John Gardner

Investing: 22 Steps to do in 2022

February 4, 2022 by John Gardner Leave a Comment

With the start of another new year, it might be a great time to review your investments and your overall financial plan. Investment planning and management requires myriad steps. It is prudent to revisit your plan and check that the steps you have taken are keeping you on track. Here’s 22 steps you might do in 2022.

Know Yourself

An individual must know him/her-self to be a successful investor. This is the ‘Be true to you’ rule. Knowing the investment parameters and constraints unique to you will help you stay true to you.

Be Disciplined

Investing is not for the undisciplined. A disciplined approach to research, and investment rules are critical to success. Be intentional and precise, not arbitrary

Go With What You Know

Being aware of what you trust, buy, use, and like can lead to a common-sense approach to investing. “Invest-sense” is a term I use to imply the combination of intuitive common sense and a sound psychology leading to successful investing.

Control You Emotions

To be a successful investor you must control your emotions. We are only human, so fear and greed are unavoidable for investors. Try to not make investment decisions when feeling FUD or FOMO: Fear, Anxiety & Doubt. And, Fear Of Missing Out.

Remember, it’s Time-in, Not Time-ing

A key to successful investing is time; it is the amount of time in, not the timing, that matters. Time in the stock market does two things: It reduces risk and avoids the cost of being out. The longer the time in the market, the lower the risk.

Minimize Losses & Maximize Gains

Cut your losers … let your winners run. Avoiding large losses and holding on to gains precludes potentially unrecoverable losses and allows for big winners in a stock portfolio.

Concentrate for Accumulation & Diversify for Preservation

Too much diversification can dilute profit potential. Too much concentration can be dangerous, also. Knowing your investor-self will help you with concentration vs. diversification.

Be Contrary, not Ordinary

Contrarian investing was famously expressed by Baron Rothschild, who said “The time to buy is when there’s blood in the streets.” Contrarian investing can feel counter-intuitive. But can also provide you the most profit.

Put Risk Before Return

“Investing is a process that should be based on a disciplined approach to risk management.” My quote. Strive to minimize the risk inherent in all investments before chasing returns.

Put Process before Product

Investing is a process. In fact, it is a never-ending process. Have a strong understanding of the investment planning process before buying any investment product.

Plan your investments & invest your plan

SCUBA divers honor the rule, “Plan your dive, and dive your plan”. Apply this approach to your investing.

Check your Titles and Beneficiaries

Your investment/savings accounts and properties are uniquely titled, and some have designated beneficiaries. With years gone by and with life changes, it may time to check your holding’s titles to ensure they are what you want and pass on to whom want.

Maximize your contributions

If still working, contribute early and often to your retirement savings accounts. Max-out your allowed contributions, including your “catch-up” allowances if over 50.

Minimize your taxes

A way to maximizing investment returns is to minimize investment taxes. A prudent investment plan includes tax reducing strategies. Seek tax exemptions, tax deduction, tax deferral and tax advantaged investments and techniques.

Consolidate accounts

Create easier management and oversight, reduce fees, avoid unintended duplication, and gain more clarity of your full financial picture. All that by consolidating your investment accounts.

Trust but verify

This is a Russian proverb adopted and made popular by President Ronald Reagan. Apply it to your investment selection process. You hear from a trusted person about a “great investment”. Place your trust wisely and verify.

Think thematically

Thematic investing generally means buying stocks or other investments that may benefit from a particular trend. What trend might be your friend in 2022?

Think “Buy high & sell higher” not “Buy low & sell high”

It’s one of the most common investment adages. Who doesn’t want to profit from buying low and selling high? Though counter-intuitive, buying high and selling higher can be a less risk, more return approach.

Consider conversion

Converting some or all your traditional IRA to a Roth IRA in 2022 may be good for you. A Roth IRA conversion can save you considerable money in taxes over the long term, especially if you see your taxes rising in the near term.

Don’t risk a lot to gain a little

My dad taught me this. He was a great stock investor.

Focus on your plan

“How is the market doing?” is a common question. The question should be, “How is my plan doing?” Your income needs being met, risk levels consistent with your tolerance, and appropriate asset allocation should be your focus.

Be happy and healthy in the new year.

I saved the best for last… HAPPY NEW YEAR!!

2022 Outlook

November 25, 2021 by John Gardner Leave a Comment

As we near the end of another year and anticipate what the new year will bring, it is time for my annual Outlook. I titled my 2021 Outlook, “Less Stress, More Fun in 2021.” My 2022 Outlook theme is “Welcome the New in 2022”.

If you would like a copy of my 2021, just let me know. For this year’s final Investor’s Edge column, I am happy to share my insights and forecasts for the global stock market and world economy in the new year ahead. This column will be a summary of the 2022 Outlook provided to my clients, due to space constraints here. Here’s the highlights of what to expect in 2022.

