Wednesday, January 17, 2018

Letting Profits Run

As the market continues to rise, I am very tempted to sell some of my new positions for a 20% gain or more.  After all, taking profits isn't bad to do.  And I've had gains turn into losses when I waited too long.

Recently, however, the stocks I sell have continued to go up about 80% of the time.   As a result, I've left a lot of money on the table.

So I'm going to start following the following investing rule:   Keep the winners and let profits run.  

We'll see how this works over the next few weeks.

For more on The Practice of Personal Finance, check back Wednesdays  for a new segment.

This is not financial or investing advice. Please consult a professional advisor.

Copyright © 2018 Achievement Catalyst, LLC

Saturday, January 13, 2018

Convincing Myself to Buy More Stocks

At the end of 2017, I posted that I would add funds if the market went up or if the market went down.  Well, the market went up the eight out of the nine first trading days of the year.   I didn't expect that.   I was planning on a decline, which would allow me to add funds at a lower cost basis. (For reference, I did buy some on the down day.)  Now, I will need to buy at higher prices, with the fear that the market will fall right after I buy.

After spending the last week considering my options, I have convinced myself to add funds systematically by purchasing on the dip with winning stocks and buying good stocks in beaten down sectors to mitigate the downside risk.  However, I will wait for a correction before adding significantly more funds.

Despite many arguments for the market being too high and the bull market being too long, below are my reasons that I believe the stock market will continue to rise:
  • The stock market advance indicates approval of the government's actions over the past year.  The sentiment is the economy will improve, businesses will grow, and 
  • Trump will continue to drive his pro-business, anti-regulation, and America first agenda.  wall Street and business are responding well in this environment.
Of course, interest rates could rise sharply, which would cause stocks to decline.

Finally, an Wall Street adage is " A bull market climbs a wall of worry."   And there is a lot of worry right now.

For more on Reflections and Musings, check back Saturdays for a new segment.

This is not financial or investment advice. Please consult a professional advisor.

Copyright © 2018 Achievement Catalyst, LLC

Thursday, January 04, 2018

Million Dollar Poverty

"A nickel ain't worth a dime anymore." ~ Yogi Berra

When I was growing up, a million dollars or being a millionaire was the holy grail.  I thought I would have it made if I could accumulate a million dollars.  It definitely would have been enough

Nowadays, a million dollars may not be enough according to CNBC for today's retirees.   A million dollar nest egg would yield $40,000/year using a 4% withdrawal rule.   This would last about 12 to 25 years depending on one's state of residence.   For 42 year old GenXer, the withdrawal would be $19,000/year inflation adjusted.   The articles notes for a 32 year millennial, the withdrawal would be below the poverty line, which the article characterizes as "million dollar poverty."

Given inflation and longer life expectancies, I estimate the nest egg holy grail for our kids will be at least $5 million...or even more.  

For more on Crossing Generations, check back Thursdays for a new segment.

This is not financial or retirement advice. Please consult a professional advisor.

Copyright © 2018 Achievement Catalyst, LLC

Monday, January 01, 2018

Going with the Flow in 2018

I am convinced the next couple months will be a good time to put more funds back into the market.  If the market goes up, I will buy into the advance.  If the market declines, I will buy into the dip.   If it stays flat, I will wait before buying.

My plan is to buy commission free ETFs so that I can make several buys in small quantities.  That way if my timing is off, I can use the opportunity to dollar cost average down..

Tomorrow, January 2, is the first trading day of 2018 and will be my first read of the market sentiment/direction.

For more on Strategies and Plans, check back Mondays  for a new segment.

This is not financial advice. Please consult a professional advisor.

Copyright © 2018 Achievement Catalyst, LLC

Wednesday, December 27, 2017

Last Minute Tax Items

The last week of the year is generally packed with last minute items to minimize taxes owed.  Here's what we are doing:
  • Paying property taxes due next year.   The IRS typically doesn't allow deductions of prepayment of taxes owed in future years.  However, in our state, taxes are paid a year in arrears, meaning that we pay taxes for 2016 in 2017.   Our 2017 taxes are billed in 2018.   So it is OK for us to pay the 2018 tax bill before the end of 2017 and deduct the payment on our 2017 tax return.  
  • Charitable contributions.   We're making last minute charitable contributions that will include contributions that we were planning to make next year.  Unlike taxes, charitable contributions, even those pledged for future years, are deductible in the year paid.
  • Minimize capital gains.   If needed, we will sell some stocks with losses to offset any gains we may have this year.   We probably won't do this since I already took this step earlier in the year.
  • Medical expense.   The tax law lowers the medical expense deduction to the amount exceeding 7.5% of AGI for 2017 and 2018.   The limit goes back to 10% in 2019.   Since we have already exceeded 7.5% of AGI in 2017, any additional  medical expenses will be deductible.
  • IRA contribution.  Although we have until the April 16, 2016, I like to make our IRA contributions earlier, so that I don't forget.
  • Last estimated tax payment.   If I needed to pay estimate taxes, I would make my last state payment, which is due in January 2018, in 2017 so that I could deduct it this year.
 I will need to complete most of these by this Friday, since that is the last business day of 2017.

