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Slick TV ads often make financial planning and wealth management sound simple, but it’s usually not. Managing wealth requires knowing a lot about highly technical topics, like taxes, government regulations, and finance as well as history, psychology and how to communicate with loved ones about sensitive issues. This article highlights some of the knowledge needed to manage wealth and why it’s often so daunting without the help of an independent personal financial advisor who is familiar with your situation.
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Understanding The Federal Reserve Mandate To End Inflation
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Fed Governor Kugler Details Inflation And Economic Outlook
The 12-month inflation rate, as measured by the personal consumption expenditures (PCE) index, was 2.6% in December, down from its peak of 7.1% in June 2022, and the six-month rate for PCE inflation was even lower, at 2%, which is the target rate set by the Federal Reserve.
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Why Rates May Not Be Cut Until June
The cost of a loan to buy a home, car, college education, and achieve the American Dream is staying the same for now. As expected, Federal Reserve Chairman Jerome Powell said the central bank did not lower loan rates following the Fed’s Wednesday, Jan. 31, 2024, policy meeting.
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Practical Suggestions For Achieving Your 2024 Resolutions
New Year’s resolutions usually fail because they‘re often too hard to achieve. After six months, only 10% of people who make resolutions achieve them or remain committed to them, , according to a study by Dr. Mark Griffiths, a Chartered Psychologist and Distinguished Professor of Behavioral Addiction at the Nottingham Trent University. What can you do to make financial, medical, or other personal resolutions more likely to be achieved?
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A Sign Of Progress In Solving U.S. Economic Problems
The Federal Reserve appears to be pulling off a feat most experts did not believe it could: ending its aggressive inflation-fighting campaign of 11 interest rate hikes without tipping the U.S. economy into a recession.
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Fed Keeps Rates Unchanged; Expects Easing In 2024
To promote transparency and free markets, the Federal Reserve System began publishing the opinions of the 19 U.S. central bankers that decide interest rate policy.
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Have You Logged Into Your Social Security Account?
Have you logged in to your Social Security account? Creating an online account at SSA.gov is an important first step in understanding your retirement income situation. However, only about 60 million of the 160 million individuals in the U.S. labor force who have Social Security accounts have created a way to access the Social Security Administration’s website.
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The Great Fake Out Of 2023 Is Poised To Extend Into 2024
All year long, the economy and stock prices have fooled experts and consumers, outperforming expectations month after month.
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Test Your Financial Planning IQ
The five questions below are a challenge meant to allow you to assess your knowledge of investing, tax and financial planning. If you have been following our news stream, this quiz draws on familiar ground. The answers are below.
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Planning Briefs
Commodities Stink But Serve A Purpose
Published Wednesday, May 2, 2018 at: 7:00 AM EDT
Commodities are supposed to buffer a portfolio from inflation, but years of low inflation have made commodities laggards in a broadly diversified portfolio. We're here to remind you why commodities still belong in a portfolio, even though they've been stinkers for years.
Over the past 20 years, in a portfolio with 12 distinct types of securities, commodities delivered just a 3.48% average annual return. Only cash was worse, at 2.09%. Meanwhile, U.S. stocks delivered an average return annually over the 20-years two or three times that of commodities. Stocks and commodities are negatively correlated. When one zigs, the other tends to zag.
Of course, for short spells commodities performed well, usually because of a rise in the price of oil. In 2014, for example, oil topped $100 a barrel before plunging in 2016 to $28, and it recently hovered at around $60. Its price made shares of commodities-related companies behave totally different from the broad U.S. stock market. For perspective, the table shows how core asset classes performed since 1970, when accurate performance statistics on an index of a commodities company shares was first tracked. The 48 years have been defined by two cycles of inflation. The first 24 years were high inflation years, while the second 24 years were characterized by low inflation.
Commodities, before adjusting for inflation, averaged an annual loss of 1.97% in the 24 low inflation years, while their "real" adjusted for inflation return, after subtracting the rate of inflation based on the Consumer Price Index, lost an average of 4.03%.
In the low-inflation time, stocks were the winners, with large stocks notching a nominal 10.8% average annual return. Even cash, at a 0.41% real return, averages a higher return than commodities.
However, in the high-inflation period, it's commodities that were the champs, gaining 15.13% after inflation - three time as much as large and small-cap U.S. stocks. Bonds and cash suffered the most, with 3% and 1.35% respectively.
No one is expecting a high inflation period like the one in the 1970s anytime soon. However, the cycle of low inflation changed in 2018, as the economy grew and signs of a tightening in the labor market began to appear. The Federal Reserve, the nation's central bank, says it expects the inflation rate to rise to 2% in the second half of 2018 and is planning on raising interest rates several times. With the risk of higher inflation growing at this point in the economic cycle, commodities remain important in a diversified portfolio, even though they have been stinkers for a long time.
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