What will be new in 2022? New stock. New trends. New Fed policy. New Jobs. New consumer behavior. New health.

2021 was a record year for new stock offerings. New public stock issues between IPO’s and SPAC’s (Special Purpose Acquisition Company) shattered the previous new public stock listings set in 1999. Expect that to continue in 2022. More new stock will go public. A couple of highly anticipated names are Impossible Foods and Instacart.

Persistent inflation pressures will spark new trends in market sectors such as gold, oil, housing, and other real assets. The Consumer Price Index jumped to a 12-month rate of 6.2% through October 2021. Overall, the cost of living is rising at the fastest pace in almost 40 years. Oil soared by roughly 80% in 2021 through early November and gold, at around $1,800 per troy ounce, is still below its August 2020 high over $2,000. Expect both to hit new highs in 2022. At least through the first half of 2022, expect the housing market to climb to new highs. The continued combination of lower rates, easier lending standards, low supply and high demand will remain strong tailwinds.

The Federal Reserve Board and its decision-making committee, the Federal Open Market Committee (FOMC), has been at the forefront of investors’ attention seemingly everyday for the last decade and beyond. Even the Board’s chairman has been a topic of market speculation in 2021. We now know President Biden will let Chair Jerome Powell keep his job going into 2022. Expect the FOMC to announce new interest rate policy next year. My forecast for interest rates is they go higher sooner.

Want a job? They’re plentiful. An October jobs market report noted there over 10 million job openings. Many will likely be filled in 2022, driving down the current unemployment rate. Employers, though, will probably have to offer more pay to fill them. I expect the fastest wage rate increase in a long time in 2022. This in turn will fuel higher inflation.

More workers making more money should result in more spending. That should be the story for consumers next year. What could be new next year is where and how consumers spend. While wages will rise, the prices of goods and services could rise more. American consumers will likely shop more at discount stores in the year ahead. Assign this shift in consumer behavior to inflation. Transactions at Dollar Tree climbed 65% in 2021 compared to pre-pandemic 2019. I expect that consumer choice to stick in 2022.

The best for last. New (good) Health. As of this writing, the country of Austria is in lockdown. The World Health Organization is concerned and warns new Covid cases are rising sharply on the continent. Germany is considering similar measures. With about 65% of Austria’s population vaccinated, it is one of the lowest in Western Europe. While this is NOT good, new GOOD health should be the best new year’s gift in 2022. We have a booster. We have antiviral drugs, and many millions of Covid vaccine doses. 2022 is hopefully the beginning of the end for the pandemic. Beyond pharmaceutical help, some expect a new Covid variant is unlikely next year. Hopefully, there will be no new wave of Covid-19 in 2022.

ENJOY THE NEW IN 2022. HAPPY NEW YEAR!

What is a CFP®?

October 7, 2021 by John Gardner Leave a Comment

Investing is inherently complicated enough without the “alphabet soup” it is served with. The reality for most investors is that the myriad acronyms, idioms and initialisms related to investments and investment professionals makes the endeavor even more confusing. Here’s an example of a statement full of that alphabet pasta: “As a CFP^®, CPM or AIF, an IAR of an RIA should remain compliant with SEC rules when recommending IPO’s or ETF’s to investors, and be familiar with a company’s EBITDA, P/E, CAGR and ADY when selecting LCG equities.” That’s clear, right? For most, probably not. My hope in this month’s Investor’s Edge column is to provide some clarity. As a CFP^® professional, I think it is timely to explain what the CFP^® certification is and what a Certified Financial Planner does. As more people call themselves “financial planners,” finding the right professional to address your financial planning needs isn’t always easy. Become familiar with the planner’s business style and understand the level of services he or she provides. As noted below, only a professional advisor who has satisfied all the CFP^® certification requirements is a Certified Financial Planner.

For the decades I have served clients as their investment advisor, I’ve always said, “I seek to understand before I am understood.” The inference of that statement is my intention to convey to a client the importance I place on learning all I can about them in order to recommend a suitable investment plan before emphasizing what I do and how I do it. When offering insight to what I am and do as an investment advisor, I strive to help clients understand my expertise as a Certified Financial Planner (CFP^®) and Certified Portfolio Manager (CPM). They are significantly different. Here’s more on what is a CFP^®.

The Four E’s of a CPF^®: Education. Experience. Examination. Ethics.

Education:

The educational curriculum includes 72 Principal Knowledge Topics under the categories below, as well as a comprehensive financial planning capstone course. These financial planning topics are:

• Investment planning

• Tax planning

• Retirement planning

• Estate planning

• Insurance planning

• Financial management

• Education planning

In addition to completing a comprehensive financial planning curriculum approved by CFP Board, those seeking CFP^® certification must have a bachelor’s degree (or higher) in any discipline to become certified. Once certified, CFP^® professionals are required to complete continuing education coursework, including a CFP Board approved ethics course, to further their competence in financial planning and remain current.

