Managing Expectations

This month, the U.S. stock market hit an all-time record-high of over 22,000 in the Dow Jones Industrial Average. This rise represents a 20 percent return since November 2016 and a more than 300 percent return since a low of about 6,600 in March 2009. Managing expectations, as an investor during such a strong bull market can be difficult.

Stock market investors have enjoyed a string of steady positive returns for the better part of two years now without any meaningful correction. A meaningful correction would be a pullback in the 8 percent to 10 percent range, which from the current levels would constitute a fall of about 2,000 Dow points. As shocking as that sounds, a correction or pull back of any level would be a natural occurrence in the financial markets.

The reality is financial markets do not usually march straight upward without some type of bump or hiccup that would cause it to drop and pull back for a rest. It’s normal to experience some kind of volatility or downward movement in the course of investing. Likewise, the recent stretch of market appreciation, while welcome, is not typical.

When the inevitable and natural occurrence of a market decline takes place, remember the following things to help you manage expectations through the downturn:

  • Stay diversified. Even if it doesn’t feel right, history shows that this strategy works.
  • Avoid jumping in and out of the market. It is virtually impossible to time the market.
  • Invest regularly. The potential to buy investments at discount prices can only happen if you are involved when things look bleak.
  • Market corrections, no matter how painful, are a natural part of an economic cycle.

Finally, stay in communication with your advisor as changes take place in your life or even if you just want some perspective on market movement. An important role we play in our clients’ lives is managing expectations, or being an “emotional surge protector,” when these unavoidable declines take place.

By |August 28th, 2017|Advisors, Current Affairs, Investing|

Your Investment Portfolio Pyramid

Building a strong investment portfolio is like building a pyramid. In this brief video, Certified Financial Planner™ practitioner Mike Larriva shares his reasoning for this analogy.

Your Investment Portfolio Pyramid

By |June 5th, 2017|Advisors, Investing, Video Blog|

Enter the Age of Bionic Financial Planning

bionic financial planningA recent study conducted by the Financial Planning Association and Investopedia revealed today’s investors require both high-tech and high-touch forms of advice to satisfy their increasingly complex financial needs. While investors are happy using “robo-advisors,” they’re more satisfied when using both a human advisor and an automated investing platform. In other words, bionic financial planning.

Enter the Age of Bionic Financial Planning

“The debate about whether robos or human advisors will win is moot. The future of financial advice is bionic – a powerful combination of both,” said David Siegel, CEO of Investopedia.

When asked about specific financial issues – such as estate planning, elder care and tax planning – roughly 50 percent preferred working with a financial planner/advisor and about 30 percent preferred utilizing both a personal advisor and an automated investing platform.

At Perspective Financial Services we’re proud to offer the best of both worlds, by building personal long-term relationships with our clients and providing access to a variety of automated and online tools.

Image courtesy of alex_ugalek at

Bonds Play Key Diversification Role

Jim Mailliard, CFPSo far in 2017, the U.S. economy has been showing signs of stronger economic growth ahead.

Since the presidential election, the bond market has flashed a signal of the expectation of stronger growth, higher future inflation and, thus, higher interest rates. Interest rates have soared with the yield on the 10-year U.S. Treasury bond going from 1.4 percent in June to around 2.3 percent now. Rates are still low by historical standards and will continue to bounce around; but it wouldn’t be a big surprise if the trend continues upward for a while.

Interest rates and bond values move in opposite directions; when one rises the other falls. When bond values fall, investors often wonder if they should hold on to their bond funds. The answer in most cases is yes. Discipline, patience and a willingness to diversify for the long-run are keys to investment success.

Bonds Play Key Diversification Role

Sometimes bonds get a bad rap, but they can play a key diversification role. Bonds historically have been a lot less volatile than stocks. In addition, bonds often move in the opposite direction as stocks. As a result, bonds have a calming effect on portfolio swings. Diversification does not eliminate risk, though bonds mitigate the bad times.

To put it another way, Marketwatch columnist Paul Merriman likens a portfolio to a car: Stocks are the engine, and bonds are the brakes.

Further, studies have shown that rising rates benefit investors over the long-term. Though higher rates temporarily weigh on bond prices, portfolios eventually benefit from the ability to reinvest at higher rates.

Bond funds hold perhaps hundreds of bonds, with bonds maturing pretty much all the time. Fund managers then put the cash into new bonds that pay higher yields. The income distributed to the investor eventually rises, and the investor can reinvest at higher rates – a rewarding strategy over time.

By |May 8th, 2017|Current Affairs, Investing|