Home

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.

Changing the Face of Financial Planning

 Black Financial Advisor

Over the last few weeks, the world has come to see how broken our system truly is. People of all colors have flocked to the streets to let their voices be heard, and to demand that the change starts now. This fundamental change has to come at all levels, and across all industries.

As a young black financial planner, I’ve come to realize that my industry needs a major shift of tides. Black people as a whole, make up 1.2 trillion of purchasing power yet are so underrepresented in financial services. In 2018, the CFP Board released a study that showed, out of the then, 80,000 CFPs only 1,200 of them were black. Now, why is this racial disparity here you ask? It stems from systematic issues that are so deeply ingrained in American culture. Issues such as redlining, which led to less economic activity, as well as poor funding of school systems in predominantly black neighborhoods. Historically, black people have had less opportunity, compared to their white counterparts. Which has changed the way we view money, family structure, as well as ourselves.

I believe that it’s time we change the face of the profession. America is a mosaic filled with people from all different races, and color and the financial planning industry should resemble it. Black financial planners, even though few, are a beacon of hope. We bring with us empathy for the trials and tribulations that our people face. We come with new and creative ideas that will help thrust the financial planning industry to the forefront. Then, most of all we uplift our communities. We inspire little black girls and boys to dream. To dare to be different, as well as do things they never thought they could, because they never saw someone who looks like them do it.

Where do we go from here?

To see the changes that we want in the profession I believe that we need to focus on the next generation of black planners. We must mentor the ones who are developing in the industry now so that they can survive the ups and downs of the business. Next, we must also be there and present in our communities as advocates for financial literacy. This is important because not only will it help to bridge the wealth gap in America, it will allow us to be visible and shed light on a profession that may not be known in the community. Then, we must eliminate barriers to entry, by donating to organizations such as the Association of African American Financial Advisors and the African American Diversity Scholarship through the American College, whose mission is to develop the next generation of advisors and provide them with a community to help them advance themselves and the profession.

I believe that we are at a turning point not only in our industry but, in America as a whole. It is up to every one of us, to put our best foot forward and be the change that we want to see.                                                                                               

 

                                                                                        Donation to AAAA              Donation to AmericanCollege

 

 

 

 

 

 

 

 

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

What is “Good Debt”?

Good Debt House and debt balance on the scale

 

Debt is something that is talked about frequently. There are many types of debt and they could include a mortgage, credit card, auto loans, student loans, and personal loans. This not a fully exhaustive list, but covers some of the more widely used types of debt. It is fairly common for most people to incur some type of debt over their lifetime and we want to explore whether or not “good debt” exists.

In my view, there certainly is a line of demarcation between “good debt” and “bad debt” and not all debt should be treated equally. Good debt would be debt that allows you to purchase something that over time will increase in value or be valuable over time by taking on the debt. Let’s focus on a few examples of good debt.

Obtaining a mortgage would be one of the most well-known forms of good debt. The mortgage will allow you to purchase a property or piece of real estate that you ordinarily would not be able to purchase without a loan. Most of us cannot simply pay cash for a home and a mortgage presents an opportunity for us to buy a large asset that we could not afford without and benefit from having a home, and an appreciable asset. It is important to make sure that you are not overusing leverage and taking out a mortgage that you cannot afford or one that is not the right loan for you and your family. Good debt can turn to bad debt if you have not planned appropriately for the loan amount you can afford.

A home equity loan or line of credit can be a good form of debt too. This is very similar to a mortgage and should be treated similarly. Using a home equity loan or line of credit to improve your home and its value is a good form of debt. You will want to analyze how the improvements will impact the value of the home at the cost of borrowing the money. Loans and lines of credit become troublesome when you tap into them and use the proceeds for things that will not increase in value, such as buying cars and consolidating credit card debt. You can certainly use this as a tool for these items, but you will want to be careful and be sure that you will be able to make the payments over time.

Student loans, if used properly, can be good debt as well. There are many instances where education can lead to higher-paying careers that otherwise would not be in reach. Taking on student debt for a career and pursuit of the right degree could be an excellent way to receive a better education and graduate with an opportunity to earn significantly more than you would have without it. It is important here to make sure that you are not taking on mounds of debt in order to graduate with a general degree with no path to a career with a significant income. This is where good debt can certainly turn bad and you can read about the Three Main Contributors to The Student Debt Crisis. It would be important to do a cost-benefit analysis of taking the loan versus a less expensive path to another career choice.

Debt is a financial tool that can be used for good or could be evil for your financial future. We discussed some of the more prevalent ways to use debt in a good way and we would be remiss in mentioning some of the biggest contributors to bad debt. Credit cards, auto loans, and personal loans can be some of the biggest examples of bad debt. These methods are either buying assets that have really no value or ones that will decrease in value the minute you purchase them. You should also read about the 5 Credit Card Myths Hurting Your Financial Future as this will also help you manage your debt appropriately.