Experience:

CFP^® professionals must complete thousands of hours of professional experience related to the financial planning process prior to earning the right to use the CFP^® certification marks. As a result, CFP^® practitioners possess practical experience, in addition to financial planning knowledge.

Examination:

This is the hard part. To become certified, one must pass a comprehensive 6-hour CFP^® Certification Examination that tests their ability to apply financial planning knowledge in an integrated format. The CFP® exam measures the candidate’s critical thinking and problem-solving ability. The exam does not test textbook theories; rather, it assesses the candidate’s ability to apply financial planning knowledge in an integrated approach to real-life financial planning situations. To develop exams that reflect the current practice of financial planning, the CFP Board conducts regular “Job Task Analysis” studies to identify the important tasks performed by planners and assess the knowledge and skills needed to perform these tasks.

Ethics:

The final step to certification requires candidates to meet the CFP Board’s Fitness Standards and commit to abide by the Board’s professional standards, known as CFP Board’s Code of Ethics and Standards of Conduct, that sets forth their duties to the public, clients, and employers. The CFP Board routinely performs background checks of candidates for CFP^® certification and CFP^® professionals, and requires candidates and professionals to disclose various matters, including, among other things, criminal history, bankruptcies and liens, and regulatory or civil proceedings.

CFP’s generally help clients create a financial plan to manage investments, retirement, insurance, and taxes. And, as I mentioned above, these professionals are held up to a high ethical standard. They always have a fiduciary obligation to make decisions that protect the financial interests of their clients. As for me, I try to help investors de-mystify the financial planning process and clear away the cloud of alphabet soup.

Bitcoin Buzz & Crypto Craze

August 6, 2021 by John Gardner Leave a Comment

Bitcoin (and other “cryptocurrencies”) have captured the world’s attention like few investment assets in history: It has become one of the greatest manias of all time. What is it? Is it for you? Those, and other important questions may have been on your mind. I hope to help answer them in this month’s Investor’s Edge.

For starters, what is a cryptocurrency? When you simply break it down into crypto + currency, you get hidden money. This is more often referred to as a private, decentralized digital currency. For discussion’s sake, I will default to Bitcoin when referring to crypto since it was the first created and is by far the biggest. There are now over 1,600 crypto’s. Consider “crypto” as more of a digital asset class than a currency. I prefer to consider Bitcoin as a speculative investment (digital asset class) than a currency like the dollar, euro, pound, etc. even though it is now used as such. Bitcoin is becoming increasingly popular for international payments. The prospect of a fast, secure, low cost and genuinely international payments system is encouraging businesses and individuals around the world to seriously consider cryptocurrency settlement. You can now pay your AT&T phone bill with Bitpay using Bitcoin. Or buy a Whopper at Burger King in Venezuela. For a few weeks earlier this year you could have bought a Tesla with Bitcoin – but no more. American Express advises business customers that a disadvantage of Bitcoin is that it is not yet widely accepted in many countries, and in some countries its use is illegal. Payment processors such as Bitpay, Paypal and Square let you make payments to merchants who accept it, but those merchants usually immediately convert the crypto received into dollars or the fiat currency where the merchant is domiciled. They don’t want the risk of Bitcoin’s value dropping dramatically. Whether viewed as a digital currency or asset class, crypto “coins” are created (“mined”) and ownership is recorded and stored in a ledger existing in a form of a computerized database using strong cryptography to secure transaction records. This technology is known as a blockchain.

As an asset class, like stocks and bonds, Bitcoin and other crypto’s are the newest investment class in the investment universe. The U.S. Commodity Futures Trading Commission (CFTC) determined Bitcoin a “virtual currency” commodity in 2015. It is here, in the investment realm, where I place Bitcoin. As a commodity, the digital asset class has experienced phenomenal price appreciation and inordinate volatility. One attribute of Bitcoin that makes it a unique commodity is its’ supply. The number of Bitcoins is finite; there are 21 million coins. There are about 19 million Bitcoins in circulation. Bitcoin was created in 2009 and valued at less than half a penny. It peaked this April at over $63,000. As I write this today, Bitcoin is bouncing off a low near $31,000. This is near where it was at last year-end. It opened 2020 at about $7,000. As I mentioned, it is volatile. Is it for you? Yes. No. Maybe? Only you can know. As an investment strategist, portfolio manager and wealth advisor, I can just remind you to be true to you as an investor. Know the parameters and constraints unique to you that govern how you invest – or speculate. Indeed, Bitcoin is a speculation.

