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The S&P 500 index, which represents some 80% of the market by valuation, is higher now, under the presidency of Joe Biden, than it was at the end of the Trump first term. The index ended the period of Trump's first stint in the Oval Office higher than it was at the end of the Obama era. And the market finished higher under Obama than it ended under George W. Bush. You get the idea: The stock market is agnostic when it comes to politics.

With that perspective, it is clear that staying invested in the market, no matter which party is in the White House, has historically been a wise decision. Throughout its 67 years, through countless political and policy changes, under five Democratic and four Republican administrations, the S&P has yielded an average annual return of 10.5%. That performance would have turned a $10,000 investment into more than $4.6 million over the lifespan of the index.

There are different ways to frame the numbers that make them look better for one party or the other. For example, the S&P's median compound annual growth rate under Republican presidents is 10.2%, compared to 9.4% under Democratic presidents. But the median annual returns over the index's existence have been 12.9% under Democratic presidents and 9.9% under Republicans.

These kinds of quibbles miss the larger point though. The best way to make money in the market is to stay invested. Remember, presidents and their policies are different from businesses and the goods and services they sell. Stocks rise or fall based on businesses' earnings performance, not the president's positions on hot-button topics.

Presidents don't control the stock market, and they have only limited control over the economy. While they can propose lowering or increasing corporate tax rates, they must work with Congress to create laws, a process that usually necessitates significant compromise. Presidents don't directly control interest rates. They can't cause or prevent pandemics or financial crises. Those are among the many reasons avoiding the stock market based on which political party controls the White House is a bad idea. History says patient investors will be rewarded, and I believe that's the case after Trump's win just as it would have been under a Harris win.

It's a fair question, and there's a straightforward answer. According to research by Vanguard, one of the country's biggest asset managers, working with a good financial advisor can earn you a 3% increase in returns on your money, and that's after paying the fee. Just to put that in context, if you earned 8% in a year on a $500,000 DIY portfolio, you'd net $40,000. Adding 3% to that result means you'd net $55,000.

According to Vanguard's "advisor alpha" research, one of the most valuable services an advisor can provide is helping clients set their emotions aside as investors. By creating a long-term financial plan with you, and reminding you as markets change of the goal you're working toward, he or she can help you avoid the impulsive buying and selling that has been proven to hurt the returns of almost every investor.

On the other hand, your advisor can push you to take action when solid opportunities arise, for example during a temporary market pullback. Bear in mind that improving your investment returns doesn't necessarily mean beating the market—an advisor can add value just by helping you avoid unnecessarily losses caused by poor decision making.

A good advisor can also help you not only create a financial plan but hold you accountable. A proper plan is very different from the kinds of often-vague goals we set for ourselves. Most notably, it includes clear, measurable time-bound goals.

Other areas where an advisor can add significant value include giving good advice on the order in which you should make withdrawals from various retirement accounts. By optimizing the withdrawal order from taxable, tax-deferred and tax-free accounts, you can minimize taxes and potentially make your money last longer.

A good advisor can also add value by guiding you to strategically place investments in accounts with different tax treatments to maximize after-tax returns. Recommending investments with lower costs can also help you maximize net returns.

Your advisor can also make sure your portfolio is rebalanced regularly to maintain an optimal mix of investments. This can reduce portfolio volatility and lower risk, as well as enforcing a disciplined "buy low, sell high" approach to investing over time.

Of course, not all advisors are the same. Seasoned advisors can provide the benefit of having navigated the market's ups and downs over the years, and having guided clients through various kinds of financial challenges. And an independent registered investment advisor who does not charge sales commissions is best positioned to provide objective, unbiased advice. If you'd like to discuss your investments and your financial goals, please reach out to us.

Rate cuts generally give the overall economy a boost. And with inflation seemingly under control, the central bank is signaling that it will decrease short-term rates by a quarter of a point at its mid-September meeting. And once the Fed starts cutting rates it typically continues. The market expects that by this time next year the central bank will have gradually cut rates by a total of two percentage points.

At inflection points in the interest-rate cycle such as this, investors who want the best returns should not just be invested in the market, but they should be looking for specific stock-market sectors that may stand to benefit from the changing environment. Four such sectors worth looking at are insurance companies, banks, real estate-related businesses and small business that had been hampered by high-rate debt.

