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Mitlin Financial Inc. - An SEC Registered Investment Advisor - Volatility

Active Investing

As we had learned about the inner-workings of passive investing in the previous edition, we will now focus our attention on passive management’s counterpart, active investing (active management). Under this type of investment management, managers take a more proactive approach in effort to achieve optimal returns and to outperform the market.

What is active investing and how does it work? This investment strategy uses the human touch to actively manage an investment portfolio. Managers will utilize analytical research, forecasts, as well as their own investment experience, expertise and judgment in an effort to make the best possible investment decisions regarding what securities to buy, sell or hold. Active managers tend to believe that short-term price movements are significant and that these movements can often times be predicted. They are not bound by any single index fund’s performance potential and can deploy a multitude of strategies with the goal of outperforming an investment benchmark index. Some of the strategies used by active fund managers to construct their portfolios include risk arbitrage, short positions, option writing and asset allocation.

Financial Markets and The Media

Financial Markets and The Media

 

One of the most prolific changes in the financial markets, since I started my career, has to be the onslaught of media outlets reporting on the financial markets and the speed by which information is released. Today we are inundated with financial information on a daily basis from national broadcasts that are solely dedicated to financial news 24/7, posts on social media, down to your local television and radio stations that are providing financial reports and information.

Looking back over the last thirty-plus years there has been a tremendous shift in how much and the medium by which information is shared about financial markets. In the beginning, information was primarily disseminated through a few financial institutions, brokerages houses, and the brokers that worked for them. Investors were reliant on speaking with their broker in order to obtain the most up-to-date information about what was taking place. Brokers were provided with Quotron machines that were available for them to check stock prices and tickers were used to keep on top of news for their clients. It allowed them to share the most current information with their clients on a somewhat real-time basis. The only other place to receive information regarding your portfolio would have been the nightly news or the financial newspapers the following morning.

Fast forward to current times and we have a much different world. Essentially we are bombarded by financial data and information in a 24/7 news cycle and it is broadcast live and disseminated online as it takes place. This information is no longer simply available to brokers or financial professionals, but it is readily available to everyone. The amount of information and the places by which it can be received can become somewhat overwhelming and confusing. Having this information available and the transparency is key to the success of financial markets, this is a positive, but overall it is a distraction to many.

Is this information, or the access to, it helpful or a detriment to our portfolios? People have access to financial information through many channels, including social media, 24/7. The lion’s share of this information is giving you an in the moment view of what is taking place. A trader, someone who is investing for a short term profit, may find this information very useful, actionable, and help to their performance. However, an investor who is positioned for the long term may find this information confusing and troublesome. Long term investors who subscribe to making changes to their portfolios based upon the news at the moment can have long term dramatic effects to their portfolios and reach their goals. The power of staying invested vs. timing the markets can mean the difference between a positive and negative return, as seen inJP Morgan Asset Management’s 2019 Retirement Guide.

Perfromance Chart

Think about it, does it really behoove an investor with a long term time horizon to make major portfolio changes based upon interest rate changes at the moment or if GDP is higher or lower than expected? Making changes for the long term, based upon short term events is really counterproductive to the investment process.

The keys to being a successful investor over time have not changed much, build an asset allocation strategy and take on the amount of risk you are comfortable with, know what your goals and time horizon are, and build a strategy that will work towards this. The newest key is to either turn off the barrage of financial information or listen and filter it with the fact that you are a long term investor and not a short term trader. Long term investors that act as traders are typically not successful in reaching their goals.

Due to the plethora of financial information available, having a financial advisor that is a fiduciary will be a huge help too. They will be able to help you stay on track if you are tempted to deviate from your plan based upon something you heard on television or read on social media. Many advisors are a tremendous help to their clients during volatile times where the news media tends to take advantage. They get investors quite agitated and to a point, they feel like doing something, and this is where a good adviser can earn their stripes and put things in perspective.    