When I hear about the crypto “miners,” I think of the “Niners” that speculated for gold, using picks and shovels mining for nuggets. Similar to the gold rush, Bitcoin speculation gives you a few ways to get involved, should you choose to. You could take the more conservative approach, selling the supplies (“picks and shovels”), or be a miner, or directly buy existing Bitcoin. Your risk/reward ratio differs with each. Here, for your information, are examples of securities you might consider with those approaches to Bitcoin in mind. Coinbase Global, Inc. (COIN) is essentially the Bitcoin exchange. The publicly traded security is the platform where crypto traders can buy and sell crypto assets. Think of it like the “house” or casino for gamblers. A miner is Riot Blockchain, Inc. (RIOT). This listed security is the largest Bitcoin mining company in North America. Then, as mentioned, you could buy Bitcoin directly either from Coinbase or buying shares of the Bitcoin “tracker” issued by Grayscale Bitcoin (GBTC). GBTC is a listed security like COIN and RIOT. Their shares trade on the stock exchange and are highly liquid. Lastly, and perhaps the most passive way to gain investment exposure to Bitcoin is through a mutual fund or ETF that holds it. The ARK Next Generation Internet ETF (ARKW) is one. It recently held about 8% of its assets in Bitcoin related securities.

Still asking yourself if Bitcoin is for you? Here’s a prudent consideration for most investors. Old fashioned asset class diversification. As noted above, Bitcoin’s price has increased incredibly since 2009. A relatively small amount of Bitcoin held in a traditional stock portfolio would have added great value. For example, a study showing various asset class returns over the trailing twelve months ending January 2021 shows the S&P 500 stock index gained 17.25%. Bitcoin soared 248.52% during that time. An investment portfolio that was diversified with just a 5% allocation to the Bitcoin asset class over the period jumped 22.19%. That’s almost 30% more than all stock portfolio.

Diversification has always been considered a wise investment style. Now we have another asset class to choose from.

People, Planet & Profits: ESG

June 18, 2021 by John Gardner Leave a Comment

Buy now you may have heard of the “sustainable investing” or “socially responsible investing” approach known as ESG investing. ESG (environmental, social, and corporate governance) has grown exponentially. From an often-dismissed investment style only appealing to social conscious investors, ESG investing has become a much-respected investment strategy and market force. Now one-third of U.S. assets are managed with sustainable principles as investment screens. Expect this trend to continue and increase further. Under the Biden administration, steps have been taken to combat global warming and appears friendly to ESG. Essentially, this is what ESG is: Environmental criteria consider how a company performs as a steward of the planet (nature). Social criteria examine how it manages relationships with employees, suppliers, customers, and the communities where it operates (people). And governance deals with a company’s leadership, executive pay, audits, internal controls, and shareholder rights (how profits are earned and allocated).

Popularity of ESG

The number of ESG mutual funds available to U.S. investors grew to almost 400 last year — up 30% from 2019 and a nearly fourfold increase over a decade, according to Morningstar. Also, according to Morningstar, money flowing into U.S. funds categorized as sustainable hit a record $51.1 billion in 2020, more than double the 2019 record of $21.4 billion. For perspective, the annual flows into sustainable funds had been around $5 billion six years ago. Over half of institutional investors and 45% more fund selectors engaged in active ownership of ESG investments in 2020, compared to 2019, while 35% of institutional investors say corporate behavior as a major criterion in their investment selection. It is estimated that by 2025 ESG assets will reach $53 trillion. That would be one-third of world’s projected managed assets then. The transfer of wealth from baby boomers to millennials is considered a catalyst for the growing popularity of ESG investing. The thinking is because millennials expect more from companies and the products and services they offer in the marketplace. Another factor is the increase of women investors. One analyst specializing in sustainable finance said, “Women are largely focused on investing in high-quality portfolios of companies whose products and services provide solutions to environmental and social challenges.”

Is ESG investing for you?

Aside from the benefits of creating a more ethical portfolio, there is evidence that ESG investments deliver similar returns as traditional investments — and potentially carry less risk. And the numbers show you don’t have to sacrifice returns for lower risk. Recent analysis shows the performance of sustainable funds compared with traditional funds and found that from 2004 to 2018, the total returns of sustainable mutual and exchange-traded funds were similar to those of traditional funds. Regarding risk, there is evidence that ESG investments consistently showed a lower downside risk than traditional funds. A recent study found that during highly volatile markets, such as in 2008, 2009, 2015 and 2018, traditional funds had significantly larger downside deviation than sustainable funds, meaning traditional funds had a higher potential for loss. So, if your investment objectives include positive social impacts in addition to positive profits, ESG investments may be for you.

DIY or get help?

As noted, ESG investments are popular and you have hundreds of choices if you want to own them. Whether evaluating individual stocks, ETF’s, or mutual funds, there are a lot of ESG investment vehicles. Besides the “what”, there’s the “how”. You may choose to create and manage your own ESG portfolio or seek professional guidance. If you do-it-yourself, keep in mind diligent investment analysis is always wise. A thorough analysis of an investment’s fundamentals, risk, and expenses is a prudent approach. Also, be sure your investment considerations are consistent with your unique investment parameters and constraints. Should you want help, expect an investment advisor to focus on your risk tolerance and goals.

