Ahhhh, 13,000!

March 1, 2012

“After bouncing up and down around the 13000 level for a week, the Dow Jones Industrial Average finally closed above that psychologically important mark for the first time since May 2008.”

That’s what The Wall Street Journal says in its online edition about the February 28 market close. But is closing above 13,000 really psychologically important?

The short answer is that for the pros, no, it isn’t. They’re busy drawing conclusions from the facts hiding behind the milestone. The twin specters of U.S. recession and European debt collapse are fading. The Dow is up 22% since October and 6.4% since the beginning of 2012, the strongest rise to start the year since 1998. Will it continue?

On the plus side, there’s another bailout for Greece, rumors of a renewed Federal Reserve bond buyback should the economy show signs of weakness, declines in borrowing costs for Italy and Spain, and a 12-month high in the Conference Board’s index of consumer confidence. On the minus side, the slowing growth rate of corporate profits, fears that China’s real estate bubble will pop, rising oil prices, and the plain fact that stocks have been rising for five months and could be due for a correction.

So the answer to “Will it continue?” is, as usual, maybe.

And if 13,000 isn’t psychologically important for the pros, is it for the Main Street investor? Probably it is. Consider the five-month run-up that led to 13,000. In the past few weeks it has finally brought the Main Street investor creeping back into the market.

Here are some ways the average investor can avoid letting the psychological component override the facts: 

  • Pay attention to valuations, the most fundamental measure that moves stocks.
  • Remain focused on broadly diversified portfolios with exposure to multiple asset classes.
  • Focus on long-term goals and stay invested.
  • Avoid the “herd mentality” of jumping on the most recent investment bandwagon.

 

James Copenhaver, Director of Investment Management

 

Sources: Optimism Drives Dow Past Milestone; Main Street’s $100 Billion Stock-Market Blunder

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
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The Whole Picture

October 20, 2009

Do you have the diversification you need to keep your portfolio on track even when the stock market falters? The first step is to sit down with your financial advisor to take a closer look at your holdings to make sure your portfolio is well enough diversified to stand the test of time.

Does your investment portfolio have the diversification you need to sail smoothly through the ups and downs of the market? True diversification means more than spreading your assets around to a handful of stocks. It means putting assets into a variety of different types of investments beyond the stock market.

The younger you are the more aggressive you can be. While no strategy assures success or protects against loss, a portfolio heavily weighted in stocks might make sense for investors in their 20s and 30s. But the closer you are to retirement, the more important it is to spread some of your money to other types of investments.

Make sure you have the diversification you need to keep your portfolio on track even when the stock market falters, The first step is to sit down with your financial advisor to take a closer look at your holdings to make sure your portfolio is well enough diversified to stand the test of time.


Vacation Properties and Income – Part 2

September 14, 2009

Another way for retirees to generate income from a vacation home is to sell it. By using the federal capital gains exclusion in conjunction with the sale of your primary residence, you can potentially realize tax-free income. Here’s how it works. The basic capital gains exclusion rules state that you must have owned and used the home as your primary residence for at least two years out of the five-year period ending on the date of the sale. If you are married, the full $500,000 exclusion ($250,000 for single homeowners) is available as long as one or both of you satisfies the ownership test (two years) and you both satisfy the use test (primary residence).


Vacation Properties and Income – Part 1

September 10, 2009

If you have a vacation home, you’re already aware of the enjoyment it provides and the benefits it can offer at tax time. But you may not be aware of how vacation property can be used to generate income in retirement or how it can play into an estate plan. In fact, vacation properties offer retirees a number of different options in managing their finances and estate.
Vacation property may be used to generate income in several different ways. The first, and most obvious, is renting it. The IRS allows you to deduct mortgage interest on your primary residence and one additional property up to a limit of $1 million in combined mortgage debt for mortgages taken out after 1987. Current tax rules also allow you to rent out a second home for up to 14 days per year without having to report the rent as income. If you rent for more than 14 days, the home is considered investment property, and rent must be reported as income. Converting the property to an investment property, however, allows you to deduct rental expenses, such as insurance and utilities, if you have a net profit on the property (deductions are limited if you report a loss). You can still use an income-producing property for personal use while maintaining your tax advantages — but only for the greater of 14 days or 10 percent of the total days it is rented. Maintenance days do not count as personal-use days, but use by in-laws or other part-owners does, even if rent is charged.


Simple Truths

September 8, 2009

As a financial advising firm, one of the simple truths we have learned is that relationships are the single greatest influence on how people use their money and plan for the future. When people talk about their hopes and dreams, they talk about the people they love. Their future, the life they wish to live, is always full of the people most important to them. They don’t talk first about dollars and cents, Dow averages, or bond yields. They talk about a spouse, a parent, a child. When imagining their financial futures, even those without family often focus on others, such as employees, friends, faith communities, and charities.


Keeping Your Emotions in Check…

September 3, 2009

In times like these, with the economy in a tailspin, and the stock market in the tank, investing requires an extra dose of patience, perseverance and perspective.
It takes patience to ride out the bear market, perseverance to continue to invest even through a difficult economy, and perspective to see the long-term picture and realize that recessions and bear markets are just part of the natural economic cycle. Slumping economies and bear markets of the past have always turned around — and there is no reason to believe that this time will be any different.


Saving for College

August 31, 2009

Saving for College
Another school year is around the corner and your children or grandchildren are that much closer to college. If you haven’t already started to save for their college costs, this may be a good time to talk to your adviser about setting up a tax-sheltered college savings plan.
By planning ahead, you can use a 529 college savings plan to give your children a head start on their college costs. There are two types of 529 plans: college savings plans and prepaid tuition plans.
College savings plans are state sponsored investment accounts that allow participants to contribute regularly. A 529 plan account grows tax-deferred and withdrawals from the plan for qualified educational expenses are exempt from federal income tax. There are no income limits.