For more on  The Practice of Personal Finance, check back Wednesdays  for a new segment.

This is not financial or tax  advice. Please consult a professional advisor.

Copyright © 2017 Achievement Catalyst, LLC

Tuesday, December 26, 2017

Maybe It's Time to Believe

"Believe in the magic..." ~ Christmas adage

The Princess Bride character Vizzini often said, "Inconceivable" for an event he didn't believe was possible. Vizzini's refusal accept the facts and believe in the "inconceivable" eventually resulted in his demise.

Donald Trump winning the election.   The economy improving and exceeding 3% GDP growth.  The stock market advancing significantly despite being in the eighth year of a bull market.  All "inconceivable" as Vizzini would say.

Maybe it's time to acknowledge the facts and invest accordingly.  

For more on Ideas You Can Use, check back Tuesdays for a new segment.

This is not financial or investment advice. Please consult a professional advisor.

Copyright © 2017 Achievement Catalyst, LLC

Sunday, December 17, 2017

Selling the News

Once tax reform passes, I expect the market to react by going down.  

Reasons:
  • Tax reform has already be priced in.   Rotations into stocks that benefit has been occurring for the past few weeks.  Investors will want to lock in these short term profits.
  • Investors will want to delay large gains until 2018.   Tax rates will be lower in 2018 which gives some incentive to take profits in January.   However, if selling drives down the price, more people will be selling to maintain profits.
  • Avoiding a government shutdown will be challenging.  Congress only has until Friday to avert a shutdown and tax reform has limited any negotiations on avoiding a shutdown.
I'm ready for and expect at least a correction over the next few months.

For more on New Beginnings, check back Sundays for a new segment.

This is not financial, investment or tax advice. Please consult a professional advisor.

Copyright © 2017 Achievement Catalyst, LLC

Wednesday, December 13, 2017

Ten Years Later - Is the Market Higher?

In Staying Calm in a Volatile Market posted on December 12, 2007, my financial advisor said, "I know the market will be higher 10 years from now."  It gave me confidence to stay invested in the market.   However, the 08/09 bear market came and was devastating.

So is the market now higher 10 years later?

The answer is yes.  On December 12, 2007, the S&P 500 closed at  1413.21. On December 12, 2017, the S&P closed at 2664.11,  87.1% higher despite the significant decline in 08/09.     So the answer is yes.

In fact, the U.S. Stock Market has recovered from every bear market and subsequently reached new highs.

So when the market declines, I am going to stay invested and add more funds to participate in the inevitable recovery.

For more on The Practice of Personal Finance, check back Wednesdays for a new segment.

This is not financial or investing advice. Please consult a professional advisor.

Copyright © 2017 Achievement Catalyst, LLC

Sunday, December 10, 2017

Our Social Security Maximization Strategy

Last week, I had a discussion with a Social Security expert and have revised our strategy for when to take Social Security benefits.   Until this call, I was analyzing option on how to maximize our total benefits received based mainly on when I started taking Social Security benefits.   The analysis showed that it was financially superior for me to start taking benefits at 62..

The expert offered a different strategy: Maximize the higher income benefit first and then maximize total benefits received.   Her point was that the higher income benefit would be the ONLY benefit if one of the couple passed away.  Therefore, it would be important to ensure the higher benefit is as close to the maximum as possible.  From her experience, the surviving spouse (often the woman) was shocked when she learned how low the survivor's benefit was because the retirement benefit was started at 62.

However, while waiting to maximize benefits, my spouse can start her Social Security benefits at 62, and thereby enabling us to collect auxiliary benefits due to minor children.  I had not considered this approach prior to consulting with the expert.

So my new strategy is to wait until 70 before starting my retirement benefits.    This will maximize our retirement benefits when one spouse passes away.  In addition, we will plan to have my spouse start her reduced benefits at 62, which will give us some Social Security income prior to me turning 70.

For more on New Beginnings, check back Sundays for a new segment.

This is not financial, retirement or Social Security advice. Please consult a professional advisor.

Copyright © 2017 Achievement Catalyst, LLC

Wednesday, December 06, 2017

Not Feeling Brilliant

"Don't confuse brains with a bull market." ~ Humphrey Neill

I'm feeling pretty good this year about the growth in our retirement accounts.   However, I realize the returns are due primarily to a great bull market, and not because I made brilliant stock picks.

So rather than put more money in the market, I've been taking a wait and see approach.  If the market continues to decline, I want to wait until there is at least a 10% correction before adding funds.   If the market resumes it's advance, I will continue to take some profits and keep the value of my holdings constant.

So for now, I will continue to wait.

For more on The Practice of Personal Finance, check back Wednesdays for a new segment.

This is not financial or investing advice. Please consult a professional advisor.

Copyright © 2017 Achievement Catalyst, LLC