarantee future results.

 You cannot invest directly in an index. Consult your financial professional before making any investment decision. Fixed income investments are subject to various risks including changes in interest rates, credit quality, inflation risk, market valuations, prepayments, corporate events, tax ramifications and other factors.

These are the views of Inspire Financial Planning and not necessarily those of AlphaStar Capital Management, LLC, and should not be construed as investment advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. Please consult your financial advisor for further information.

 

 

 

 

 

Timing the Market: Strategies for an Election Year

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Timing the Market: Strategies for an Election Year

By Jeff Headrick, Financial Planner

 

January 2020

 

Timing the market with some type of sell could be a good strategy for 2020. With a trade war in China, an inverted yield curve, global bonds that are paying a negative yield, and the world’s biggest election on the horizon --one could probably argue it’s a good time to close up shop and come back at a later time.

That, in a nutshell, would be timing the market. But then again, many thought the same thing at the beginning of 2019—and the U.S. stock market responded with a banner year. So, you must be careful.

Wikipedia defines market timing as:

the strategy of making buying or selling decisions of financial assets (often stocks) by attempting to predict future market price movements. The prediction may be based on an outlook of market or economic conditions resulting from technical or fundamental analysis.

Market Timers Vs. Buy and Hold

I would consider myself more of a buy-and-hold investor versus a market timer. While I do rely on certain professionals like the management team at American Funds to perform some market timing for me and my clients, for the most part I’m a buy-and-hold (a.k.a. passive) investor. However, it is important to know that I do appreciate both strategies.

While the late Jack Bogle and Warren Buffett have long spoke fondly of the buy-and-hold, we all sell eventually. And when do we sell? During an up cycle? During a down cycle? Or, maybe six months from retirement? It really just depends, doesn’t it?

The Strategy of Rebalancing

As a buy-and-hold investor, I typically will set up a multiple asset portfolio and then rebalance annually to maintain specific positions. A couple of things are accomplished by the strategy of rebalancing.

1) original portfolio allocations are re-tuned to the original calibration

2) a portion of stocks or bonds that have gains, are sold to purchase ones that have not. This makes for 
buying low and selling high.

The strategy of rebalancing, while usually conducted within the scope of a buy-and-hold portfolio, is still a form of active management. You can’t say that you are 100% passive— buy-and-hold investor— if you are making a handful of modest changes every year. However, based on a multitude of research rebalancing can be one of the best ways to both decrease risk and increase return over the long haul.

What Should You Do?

Shakespeare would say follow your heart. I would say follow your convictions. As with any complicated endeavor--and I do believe investing to be a complicated endeavor--you have to know your business. You have to read, you have to study, and you have to put some thought equity into what style of an investor you are.

Once you have educated yourself and added to that guidance from a financial professional, you should be ready to go for the election year.

If you need help processing the current economic and political landscape as it pertains to your portfolio, please feel free to give me a call. I can be
reached at (910) 448-1450.

Related:

Preparing for a Market Downturn

Bear Market on the Horizon

Three Ways to Prepare for a Stock Market Crash

About the Author

Jeff Headrick is an independent financial planner and wealth manager with Inspire Financial Planning. When Jeff was still in his teens his father died unexpectedly. While his father was a hard worker and a good provider, he did not have the best financial plan in place when he died.

This left his family at a tough financial crossroad. This personal experience, coupled with being inspired by Sir John Templeton, Warren Buffett, Dave Ramsey, and the laws of compound interest, prompted Jeff to enter the financial services industry in 1999. He has been helping people with their financial planning ever since.

Jeff lives in Wilmington, NC with his wife and two children. He spends most of his spare time just across the Intracoastal Waterway in Wrightsville Beach, enjoying the beauty of the NC Coast.


Charts and graphs contained herein should not serve as the sole determining factor for making investment decisions. All hypothetical scenarios are for illustrative purposes only. Investment Advisory Services offered through AlphaStar Capital Management, LLC a SEC Registered Investment Adviser. SEC registration does not constitute an endorsement of the firm by the Commission nor does it indicate that the adviser has attained a particular level of skill or ability. Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.

Diversification does not guarantee profit nor is it guaranteed to protect assets. International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors. Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance. Past performance does not guarantee future results.

You cannot invest directly in an index. Consult your financial professional before making any investment decision. Fixed income investments are subject to various risks including changes in interest rates, credit quality, inflation risk, market valuations, prepayments, corporate events, tax ramifications and other factors.

These are the views of Inspire Financial Planning and not necessarily those of AlphaStar Capital Management, LLC, and should not be construed as investment advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. Please consult your financial advisor for further information.