Here’s to a positive ROI from your investments along with a positive impact on people and our planet.

Stocks Go Up and Down: How to Handle It

May 19, 2021 by John Gardner Leave a Comment

Excessive greed and fear are the emotions that drive the public markets. Sometimes fear and greed can double time you, which is expressed by FOMO (the fear of missing out.) Too often emotions cause individual investors to take costly actions. What I hope to help you avoid is buying high and selling low.

In my career as in investment advisor over 36 years, I have seen extreme market drops that created fantastic opportunities to BUY stocks. Instead, many individual investors were overwhelmed with fear and chose to SELL. 1987, 1994, 1998, 2000, 2008, and 2020 were some of those times of deep drops and down markets. My efforts to offer proper perspective and prudent, rational advice to investors was unsuccessful. The power of the fear emotion was too strong; “Get me out,” was the response. Less so in the 2020 “Virus Crisis” bear market because it happened so fast, but the steep sell-off in stock prices caused most investors a lot of FUD (fear, uncertainty & doubt).

You wouldn’t be human if you didn’t fear loss. No one likes to lose. Especially money. Behavioral finance studies have determined that people feel the pain of losing money more than they enjoy gains. Natural instincts cause us to want to flee the market when it starts to plummet, just as greed moves people to jump back in when stocks are soaring. Both can have negative impacts. While many investors have lost money in the stock market, they didn’t have to. Here are 3 things you can do to avoid losses in stocks and should keep in mind particularly during down markets: remember your time, do your homework, and control your emotions. It’s time in the market, NOT market timing that determines your investment success. Remember your investment time horizon when the fear driven desire to sell hits. Knowing yourself and knowing your investments will reduce the urge to sell in a down market. Do the necessary homework to understand the stocks you own. Ask yourself, “Will the company’s product or service remain in strong demand beyond the temporary down market?” Lastly, do your best to control your emotions. Fear and greed are awfully strong but reminding yourself of your investment years ahead and your confidence in the long-term prospects of the companies you own can make you a stronger investor.

Here are three helpful facts to keep in mind. Keeping proper perspective should help you overcome the power of emotions and fight the urge to sell in down markets:

Down markets are normal

History has shown us that stock market declines are an inevitable part of investing. Down markets are normal. There are two kinds: corrections (defined as a 10% or more decline), and bear markets (a 20% or more decline). The good news is that these and other challenging market downturns don’t last forever. The table below show the S & P 500 Index has typically dipped at least 10% about once a year, and 20% or more about every six years, according to data from 1950 to 2019. (The 2020 bear market fell over 30% and fully recovered to pre-crash highs in 6 months).

Its time in the market, not market timing

Every S&P 500 decline of 15% or more, from 1929 through 2019, has been followed by a recovery. The average return in the first year after each of these declines was 54%. However, investing is like buying a raffle ticket, “You must be present to win.” As the chart below shows, just being out of the market on its best days can take a toll. A hypothetical investment of $1,000 in the S&P 500 made in 2010 would have grown to more than $2,800 by the end of 2019. But if an investor missed just the 10 best trading days during that period, he or she would have ended up with 33% less.

Diversification matters

“Don’t put all your eggs in one basket.” You heard that before. The inference is to diversify your investments. Diversification can help lower volatility and help to reduce some of the stress of down markets. A diversified portfolio doesn’t guarantee profits or provide assurances that investments won’t decrease in value, but it does help lower risk. As the chart below shows, investment asset class performance can swing from first-to-worst, and vice versa from year to year. How you diversify best is to be clear on your risk tolerance, time horizon, income needs and other investment parameters and constraints unique to you.

You can control your emotions with your investments. The that end, I hope these considerations help.

How to Plan for Early Retirement

April 20, 2021 by John Gardner Leave a Comment

Why are some people able to retire long before they turn 65, while others struggle to put enough money away? Contrary to popular belief, it doesn’t all come down to income. Early retirement is a mindset, too. In this month’s Investor’s Edge column, I want to encourage you to begin the planning process now, with a clear vision of your life once you have forty extra hours per week to fill. If you are already on-track, great! Hopefully, this will still be helpful.

Below I provide an “Early Retirement Checklist”. This list should be a good guide whether you plan to retire early, at a “normal” retirement age, or choose to work longer and retire later in life. These critical considerations will help prepare you for an early retirement and your retirement years a success regardless of when you stop working.

EARLY RETIREMENT CHECKLIST

Proper prior planning for retirement includes answering these questions:

1. Do you have a pension? Know if it is a forced annuity or is a lump sum distribution a choice.

2. Do you have a company sponsored retirement plan or an IRA? Maximize contributions to both. Over 50? Make Catch-Up Contribution!