When the Fed cuts the benchmark federal funds rate, lower rates ripple through the economy. That gives it a boost by lowering borrowing costs for consumers and businesses. In that environment, consumers spend more on big-ticket items like homes and cars, and business expand. Lower rates also tend to drive up stock prices and other asset values, creating a "wealth effect" that can make consumers confident about spending more.

While the broad economy stand to benefit, falling rates may provide the strongest tailwinds for select industries. Insurance companies, which often hold vast bond portfolios—that's where they stash all your premiums to earn interest—stand to benefit. That's because falling rates typically increase the market value of existing bond holdings with higher coupon rates. Thus, insurers stand to reap significant capital gains as rates decline.

Banks could also be winners, because falling rates generally increase demand for loans to pay for big-ticket items like cars and houses. That means more origination fees for the banks, a major source of new revenue. And of course real estate companies welcome falling rates because they spur homebuying. But real estate-adjacent businesses can also benefit—think construction material providers, home improvement retailers and even furniture and appliance businesses.

Finally, there are many promising smaller businesses that are currently saddled with higher-rate debt. As interest rates fall, those companies may be able to refinance, lowering their borrowing costs and potentially improving their financial position and profitability. Investing in smaller companies can be riskier, so it's generally a good idea to hedge your bets by owning an index rather than individual names.

The takeaway: Investment opportunities often emerge as the up-and-down interest rate cycle reaches an inflection point. We're approaching that point now. If you'd like to review your portfolio and discuss possible opportunities, don't hesitate to reach out to us.

In an environment like this, it's easy for investors to get caught up in trying to figure out how to avoid all of the risks and capture all of the opportunities. I recommend that you step back and look at the big picture. Remind yourself of the reasons you're investing and the long-term returns you need from your portfolio to retire well or achieve other big financial goals.

There are definitely enough headlines to distract you from the big picture right now. New data show that the U.S. job market has slowed significantly, and that puts pressure on the Federal Reserve to cut rates sooner and more aggressively than it had planned to. Rate cuts are like catnip for the market; they can send stocks soaring. But if the Fed waited too long, as many fear, a recession could be in the cards, making stock gains harder to achieve.

Meanwhile, the U.S. government is warning that Israel's war with Hamas could escalate into a broader Middle East war following the assassination of a Hamas leader in Iran. A war between Israel and Iran could significantly disrupt oil supplies and hurt the global economy.

And of course the presidential election campaign cycle has been a dramatic spectacle, including President Biden's disastrous debate performance in June, the assassination attempt on former President Trump and the Democrats' change from Biden to Kamala Harris as their candidate. That race, which was leaning toward Trump, now looks very tight. While the market might rise or fall in the short term based on the election results, history has shown that over time stocks are more correlated with economic performance than which party controls Washington, D.C.

When you're investing for retirement, you definitely don't want to take on too much risk. Unnecessary losses can be difficult to recover from, especially if you're near or in retirement and are taking withdrawals. But it's equally dangerous to invest too conservatively. Playing it too safe is a trap that it's easy to fall into when you're in an environment like today's. Your principal needs to grow robustly in order to outpace inflation and grow your nest egg to the point where it can be your main income source throughout retirement. Loading up on safe investments like Treasury bonds or utility stocks won't do it. Worse still is to be out of the market altogether.

It's a good idea to keep an eye on the major market indexes like the S&P 500, which is up about 90% over the past five years. If the stock portion of your portfolio is lagging the market significantly, you may be investing too conservatively. Of course, investing a portion of your principal in safer investments can be a good idea as long as that allocation is appropriate to your age, goals and investing timeline.

An experienced, qualified advisor can help you determine exactly how aggressively you should invest in order to achieve your goals. Just as importantly, they can help you maintain a long-term outlook and avoid getting too conservative or too aggressive in response to temporary events. If you'd like to review your investments, please don't hesitate to reach out to us.

More importantly, the blue-chip index's new record was a validation for investors who had kept their nerve and stayed in the market through the past few years. Think about how many market gurus were warning of recession and a bear market. As they always have, investors who are patient and who ignore scary headlines as well as euphoric ones tend to see gains in their portfolios over the long run.

And that's exactly why investors shouldn't be discouraged if the Dow and the stock market in general follow an up-and-down path for at least the next few months. It's very possible that the Dow specifically could move up and down in a range, fluctuating between, let's say, 38,000 and 40,000 without breaking out significantly above or below these levels.