Debt is something we will all need to utilize and manage at some point in our financial lives. It is key to learn how to appropriately use it and leverage good debt to your benefit. The earlier this is learned, just like many other financial concepts, the better off you will be financially. Just contact us, Mitlin Financial, at (844) 4-MITLIN x12 to schedule a time to review your own personal use of debt.

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 the Nasdaq Composite Index?

 

 Nasdaqphoto

The Nasdaq is an index that gets referred to daily on television, in the papers, and on social media. It is typically one of the main indices that people who follow the markets look to for guidance on the overall markets.   There is a good deal of discussion about this index and we wanted to take a minute and explain “What is the Nasdaq?”

The Nasdaq Composite Index, or the Nasdaq in short, tracks the more than 2500 stocks that trade in its index. This index is much bigger than its counterparts, the S&P 500 and Dow Jones Industrial Average, which track 500 and 30 companies respectively. The companies listed on the Nasdaq cover a wide range of industries, however, the largest percentage of them are technology-related. The index is composed of over 50% technology companies. One other differentiator of the tech-laden Nasdaq is from other indices is the fact that includes companies that are incorporated both within and outside of the United States.

Due to its significant weighting in technology companies, the Nasdaq is an index that is used to track this sector. The large concentration of companies in tech provides investors with a better indication of performance for that sector than many of the other benchmarks available, such as the Dow or S&P. Although this index is one of the largest, we have discussed thus far, keep in mind it still will not give you a full picture for your portfolio as a whole.

Having a diversified portfolio means having assets in many different industries, sectors, countries, and company size. This is not an exhaustive list by any means and diversification can take place in many ways and these are just a few. Keep in mind, assuming proper asset allocation, many of the assets in your portfolio will not benchmark well to the Nasdaq. The Nasdaq is not generally a benchmark that is looked at to guide investors on how the overall markets are performing, like the S&P may be relied upon by some. Its tech-heavy composition does make it a good candidate to evaluate the performance of your technology holdings, making a good benchmark for that.

Knowing the composition of your portfolio will assist you in building a benchmark(s) that would be best suited to evaluate your portfolio and how your assets are performing to the markets in general. The Nasdaq Composite is one benchmark that could be used in this evaluation, in addition to others. It is key to make sure that you are comparing this benchmark to the correct assets in your portfolio.

We would be happy to discuss your situation regarding the benchmarks being used to evaluate your portfolio and what indices would be most relevant to you. 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 the S&P 500?

SP500

 

The S&P 500 is spoken about on every media outlet you can think of from print to online. No matter where you turn you are bound to hear something about it.  There is a lot of focus placed on this index and we wanted to take a minute and explain “What is the S&P 500?”

The S&P 500, or S&P for short, tracks the 500 largest publicly-traded companies in the United States. Although this is a broader index than the DJIA it still only tracks 500 companies that are large-cap in nature. Does following the ups and downs of the S&P make sense for you, your portfolio, or the markets in general? This certainly is a better way to gauge things than looking at the Dow Jones Industrial Average, but it still does not provide any insight into how companies other than large-cap are faring. This may give you a good idea of how that portion of your assets are performing, but depending on your allocation it still will not provide a full picture. We also discussed this recently in our Mitlin Minute, What is the S&P?. This index is regarded as the best gauge of large-cap US equities available, a much better indicator than the Dow.

Hopefully, you have a diversified portfolio, and if you do there will be many assets in your portfolio that will not benchmark well against the S&P 500. Assets invested in companies that are considered small-cap, mid-cap, and international markets will not be represented well by this index. The S&P is a good indicator of how large-cap US equities are performing, but may not give a clear picture of the broader markets as a whole. When evaluating your portfolio, it is important to have appropriate benchmarks to compare your portfolio. The S&P will certainly provide a good benchmark for some of your holdings, but certainly not all of them. You may need to use several benchmarks to gauge your whole portfolio. It will be important to review the right holdings with the right benchmarks to get an accurate picture, otherwise, the data may be meaningless. As an example, you would not want to gauge a mutual fund or ETF that is made up of small companies from an emerging economy against the S&P 500. This does not provide any assistance whatsoever. It the proverbial comparison of apples vs. oranges.

Make sure you understand how your portfolio is positioned and the best ways to benchmark how your assets are performing. The S&P 500 has very little correlation with a portfolio that has a vast majority of assets not in large-cap companies and will not provide you with a good indication of how your portfolio is performing during bull or bear markets.

We would be happy to discuss your situation regarding the benchmarks being used to evaluate your portfolio and what indexes would be most relevant to you. 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.

More Articles ...

@MitlinFinancial