3. When will you take Social Security? 6% compounding tax free from 66 to 70.

4. Will you downsize your home? Relocate?

5. How much do you expect to spend each month in retirement?

6. How will you continue to invest during your retirement?

7. Are you ready? What will you do?

8. Is your spouse ready? What will he/she do?

9. Will you stay in the same state?

10. Will you move in with family?

11. Do you have health insurance? Long-Term Care?

12. Do have an Estate Plan? Who are your Beneficiaries?

There seems to be a never-ending flow of new, often conflicting information addressing retirement planning. Many accepted standards for what percentage of our income you need to save to retire comfortably seem to change from year to year. So many opinions and do’s and don’ts can cause uncertainty and doubt. This lack of clarity causes most people to stress out, shut down, and do nothing rather than risk taking the “wrong” action. DON’T LET THIS BE YOU! Approach your retirement as a numbers game. Know the answers to these questions. They are not right or wrong. The answers (numbers) are yours.

**How much income will I need in retirement?

**How much money will I need to save for retirement?

**When can I retire?

**Will I outlive my money in retirement?

**Do I want to preserve my retirement savings for my estate or spend it in retirement?

Know yourself…. How much income you will need in retirement is unique to you. Most common wisdom today is 70-80% of your current income needs will be needed in retirement. Could be more for you. Could be less. Start with a simple budget. It is the only way you can really know.

I can help. Two common tools I give folks to help plan for retirement, especially early retirement, are my Blackhawk Wealth Advisors Budget Worksheet and my RACE planner. RACE (Retirement Analysis & Cashflow Evaluation) answers those tough, need-to-know retirement planning questions. These are free. Let me know if you would like either, or both. I am always happy to help.

John Gardner, CFP^®, CPM^®

jg@blackhawkwealthadvisors.com

blackhawkwealthadvisors.com

888-985-PLAN

Review or Renew Your Financial Plan

March 13, 2021 by John Gardner Leave a Comment

An annual financial plan allows you to determine your financial situation at a given moment. Now is a great time to get this done for 2021. It should include looking at all your assets and liabilities, deciding what your goals are, and what methods you will use to achieve them. Call it your financial roadmap for the year ahead. This will serve you as a simple visual guide to help you remember your financial priorities this year. Consider it a short-term steppingstone on the way to your long-term financial goals. It is designed to help you maximize your money by prioritizing short-term goals with longer-term goals in mind.

With your annual – 2021 – financial plan mapped out, you will see at a glance all your assets and liabilities. All your expected income, what’s in your savings and checking accounts, how much you have in retirement savings, and your liabilities. The liabilities column of your ledger should list your outstanding debt (mortgage and car loans, credit cards, and other personal debts). That should sum up your monthly expenses (out-go). This snapshot should also factor in what your goals are and what you’ll need to do to get there. This can include things such as retirement planning, education cost saving, tax planning, and investment strategies.

Here is a five-step checklist to mapping out your financial plan for the new year.

● 1 Know what you are saving for

It is important to be clear on your “why?” Your plan is YOUR plan. So, think about what your financial goals are, and why. For example, my wife and I are planning for new windows. We recently moved into a new home (new home for us, but an old house!). Our why is simple. It is too cold in our house!

● 2 Make sure your saving goals are smart and realistic

By smart, I mean choose your savings instruments wisely. In the last year, you could have saved in a bank CD or U.S. Treasury bond and earned less than 1%. Though there is certainly more risk with stock market investments, a simple S&P 500 index fund would have given you about a 16% gain. Realistic? Make sure your short and long-term goals are. Maybe a 2021 financial goal for you and your family is a new SUV. Be honest with what you can afford. Given your income and expense awareness, be realistic about an SUV purchase that is prudent for you. Maybe it is a Ford and not a Bentley. Again, be smart. With interest rates at near all-time lows, you should be able to buy that car at a great low rate. Don’t settle for a high-cost loan.

● 3 Find ways to reduce your expenses

It starts with knowing where your money is going. For most of us, seeing where our money comes in from is easy. But as we go about our daily lives it is typically less clear where the money goes. And, by month’s end we may say, “Where did it all go!?” By being aware of your spending habits, you can more easily note what your expenses are and where your money is going. I surprised my wife when I pointed out that between us, we were spending nearly $4,000 a year at Starbucks. Were. She quickly started making us our morning cup at home. A quick and easy way to reduce expenses.

● 4 Create a budget

I offer the “Blackhawk Wealth Advisors Budget Worksheet”. This is certainly nothing new and revolutionary. To the contrary, it is simply a sheet which lays out all your potential expenses to help assess where your money in going. As it does not pretend to be exhaustive in terms of all possible fixed or variable expenses you may have, it is at least a good start. Let me know if you would like a free copy.