The reason is that there's a lot of uncertainty now, specifically around inflation, interest rates and even the upcoming presidential election. But there's a good reason to stay invested in the market: A new bull market could start at any time. If you're on the sidelines when it begins, you could miss out on significant gains.

The 1982 bull market, for example, began after a stagnant period in the 1970s. And the 2009 bull market followed a sluggish phase after the 2008 financial crisis. Many investors missed significant portions of those rallies because they thought it wiser to stay out of the market until it was clear that sustainable gains were occurring. But correctly guessing the right times to jump in and out of the market is something that even professional investors fail at.

For instance, in 2023, 60% of all active large-cap U.S. equity funds underperformed the S&P 500 (https://www.spglobal.com/spdji/en/spiva/article/spiva-us/). The reason: Rather than just holding on to stocks, they tried to outsmart the market by buying and selling at opportune times.

Yes it can be hard to stay the course when your portfolio is stagnant or falling in the short term. But buying into the market and staying invested really does work to your advantage over time. If you had bought an S&P 500 ETF at the market high that preceded the Covid crash of 2020, you'd still be up 57% today. The gains that investors make in stocks is critical in preserving or even growing the spending power of their money over time.

Yes, there's risk in owning stocks, but it's a tradeoff for the potential of long-term reward. In the stock market, time is your friend.

If interest rates stay high, there will still be opportunities to make money in the stock market—but investors would need to evaluate their holdings and potentially make some changes.

Here's how we got here. The Federal Reserve started raising rates in in March of 2022 as it became clear that high inflation was a problem that wasn't going to solve itself. By July of 2023 short-term interest rates had gone from close to 0% to over 5%. But while inflation has slowed, it rate of consumer price increases remains at 3.5%, higher than the Fed's 2% inflation target.

Now the market's interest-rate expectations have changed: Instead of the six quarter-point rate cuts this year, the consensus is three or even less. My opinion is that there's a 60% chance we don't see any rate cuts from the Fed this year.

If that's the way things play out, here are a few things to watch for. First, I think the housing market would continue to be in a funk. The average interest rate on a 30-year mortgage is 7.5%, the highest level in two decades. That's hitting demand for buyers of existing and new homes, which is weighing on companies that provide housing materials. When interest rates are high, that's generally a sector of the market to avoid, and it's part of why the economy in general could struggle in the next few months.

Another sector that is likely to be hit hard by a higher-for-longer environment is small-cap stocks. Smaller companies need to borrow capital to grow, and higher costs of capital push their profitability lower. Meanwhile, elevated inflation usually hits consumer-discretionary industries. Americans could rein in their vacation travel, for instance, hurting companies in related businesses.

Meanwhile, I'd be very careful and selective with corporate bonds in a high-rate environment. There are a lot of debt-laden companies out there, and with higher rates, the risk of default is greater than I think the market appreciates.

Where would opportunities be found in a continuing high-rate environment? A good place to look is companies that have low levels of debt, that are increasing their sales and that have the cash to purchase distressed companies. Some of the biggest and best-know technology companies have billions of dollars of cash available, and as small companies wrestle with high-interest debt, they can virtually pick and choose the ones they want to acquire.

As always, choosing the right mix of investments depends on your goals, your timeline and your comfort level with risk. Don't hesitate to get in touch with us if you'd like to discuss your investment portfolio.

But if you're trying to achieve long-term goals like being able to retire at a reasonable age, over-aggressive investing is one of the biggest mistakes you can make. Yes, your investment portfolio might make a nice jump in the short term, but just like at a blackjack table in Las Vegas, big initial gains can blind us to the fact that big losses lie ahead. As Warren Buffett said, "The stock market is a device for transferring money from the impatient to the patient."

Successful investors invest based on the answers to three fundamental questions. None of those questions are "What's the hottest opportunity out there?" But the answers can form the basis of long-term financial success.

1. What are my investing goals? To be able to fund the important goals in your life, like retirement, education or financial freedom, you have to be able to define those goals and figure out their cost. Having that information allows you to determine how much you'll need to invest and the returns that you'll need to generate to meet your goals. And that's where time horizon comes in.

2. What is my time horizon? Time horizon refers to the length of time over which you plan to invest your money before needing to access it. The longer you have to invest, the better, because of the power of compounding. Compounding is when your returns earn returns, ultimately creating the snowball effect that prompted Einstein to call compounding "the eighth wonder of the world." The length of time your money has to compound is critical because it determines whether you'll be able to achieve your goals and how much risk you'll need to take to do so. Yes, it's true that you'll need to take risk to make money as an investor, but you should not take on more risk than you are comfortable with.