The news media, social media, and all financial outlets can be convincing. They are in the business of entertaining and keeping you glued to their programs and they are not concerned about your portfolios. Do not be swayed by what you are reading and hearing and be sure to build a solid plan. Feel free to give us a call, Mitlin Financial, at (844) 4-MITLIN x12 to schedule a time if you are feeling overwhelmed by what you are reading, listening to and watching so we can help put it all in perspective for you. Be sure to share this article with friends, family and business acquaintances who might be experiencing this too. We look forward to helping you, and them, get on the right path and stay there.

This article represents the opinion of Mitlin Financial Inc. It should not be construed as providing investment, legal and/or tax advice.

Mitlin Minute: Market Update October 11, 2018

In this edition of Mitlin Minute we discuss the recent market selloff and what you should be thinking about and how to appraoch the recent events.

These are times where it is important that your advisor is communicating with you.   Be sure to share this Mitlin Minute with your network.  They can feel free to contact us if they are not hearing from their advisor for a free no obligation consultaion.  Many times minor adjustments can lead to major improvements.

 Disclaimer: This article represents the opinion of Mitlin Financial Inc. It should not be construed as providing investment, legal and/or tax advice.

Mitlin Minute: Market Volatility- Are your emotions on the same up’s ⬆️ and down’s ⬇️ as the current markets?

In this edition of Mitlin Minute we discuss Market Volatility- Are your emotions on the same up’s ⬆️ and down’s ⬇️ as the current markets?

These are times where it is important that your advisor is communicating with you.  Have you heard from your advisor?  Are they communicating with you?  Do you have a plan? 

Be sure to share this Mitlin Minute with your network.  Please feel to contact us for help understanding the historical context of the market and why it’s so important to have and follow a personalized plan

Many times minor adjustments can lead to major improvements.  

 

 Disclaimer: This article represents the opinion of Mitlin Financial Inc. It should not be construed as providing investment, legal and/or tax advice.  Past performance is not indicitive of future results.

Mitlin Minute: Turkey Day Conversation

In this edition of Mitlin Minute we discuss how Mitlin Financial has communicated with their clients through this period of volatility.

These are times where it is important that your advisor is communicating with you.  Have you heard from your advisor?  Are they communicating with you?  Do you have a plan? 

Be sure to share this Mitlin Minute with your network.  They can feel free to contact us if they are not hearing from their advisor for a free no obligation consultaion. 

Many times minor adjustments can lead to major improvements. 

 

 Disclaimer: This article represents the opinion of Mitlin Financial Inc. It should not be construed as providing investment, legal and/or tax advice.

Mitlin Minute: We Are All In This Together

A special edition of Mitlin Minute discussing the current events of the market and the fact that we are all in this together.

We talk about the recent volatility and the importance of remaining calm.

Be sure to listen and feel free to contact us at (631) 952-4466 x11 if we can be of any assistance.

 Disclaimer: This article represents the opinion of Mitlin Financial Inc. It should not be construed as providing investment, legal and/or tax advice.  Past performance is not indicative of future results.

Stay the Course, What Does That Mean?

Roadmap

Volatility has been consistent throughout the COVID-19 pandemic. One other constant I have heard is, stay the course. Staying the course during an event like this may very well be the right advice, but I think there is another variable that needs to be looked at to help confirm that this is the right choice. Reviewing how the volatility has affected your plan is an additional component that needs to be reviewed. The plan is paramount in deciding to stay or abandon the course.

Investors mistake making buy/sell decisions for their investments with having a plan for their financial future that will dictate how the investments should be handled. This may seem like semantics, but it is not and there are definitive differences in the way you look at your portfolio and judge when to stay or change your course.

This reminds me of a quote by John F. Kennedy, “The time to repair the roof is when the sun is shining.”. This rings true with your investments and too. Typically, volatile times do not present an ideal time to change or amend your investment strategy or financial plan, you want to address these items when the sun is shining.