● 5 Pay yourself first

This is a personal finance strategy of increased and consistent savings and investment towards your financial goals. This old advice helps you make sure that enough income is first saved or invested discretionary purchases are made. Here’s perspective on the real cost of that new car you may be yearning for. Consider you are thinking about a new car requiring $6,000 down and a $600 monthly payment for 72 months. You spent $49,200 (not including taxes, fees, insurance, and other new car costs). Chances are that car is worth very little in six years. If instead, you invested that money, and assuming an 8% annual rate of return, you would have $64,250 in six years. Maybe now your old car doesn’t look so bad….

Some more keys to making this planning task work. Be flexible. You just never know life’s unknowns. Update your map on a regular basis. And, have FUN with it. I hope this helps. Call me anytime with questions, John at 888-985-PLAN.

Happy investing!

John J. Gardner, CFP®, CPM®

BLACKHAWKWEALTHADVISORS.COM

Market Mania Momentum

February 20, 2021 by John Gardner Leave a Comment

Momentum is defined by Websters as: “strength or force gained by motion or by a series of events.” There is certainly momentum in the stock market now. I’ll get to mania below….

Where is the market now and how did it get here?? The simple answer is the stock market it at record highs because there are more buyers than sellers. Simple is not always better. Yes, the U.S. major stock market indexes are at the highest in history (as of today, February 19, 2021), but a better answer to how it got here is much more insightful than “more buyers than sellers”. Sure, the basic law of supply and demand determines price. But it is the factors driving demand for stocks over the last near-year that explain the higher price momentum and has fueled what some say is a stock market mania now. Okay, time for a reminder on “mania”. Oxford Languages defines mania as “an excessive enthusiasm or desire; an obsession.” What the world witnessed in GameStop stock recently is an excellent example. There are many examples besides GameStop. Speculation in cryptocurrencies, EV’s, marijuana, clean energy and other headline-grabbing “disrupters” are making mania-like moves.

In this month’s Investor’s Edge column, I want to shed a bright light (think of a yellow traffic signal light) on the stock market’s level today, the catalysts that got it here and what you as an investor should consider. So, with signs of a market mania and what is realistically unsustainable price momentum in many stocks, I think is helpful to understand the major factors fueling a seemingly insatiable appetite for quick, short-term profits. What you should consider for your own benefit will be discussed below.

There are numerous factors that have led to mania investing in high-risk segments of the stock market (as I noted above). Here are a few I think have fed the frenzy the most. What has been happening in the stock market has been extraordinary. Looking back over my near 37-year career as an investment advisor, only the 1999/2000 climactic run-up in the market resembles the market now.

* * SPACS – These are the new IPO’s. SPAC’s (Special Purpose Acquisition Corporations) are created and issued to public investors by their “promotors”. In my experience, anytime investments are promoted they rarely end well. SPAC’s have had incredible growth. Last year the number of new SPAC issues was 4 times 2019’s offerings – and that was the previous high. The $70 billion raised by SPAC’s last year was 5 times the 2019 amount.

* * Social Media – Reddit and “subreddit” WallStreetBets, Twitter and message boards throughout the internet have had a massive impact on specific stocks. The likes of Reddit and Robinhood’s trading platform have made stock speculation a cultural phenomenon.

* * Margin – Investment leverage is achieved through investing borrowed money. This is called margin. Like other aggressive investment techniques, margin investing adds another element of risk. Sure, margin trading can result in higher profit potential than traditional investing. Investors use of margin has soared in recent months.

* * Options – Stock options, especially buying “call” options, have seen volumes explode to the upside recently. This is a classic sign of stock speculators gambling on specific stocks going up. Buying options is another form of stock leverage and usually best used by investment professionals. In the last 9 months, they have been used my many million relatively new investors. Like all gambling, option trading is a zero-sum game. The few winners win what the many losers lose.

* * Short Squeezes – While generally reserved for experienced investors, short selling in some stocks has back-fired. Short selling stock basically involves selling borrowed stock. The short seller hopes to sell the borrowed stock at a high price and then buy it back lower later to return the shares to the lender. If, instead, the borrowed stock goes up, the short seller then is likely to buy the stock back quickly to minimize the loss of paying more than it was sold for initially. A short squeeze is an attack on short sellers and occurs when great demand all at once to buy a specific stock forces the short seller to buy the stock to “cover his shorts”. This was at the epicenter of the GameStop stock craze.

All the above, and more, have led to the…

* * FOMO – Fear of missing out is at full force during a mania. Too many people know too many people making too much “easy” money. It is the great human condition, emotional. This speaks to the psychology of investing and is typical of investor behavior. Fight it! Avoid the temptation.