The Frailty of Life

Christmas Tree Bulb

 

The Frailty of Life

By Jeff Headrick, Financial Planner

December 2019

 

As a financial advisor, it may be a misnomer to write about the frailty of life. After all, if I am in the business of making people money on their money by making solid financial recommendations, why would I waste time discussing anything other than perfectly blue skies?

Wall Street does seem to want financial advisors to portray an image of prosperity. And, this is the way it should be. Just not all the time.

For instance, I believe that every new investor I meet wants to hear and see a confident presentation from a confident financial advisor. Any new coach would want to portray the same for his or her athletes.

But I’ve learned through the years, that some people who really need financial advice don’t always seek it out unless their current financial season is a good one.

Those who have just lost a job, made poor decisions, or just plain had a bad year--- often feel uncomfortable sharing their woes. And to me, that’s incredibly unfortunate. It’s in the winter that the roots grow the deepest. If your current financial season of life has taken some hits, this could be a great time to dig in and make some soulful changes.

Life is Fragile

One of my first blogs last year was on budgeting. The driving force behind the post was that all of us need a budget—even those—who are in a season of prosperity. It’s just smart business. If life is fragile, and can change on a dime, then having had a banner year in 2019 just means that you better have a larger Murphy’s Law fund (AKA Emergency Fund) in 2020.

Murphy doesn’t care how financially healthy you think you are, or how impervious you might feel to financial loss. That’s why I recommend a solid financial plan for folks from just about all seasons of life. (You can read our Beginner’s Guide to Working with a Financial Planner here. )

Bankruptcy & Stupid Debt

Bankruptcy is something that many go through. If this has happened to you don’t feel bad. Many smart people and companies have had to file, and it is not the end of the world. Do you know what  Coca-Cola, Kodak, Marvel, General Motors, and Radio Shack have in common? I’ll bet you guessed it. All have gone bankrupt at least once. While Ford Motor Company has never filed bankruptcy, its founder, Henry Ford, went bankrupt twice before he got it right.

But maybe your situation is not so dire. Maybe you just made some poor decisions with what Dave Ramsey would call “stupid debt”. Stupid debt is when you did something that was financially—well—not such a good idea. For example, you may have gone on a vacation that you couldn’t afford. Or, you may have spent some money before you had it by placing a purchase or two on your Visa.

Not to worry, you just have to pay the stupid tax. In other words, pay your debtors, plus interest.

Stay Inspired No Matter What

This Christmas season don’t get taken down by the past. The past is gone, and you can’t get it back. But you can learn from your mistakes—or misfortune—and get busy rebuilding.

Also, please know that not everyone’s financial health is perfect when they seek out a financial advisor. And yours doesn’t have to be either. Financial advisors are doing a better job these days helping people from all financial seasons because life, after all, is fragile.

Related:

How to Stay Inspired

Be Smart: Why Everyone Needs a Budget

The Financial Planning Revolution: A Beginner’s Guide to Working with a Financial Planner

Sources:

10 Once-Dominant Businesses that Ended up Declaring Bankruptcy

15 Most Memorable Companies that Vanished

Henry Ford’s Bankruptcy’s Offer Lessons in Persistence

 

About the Author

Jeff Headrick is an independent financial planner and wealth manager with Inspire Financial Planning. When Jeff was still in his teens his father died unexpectedly. While his father was a hard worker and a good provider, he did not have the best financial plan in place when he died.

This left his family at a tough financial crossroad. This personal experience, coupled with being inspired by Sir John Templeton, Warren Buffett, Dave Ramsey, and the laws of compound interest, prompted Jeff to enter the financial services industry in 1999. He has been helping people with their financial planning ever since.

Jeff lives in Wilmington, NC with his wife and two children. He spends most of his spare time just across the Intracoastal Waterway in Wrightsville Beach, enjoying the beauty of the NC Coast.

Charts and graphs contained herein should not serve as the sole determining factor for making investment decisions. All hypothetical scenarios are for illustrative purposes only. Investment Advisory Services offered through AlphaStar Capital Management, LLC a SEC Registered Investment Adviser. SEC registration does not constitute an endorsement of the firm by the Commission nor does it indicate that the adviser has attained a particular level of skill or ability. Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.

Diversification does not guarantee profit nor is it guaranteed to protect assets. International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors. Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance. Past performance does not guarantee future results.

You cannot invest directly in an index. Consult your financial professional before making any investment decision. Fixed income investments are subject to various risks including changes in interest rates, credit quality, inflation risk, market valuations, prepayments, corporate events, tax ramifications and other factors.

