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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
The Federal Reserve System, the nation’s central bank, has a dual mandate to pursue maximum employment and maintain price stability. These two priorities are currently treated equally, but that was not always the case. In fact, the Fed’s bias toward maximizing employment was a critical driver of the stagflation that plagued the U.S. in the late 1960s and 1970s. Recognizing the need to balance price stability and maximum employment, in 1977, Congress revised the Federal Reserve Act.
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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
Developing Portfolio Return Expectations
Published Thursday, January 26, 2023 at: 8:57 AM EST
Investment success hinges largely on getting the answer right to this question: Would you accept 10% less return on stocks annually to experience 40% less volatility than stocks? If so, congratulations! You’re on your way to developing realistic investment expectations.
This article is not intended as advice but only to help permanent investors develop expectations about generating retirement income or building enduring family wealth.
This table below shows the annualized risk and returns of seven distinct assets for the 50 years ended December 31, 2022.
These seven assets were selected because, as a group, they comprise a diversified portfolio and have been indexed publicly since 1970. The red rectangle highlights the risk and return of owning a portfolio comprised of equal weightings of the seven indexes.
The data were collected by Craig Israelsen, Ph.D., who teaches portfolio management to students at Utah Valley University and to financial professionals on Advisors4Advisors.
Fifty years of risk and returns is a lot of history, and history rhymes or repeats periodically. Thus, this is a constructive way to start to set your investment return expectations over the rest of your lifetime, assuming you can adhere to a discipline.
Of the seven assets, small company stocks had the highest return, 11.07%. It also had the highest risk, as measured by standard deviation, at 21.34%.
The asset class with the best risk/reward tradeoff was large-company stocks, as measured by the Standard & Poor’s 500 stock index. The seven-asset portfolio was much more efficient and offered 90% of the return of the S&P 500 but with 40% less volatility.
If you align your expectations with data in this table, it may help you hold firm as the bear market approaches its one-year anniversary on June 13, 2023.
Indexes Used in 50-Year Performance Calculations
Data Source: Steele Mutual Fund Expert
- Large-cap US equity represented by the S&P 500 Index from 1973-2022.
- Small-cap US equity represented by the Ibbotson Small Companies Index from 1973-1978 and the Russell 2000 Index from 1979-2022.
- Non-US equity represented by the MSCI EAFE Index from 1973-2022.
- Real estate represented by the NAREIT Index from 1973-1977 and the Dow Jones US Select REIT Index from 1978-2022.
- Commodities represented by the Goldman Sachs Commodities Index (GSCI) from 1973-2022. As of February 6, 2007, the GSCI became the S&P GSCI Commodity Index.
- U.S. Aggregate Bonds represented by the Ibbotson Intermediate Term Bond Index from 1973-75 and the Bloomberg Aggregate Bond Index from 1976-2022.
- Cash represented by 3-month Treasury Bills from 1973-2022.
Nothing contained herein is to be considered a solicitation, research material, an investment recommendation, or advice of any kind, and it is subject to change without notice. Any investments or strategies referenced herein do not take into account the investment objectives, financial situation or particular needs of any specific person. Product suitability must be independently determined for each individual investor. Tax advice always depends on your particular personal situation and preferences. You should consult the appropriate financial professional regarding your specific circumstances. The material represents an assessment of financial, economic and tax law at a specific point in time and is not intended to be a forecast of future events or a guarantee of future results. Forward-looking statements are subject to certain risks and uncertainties. Actual results, performance, or achievements may differ materially from those expressed or implied. Information is based on data gathered from what we believe are reliable sources. It is not guaranteed as to accuracy, does not purport to be complete, and is not intended to be used as a primary basis for investment decisions. This article was written by a professional financial journalist for Advisor Products and is not intended as legal or investment advice.
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