Now, what might you do. First, have an investment plan. Secondly, stick to it. As a SCUBA diver, I respect the mantra, “Plan your dive, and dive your plan.” All investors should plan their investments and invest with their plan. Yes, the FOMO feeling is hard to resist. But if your long-term, reasonable risk investment plan doesn’t allow for speculation – then don’t do it. Investing and gambling are quite different. You know that. And remember, the stock market is not a casino. Also remember, “what goes up, must come down”. After a remarkable advance since last April, the stock market at some time will go down. Before that happens, ask yourself how you feel if the value of your stock investments dropped 25 or 30 or 40 percent. What would you do? Know those answers before it happens. The opposite of FOMO is GMON (Get Me Out Now). Avoid reacting emotionally to a falling market. Have an exit strategy in your plan.

I hope this helps make some sense of what appears to be a market mania and more importantly, what you might do now.

Invest wisely!

Happy New Year!

January 19, 2021 by John Gardner Leave a Comment

As I am, you are also likely looking forward to the new year… so long 2020 with your horrible global pandemic, seemingly endless politics and deadly social unrest. Hello 2021! The spirit of 2021 was quickly turning cheery as I wrote this month’s Investor’s Edge column near year end. Coronavirus vaccine daily delivery began worldwide by the tens-of-millions and Congress was just days away from a second 2020 emergency Covid Relief package. This is sure to help people in need, offer assistance to businesses and provide overall economic stimulus.

With the new year comes an old tradition – my annual investment market and economic outlook. Last month I shared my expectations for the U.S. stock market and economy. This month I offer my international outlook.

2021 GLOBAL MARKET OUTLOOK

2020 was both a surprise (in more ways than one!) and not a surprise. As I wrote in my 2020 OUTLOOK, the world markets would be “resilient amongst uncertainty.” Looking forward, the global economies are in the early post-recession recovery phase of the cycle, which implies an extended period of low-inflation, low-interest rate growth that favors stocks over bonds. One of the biggest surprises of last year is that global equities, from late November, gained around 14% since the beginning of the year—an outcome few would have predicted or expected during a global pandemic. With the U.S. election behind us and effective vaccine deliveries on the way, bullish investors pushed the S&P 500 Index to record highs into year’s end. In last month’s column highlighting my 2021 U.S. Outlook, I offered a moderately bullish stock market forecast. I expect investors will experience “Less stress and more fun in 2021.” This prediction is based on my view that stock supporting catalysts remain. Generally, interest rates are likely to remain near all-time lows as the Federal Reserve has recently reiterated its near zero interest rate policy. Consumer confidence is likely to improve. Retail sales, especially via e-commerce, are strong, corporate earnings are rising and investor sentiment is high as the TINA effect (There Is No Alternative) prevails.

Foreign focus in 2021 should be on emerging markets (EM). From an international equity allocation point of view, I recommend an overweight position to EM stocks. I see them as principal beneficiaries of a vaccine-led global economic upswing in 2021. Other positives I think will benefit EM stocks are a likely flat to weaker U.S. dollar and a more stable trade policy under the Biden administration. Secondly, I expect strong stock gains from Asian country stocks (excluding Japan). Asia ex-Japan countries have effectively contained the virus – and are further ahead in the economic restart. I expect the region’s tech orientation allowing it to benefit from structural growth trends. A surprise stock market move may come from European equities. However, I see unique risks in Europe that may stifle stock gains. The Eurozone has relatively high exposure to financials pressured by low rates. It also faces structural growth challenges, even given potential for catch-up growth in a vaccine-led market and economic revival. Germany, France, Italy, Spain and the UK are all embarking on new nationwide lockdowns. Their recoveries in 2021 will likely be boosted by the huge monetary and fiscal stimulus policies adopted by their central banks governments.

Overall, these are my asset class implications for 2021:

Equities should outperform bonds.
Long-term bond yields should rise, though with steeper yield curves likely limited by continued low inflation and central banks remaining on hold.
The U.S. dollar will likely weaken given its countercyclical nature.
International stocks to outperform given their more cyclical nature and relative valuation advantage over U.S. stocks. Overweight EM.
The rotation to value stocks continues but they do not outperform the growth class.

Global Economy in 2021

The consensus forecast for global economic growth for 2021 is 5.4%. I expect more. Following a steep decline in early 2020, the world economy enjoyed a sharp rebound that began in May and remains on track to surpass pre-pandemic GDP levels by the end of 2021. This sets the stage for strong post-recovery growth this year. Emerging markets, notably China and India, along with the re-opening of Europe, leads me to expect a macro global economic growth outlook that exceeds consensus. I am less bullish on Europe in 2021. After declining by 3.8% and 11.8% in the first and second quarters of 2020, the Eurozone’s real GDP rebounded strongly by 12.7% in the July to September quarter, making up about half of the contraction in the first half of the year. In summary, a global GDP growth rate of 6% or higher is my prediction.

Whether global investments appreciate greatly or economies rebound strongly, my hope for 2021 is the world’s population has a healthy, virus-free year!

Call me anytime. I am always happy to help. 888.985.PLAN

Happy New Year!