These are the views of Inspire Financial Planning and not necessarily those of AlphaStar Capital Management, LLC, and should not be construed as investment advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. Please consult your financial advisor for further information.

 

 

 

 

 

 

Preparing for a Market Downturn

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Preparing for a Market Downturn

By Jeff Headrick, Financial Planner

October, 2019

 

Control the Controllable

I have a son that just turned eleven. He is a ruffian and loves tackle football. During the first few years he played he was about average size. But this year he weighs much less  than many of his teammates.

Obviously, this has made the game more demanding on him. There are certain factors in sports that are uncontrollable, and the disparity in his teammates size is one of those uncontrollables.

Recently I noticed that even during wind sprints at the end of practice he was coming in   near last place every time. This is typically an area of strength for him—but I believe his slow running was a psychological effect of losing some of his confidence due to his size.

So, I made him a deal.

I told him that if he could start running in the top half of the pack for one-week, I’d take him to Dunkin’ Donuts. I also told him that if he started placing in the top 10% of the pack for one-week, I’d take him to Cracker Barrel.

The result?

In one week of practice he went from an average of 12th or 13th to being 1st, 2nd, or 3rd,  every time.

While he cannot control the fact that his peers outweigh him, he can control his effort and his God-given ability to run like the wind. Control the controllable. His confidence is now much higher, and he is performing better at all the aspects of his game.

Control the Controllable with Your Investment

The same methodology in sports works in the world of investing. For example, what  can’t you control?

  • You can’t control the economy
  • You can’t control the stock market
  • You can’t control political factors that influence both the economy and the stock market

But you can control the following:

  • You can control the expenses of your portfolio through investment selection
  • You can control your asset allocation
  • You can control how you react, or do not react, during a market downturn

Controlling your behavior, your expenses, and your investment allocations are just a few things that you can control if you want to become a successful investor.

Learn to control what you can now, before a bear market begins and causes you unneeded stress.

 

“With a major election brewing, an inverted yield curve, and world trade tensions rising, take time to prepare now—while you can still think objectively.”

Preparing for a Market Downturn

As we have written this past year in blog posts such as Three Ways to Prepare for a Stock Market Crash, preparation matters. It seems inevitable that the bear market will show its teeth sometime in the future--we just don’t know when.

But we do believe that the time to prepare is now. The proper asset allocation can be very effective when it comes to a stock market correction. In the blog post Your 401K and the Efficacy of Asset Allocation,  we walk you through three specific steps that you can take to mitigate a precipitous crash. The beauty of this type of asset allocation is that it will help you remain predominantly offensive, while still keeping losses to a minimum.

With a major election brewing, an inverted yield curve, and world trade tensions rising, take time to prepare now—while you can still think objectively.  

Be Open Minded to Investment Advancements

The investment industry is constantly evolving. Even as a professional I have a very hard time staying on the cutting edge of new investment ideas.

As human beings we tend to lean too heavily on investment concepts from the past. Many of which that may be outdated.

In particular, I have recently read some provocative research that explore why fixed indexed annuities may be a better alternative to bonds in your portfolio*. Until recently, I would never have thought that investing in a fixed indexed annuity could be quite so competitive. But the design of this particular investment has changed dramatically over the last few years, and traditional bond investing has proven difficult with historically low interest rates.

While preparing for a market downturn, we must continue to keep abreast of the latest in investment thinking. We must continue to desire an optimal return and to obtain it through research, patience, knowledge, and innovation. 

Sources:

*Fixed Indexed Annuities: Consider the Alternative by Roger G. Ibbotson, PhD.

 

About the Author

Jeff Headrick is an independent financial planner and wealth manager with Inspire Financial Planning. When Jeff was still in his teens his father died unexpectedly. While his father was a hard worker and a good provider, he did not have the best financial plan in place when he died.

This left his family at a tough financial crossroad. This personal experience, coupled with being inspired by Sir John Templeton, Warren Buffett, Dave Ramsey, and the laws of compound interest, prompted Jeff to enter the financial services industry in 1999. He has been helping people with their financial planning ever since.

Jeff lives in Wilmington, NC with his wife and two children. He spends most of his spare time just across the Intracoastal Waterway in Wrightsville Beach, enjoying the beauty of the NC Coast.


Charts and graphs contained herein should not serve as the sole determining factor for making investment decisions. All hypothetical scenarios are for illustrative purposes only. Investment Advisory Services offered through AlphaStar Capital Management, LLC a SEC Registered Investment Adviser. SEC registration does not constitute an endorsement of the firm by the Commission nor does it indicate that the adviser has attained a particular level of skill or ability. Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.

Diversification does not guarantee profit nor is it guaranteed to protect assets. International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors. Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance. Past performance does not guarantee future results.