You should have a plan in place for your financial future. This plan will act as a roadmap, a guiding light to help you make decisions about your financial life including your investments. Investments are simply one component of your financial plan. The plan will help you make the decisions you need to reach the goals you are aiming towards. Whether you have a plan in place or not, now is the time to look at it or get one in place. This will ultimately provide you with the assurance of staying the course or the suggestion that you should consider adjusting your overall plan

Staying the course, without knowing what the course is, is simply looking at your investments and making an educated guess on where you believe asset prices will be soon. Making decisions based simply on market prices, and not your plan, can cause you to make a bad or wrong short-term decision that can harm you in the long-term.

To effectively determine if and adjustment needs to be made to your portfolio, you want to evaluate market fluctuations in terms of your financial plan and whether your plan is on or off track. This is what will indicate if the fluctuations have caused your plan to veer off course. Making decisions simply about your investments is like driving to a far destination, getting off the highway, and taking local roads the rest of the way because there was a small traffic jam. This may help you avoid five minutes of traffic but will add hours to your trip.

In my work with clients over the last 20 plus years, I have come to realize that most people are not concerned about the change in the value of their portfolios when markets fluctuate, and they see market declines. They are nervous about what it may mean to their overall financial plan and their ability to reach their goals and dreams. Essentially it is not the loss of the money, but what the money will ultimately be able to “buy” them. To be able to evaluate the impact the market fluctuation has on their ability to reach their goals, clients would need to have a financial plan. This would provide them with a clear view of how they will be impacted in both the short and long term.

We would be happy to discuss the recent volatility and how it may be having an impact on your plan. We can also help you get a plan in place so the next time volatility arises you will be prepared. Just contact us, Mitlin Financial, at (844) 4-MITLIN x12 to schedule a time for this review. Be sure to share this article with friends, family, and business acquaintances who might be interested too. We look forward to helping you, and them, get on the right path and stay there.

This article represents the opinion of Mitlin Financial Inc. It should not be construed as providing investment, legal and/or tax advice.

What is a Bear Market?

 

Bear Market

One little known fact is how a bear market received its name. A bear, when attacked or going after its prey, will use its paw and motion downward to defend itself or get its prey.

Bear markets are a fact of life and one part of an overall market cycle. It has been over ten years since we have seen a bear market and due to recent volatility, it has come into the conversation. I am sure you have heard this term as well, but do you know what it means?

The technical definition of a bear market is where the markets have declined 20% or more from their recent highs. Should markets fall 20% or more in a few days it may not indicate a bear market. Certainly, if the markets decline, in total, 20 % or more over time and it is believed it will continue and not rebound it would be considered a bear market.

Bear markets are usually accompanied by an economic slowdown and rising unemployment. A bear market is usually indicative of an economy that is experiencing a lull which means corporate profits will experience a decline, spending will as well and layoffs will occur too. This is a natural part of the economic cycle and one you need to prepare for as part of your overall financial plan.

This part of the economic cycle is not one to be afraid and should be embraced. Bear markets do not mean all companies and all industries are being impacted negatively. There will be companies that will be well prepared to sustain themselves during an economic slowdown or bear market. It may mean a slight shift in your investment philosophy during these times. Also, for those with a long-term time horizon, the decline experienced during a bear market could present a tremendous opportunity to buy great companies at a significant discount.

Your financial plan must incorporate strategies on building portfolios that will endure in both bull and bear markets. I would also suggest stress testing your retirement plan against a bear market. Retiring during or shortly before a bear market can have an overall impact on your retirement plan. Testing this in advance of your retirement will help prepare you for retiring in this type of environment. This was most recently experienced by those who were retiring during the 2007-2009 bear markets.