You cannot invest directly in an index. Consult your financial professional before making any investment decision. Fixed income investments are subject to various risks including changes in interest rates, credit quality, inflation risk, market valuations, prepayments, corporate events, tax ramifications and other factors.

These are the views of Inspire Financial Planning and not necessarily those of AlphaStar Capital Management, LLC, and should not be construed as investment advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. Please consult your financial advisor for further information.

Dave Ramsey and the Twelve Percent Investment

Dow Jones Indutrial Average

 

By Jeff Headrick, Financial Planner

September, 2019

 

I have heard many debates over the years about Dave Ramsey and the twelve percent investment. While most of these discussions were among my professional colleagues, many were among clients or prospective clients.

Instead of focusing on optimal asset allocation, budgeting, or the importance of working with a financial professional, we seem to have become preoccupied with things that we have little control over—aka market returns.

Truth be told an investment that can average twelve percent per year over the long haul is a hard thing to come by. Sorry to burst your bubble so early. But please read on. 

The Bigger Question

Instead of debating about Dave Ramsey and the twelve percent investment, let me ask you another question. How much additional surplus income do you have at the end of the month to put towards your retirement?  

The majority of people that I have asked this question to recently cannot answer this question very easily either. In my opinion, if we focus on cash flow first and force ourselves to save more now, then we can dig into the technical aspects of performance later.

Know Your Cash Flow

For example, if I invest $5,000 at the beginning of every year and it earns 10% per year for 20 years, I’ll  end up with about $315,012.50. However, let’s say upon examining my current monthly budget I realize that I have another $300 a month ($3,600 per year) that I could comfortably put towards my retirement. In doing so I would then be leveraging about $8,600 per year into retirement versus my $5,000 previously. Based on my calculations this adjustment would earn me an additional $226,809.00 for a new total of $541,821.50 in 20 years.

Are You Asking the Right Question?

Based on what I have seen, most people would rather talk about Dave Ramsey and the twelve percent investment instead of discussing their surplus cash flow. Let’s face it, it’s just a more fun conversation.

But if we turn a blind eye to cash flow and stick with their original $5000 per year investment, let’s see what kind of a difference that twelve percent investment might make.

Most investors that I know are making nowhere near twelve percent per year. However, if they could defy the odds and average twelve percent year, would you like to guess how much money they would have at the end of 20 years? (assuming the $5000 investment at the beginning of every year)

Don’t worry, I have done the math for you. If they could find this ideal Dave Ramsey twelve percent investment they would have $403,493.68 at the end of the a 20 year time period. That’s $138,327.82 less than if they had focused on their cash flow. So much for focusing on performance instead of cash flow and contributions.

What Would Benjamin Franklin Do?

Benjamin Franklin was once asked how to build wealth. He said that there are two ways to build wealth. One way is to find the best investments in which to invest. The second way is to live frugally and save as much money as you can. But then he added, “If you are wise you will learn to do both at the same time.”

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Dave Ramsey’s Twelve Percent Investment

There are a few investments on my radar that may fit Dave Ramsey’s twelve percent assumptions. One is an investment called the Growth Fund of America (GFFFX). With an inception date of December 1, 1973, this fund has a lifetime average of 13.78%*. This is an F-2 Share Class fund that is very difficult to find unless you are utilizing the services of a professional financial advisor.

If you are out there trying to do all of this research and portfolio building on your own, you may want to consider working with a trained and licensed financial advisor. If you need help learning where to start feel free to read the article: The Financial Planning Revolution: A Beginner’s Guide to Working with a Financial Planner.  

I hope this month’s post has got you asking the right questions, and that you now know that there are still some investments that hit that twelve percent metric Dave Ramsey has mentioned in the past.

As always, thanks for reading-- and please check back once a month for more on the world of financial planning and investments from Inspire Financial Planning.  

*Source: American Funds

Related:

Three Ways to Prepare for a Stock Market Crash

Mutual Funds Vs. ETFs: A Comparison

Your 401(k) and the Efficacy of Asset Allocation

About the Author

Jeff Headrick is an independent financial planner and wealth manager with Inspire Financial Planning. When Jeff was still in his teens his father died unexpectedly. While his father was a hard worker and a good provider, he did not have the best financial plan in place when he died.

This left his family at a tough financial crossroad. This personal experience, coupled with being inspired by Sir John Templeton, Warren Buffett, Dave Ramsey, and the laws of compound interest, prompted Jeff to enter the financial services industry in 1999. He has been helping people with their financial planning ever since.