We would be happy to discuss a bear market and how the Mitlin process helps you prepare for one. Bear markets are a natural part of an overall economic cycle and should not be ignored. It also does not necessarily mean all companies are set for a decline; it also presents opportunities. Just contact us, Mitlin Financial, at (844) 4-MITLIN x12 to schedule a time to discuss bear markets and your portfolio. Be sure to share this article with friends, family, and business acquaintances who might be interested too. We look forward to helping you, and them, get on the right path and stay there.

This article represents the opinion of Mitlin Financial Inc. It should not be construed as providing investment, legal and/or tax advice.

When Volatility Strikes, Whats Your Plan?

Planning Photo

Investing is not something you can simply do in a vacuum and the goals of your portfolio should be tied to an overall financial plan. Overall, markets have been on the rise for the last ten years plus, but there certainly have been some hiccups along the way including the most recent effects of the pandemic.

Looking back in history, there are always events, incidents, political unrest, and other things that would make a good case for not investing. In many cases, these events tend to cause short term fluctuations and do not last forever. Depending on where you stand in terms of time horizon, these fluctuations could present an opportunity that may not be seen again or could be a tremendous stress.

Ideally you want to begin your investment process with an overall financial plan. This will provide you with the guidance needed to see if you are on or off track when markets take a change for the worse. Realistically we do not believe our investments will always go up, but at the same time there is a level of concern when they do not. Much of the anxiety we feel when our investments decline is not the loss of the money itself, but the fact of what those funds will buy us. Meaning, will our future goals be impacted by this decline in assets? Will we need to delay or adjust our retirement? This is where the plan comes in handy to provide you with a gauge to see if the market fluctuations could impede our goals.

Making adjustments is something that needs to be addressed with your portfolio on an ongoing basis, as we are all in a constant state of change. Events that take place may require you to make a change to your investments and others may allow you to keep things the same. Evaluating the changes to the markets and their impact on your overall plan is paramount and may be the driver to making adjustments that could lead to your success or failure in reaching your goals.

You must have an open line of communication with your wealth advisor as these events take place. As we have seen over the past ten plus years, many events that have taken place have not had a major impact on the overall success of the market. There have been significant short-term fluctuations at times, for example, the last quarter of 2018, but nothing that has lasted all that long or caused too much concern until the recent pandemic. The economic event we have been currently living through is unique in the fact that it is a health event causing an economic one. Anxiety is at an unusually high level because people are not only concerned about reaching their financial goals, but maintaining their health too.

Hindsight is always 2020, no pun intended. I look back over the years that I have been an advisor and recall several instances where clients were so concerned with short term events that they made rash and costly decisions. It is always wise to heed caution during a volatile incident, but you also want to make sure that it does not force you to do something that will sacrifice your long-term performance.

Flexibility and making adjustments over time are extremely important. You should make sure that your portfolio is an accurate representation of your time horizon, risk tolerance, and financial plan. When you know that this is true, this should help you feel more comfortable when markets adjust. It is those people that have not aligned their portfolio with these factors that may be in for a surprise. In cases like this, it may make sense to make some adjustments more quickly if your comfort level has gone out of range.

Many investors in recent years have made adjustments to the amount of equities they have versus bonds, simply because they have not been able to get the yield they need or expect from the bond market. This is a prime example of making an adjustment based upon market conditions and/or events. Many of these same people will most likely return a greater percentage of their investment assets to bonds when we see interest rates on bonds return to levels we saw in years past.

Developing and maintaining a financial plan and having your investments represent these goals will dictate if and when adjustments should be made to your portfolio. It all starts with having the proper risk, asset allocation in your portfolio, and plan for your future. I would be happy to discuss your situation regarding the asset allocation, risk profile of your portfolio, and overall plan.

Just contact us, Mitlin Financial, at (844) 4-MITLIN x12 to schedule a time for this review. Be sure to share this article with friends, family, and business acquaintances who might be interested too. We look forward to helping you, and them, get on the right path and stay there.

This article represents the opinion of Mitlin Financial Inc. It should not be construed as providing investment, legal and/or tax advice.