Jeff lives in Wilmington, NC with his wife and two children. He spends most of his spare time just across the Intracoastal Waterway in Wrightsville Beach, enjoying the beauty of the NC Coast.


Charts and graphs contained herein should not serve as the sole determining factor for making investment decisions. All hypothetical scenarios are for illustrative purposes only.

Investment Advisory Services offered through AlphaStar Capital Management, LLC a SEC Registered Investment Adviser. SEC registration does not constitute an endorsement of the firm by the Commission nor does it indicate that the adviser has attained a particular level of skill or ability. Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. 

Diversification does not guarantee profit nor is it guaranteed to protect assets. International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors. 

Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance. Past performance does not guarantee future results.

You cannot invest directly in an index. Consult your financial professional before making any investment decision. Fixed income investments are subject to various risks including changes in interest rates, credit quality, inflation risk, market valuations, prepayments, corporate events, tax ramifications and other factors.

These are the views of Inspire Financial Planning and not necessarily those of AlphaStar Capital Management, LLC, and should not be construed as investment advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. Please consult your financial advisor for further information.

Stock Market Year-to-Date

New York Stock Exchange

By Jeff Headrick, Financial Planner

August, 2019

 

Stock Market in General

To put it mildly, most asset classes have been on a tear for the first half of the year. When I look across the array of Vanguard equity ETFs in our portfolios, the worst performer is FTSE AW ex-US Small Cap (VSS). The return year-to date through June was 12.16% The highest performer was the Vanguard Growth (VUG) at 22.44%.

Vanguard year-to-date investment performance

Source: Vanguard

Wrestling our Fears

For all the chariots that are barreling down Wall Street in a positive way, there is also an awful lot of fear. It seems like no matter how well the markets are doing, there’s always a spoiler to take the fun out of making money over the long term.

China

I empathize with your concerns. The trade war with China creates a tension (and a lot of news), that is almost palpable. However, based on what I’ve seen, the U.S. cannot continue to roll on glassy eyed and lackadaisical without a more evenly dispersed trading policy with China.

This is going to cause some short-term pain, but I believe in the long run both sides will strike a deal that they can live with.

Inverted Yield Curve

Perhaps the biggest concern I have currently is the inverted yield curve. This happens when investors  are able to get a better return over the short term than over the long term as related to bonds. The majority of time that this happens, this has been a negative harbinger of things to come. However, yield

curves are not as newsworthy as Trump tweets about China. So you may want to log out of your  Twitter or Facebook and go buy a copy of The Economist in order to get a better handle on the global economy.

Jeff Headrick at New York Stock Exchange
Author outside of New York Stock Exchange: July 2019.

Extracting the Positives

Now for the good news. Unemployment is very, very low. When more Americans are working, more Americans are spending money.

The U. S. is still the one of the best places on the world to invest. I have been a fan of the emerging market economies since as far back as 2004 or 2005. I use to teach financial workshops on China, Brazil, and India back Pre-Financial Crisis.

However, there is a soul to investing in U. S. companies that—in my opinion—is second to none. And while I know that eventually this will change, I believe this change to be a generation or two down the road.

Summary

From now until the presidential election on November 3rd, 2020, the news is only going to escalate. Maybe it’s time to insulate from some of the talk speak on the tube and hire a financial planner. It might do you a world of good. The time to prepare is always now.

Also, here is another article on how you can get started diversifying your 401(k)-- today. There is no time like the present! Above all, we recommend a long-term investment philosophy, spiked with a lot of reading and prayer. The first half of the year was great for investors, and it’s perfectly normal to stop and celebrate once in a while when things have been this good.

Related Blogs:

Your 401(k) and the Efficacy of Asset Allocation

Three Ways to Prepare for a Stock Market Crash

Disagreeing with Warren Buffet: An Argument for Bonds

Charts and graphs contained herein should not serve as the sole determining factor for making investment decisions. All hypothetical scenarios are for illustrative purposes only.

Investment Advisory Services offered through AlphaStar Capital Management, LLC a SEC Registered Investment Adviser. SEC registration does not constitute an endorsement of the firm by the Commission nor does it indicate that the adviser has attained a particular level of skill or ability. Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. 

Diversification does not guarantee profit nor is it guaranteed to protect assets. International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors.

Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance. Past performance does not guarantee future results.

You cannot invest directly in an index. Consult your financial professional before making any investment decision. Fixed income investments are subject to various risks including changes in interest rates, credit quality, inflation risk, market valuations, prepayments, corporate events, tax ramifications and other factors.

These are the views of Inspire Financial Planning and not necessarily those of AlphaStar Capital Management, LLC, and should not be construed as investment advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. Please consult your financial advisor for further information.