3. What is my risk tolerance? Risk tolerance refers to an investor's ability to withstand market fluctuations without panicking. Financial advisors help clients determine their risk tolerance by presenting hypothetical scenarios in which a portfolio declines. How much are you comfortable losing, on paper, during bad markets? It's important because panicky investors are tempted to pull their money out of the market at the worst time, locking in losses and sabotaging the likelihood of meeting their goals. The key to preventing that is to build a portfolio that, while still giving you the highest likelihood of a strong probability of achieving your goals, allows you to sleep at night in all market conditions.

It's critical not to approach investing as a get-rich-quick game. In almost all cases, the most successful investors are methodical, disciplined and patient. They ask the right questions and stay disciplined throughout the process. The opposite approach, cranking up the risk by chasing hot stocks or speculative stocks, can wind up seriously hampering your portfolio. It's a common reason why investors have had to push back their retirement dates, working several more years than they wanted to. And the older you are, the worse it is to have a gambler's mindset, because there's less time to recover losses.

As Nobel Prize-winning economist Paul Samuelson said: "Investing should be more like watching paint dry or watching grass grow. If you want excitement, take $800 and go to Las Vegas."

There's now a new answer to that question, and in my view it makes 529 plans a lot more attractive. Under the SECURE 2.0 Act of 2022, as much as $35,000 can be rolled from a 529 into a beneficiary's Roth IRA account. It's true that college costs continue to rise far faster than the general rate of inflation. But even so, it's not uncommon for beneficiaries to use only part of their 529 funds for college, graduate school or trade school.

They may get scholarships, may end up going to a less-expensive school than they'd planned, or might skip college altogether. However they wind up with leftover 529 funds, these beneficiaries can now use that money to jumpstart their retirement savings in a Roth IRA. By starting young, they can use the power of compounding over several decades to build a big chunk of what they'll need to retire.

Before the SECURE 2.0 Act, leftover 529 funds could be saved in case the beneficiary wound up with more education expenses, or could be transferred to a family member's 529 plan. Any other withdrawals of the money resulted in an income tax and a 10% federal tax on earnings. Now, 529-account owners or beneficiaries can roll $35,000 into a Roth IRA with the same beneficiary over their lifetime. The catch is that it has to be done in increments; the annual rollover limit is the same as the yearly IRA contribution limit. For 2024 it's $7,000. Starting at age 59 ½, principal and earnings in the Roth can be withdrawn tax-free.

Here's an example of how 529-plan money can be turned into retirement nest-egg money. Say a 529-plan beneficiary has $35,000 left if the account after completing their education. They start rolling $7,000 a year into a Roth. Assuming they earn 8% a year in the IRA, They'll have a total of $51,778.76 after five years in that account. Now let's say they're age 29 when that process ends, and that they intend to retire at age 65. That's 36 years of compounding, after which, at an 8% return, they've have $922,114.21 of tax-free retirement funds. The power of compounding over time would ensure the beneficiary winds up with nearly $1 million toward retirement.

As always, there are caveats. One big one is that the 529 account being rolled into a Roth IRA has to have been open for at least 15 years. Contributions made less than five years ago aren't eligible, and neither are their earnings. And remember that $7,000 is the total IRA contribution limit for this year, including whatever amount you move from a 529 to a Roth. So if you've contributed $2,000 to a Roth since the start of the year, your 529 rollover total for the year can only be $5,000.

The new rollover rules, and the age-old power of compounding make contributing to 529 plans a lot more attractive than they used to be. Please reach out to us if you'd like to learn more.

Between 1937 and 2022, for example, the S&P 500 index has posted an average annual return of 9.9% during presidential election years. You can rest assured that emotions will be in full swing as the November election approaches. But where your investment portfolio is concerned, it's important to be calm and rational, to minimize your risk and be ready to seize opportunities.

In presidential election years, the market volatility tends to be front-loaded into the first half of the year. That's when candidates, campaigning in the primaries, tend to make extreme policy proposals. It doesn't matter that they'd likely never become law: The point is to appeal to voters on the far ends of the political spectrum who play an outsized role in selecting presidential candidates.

By the time the general-election campaign is in swing, the rhetoric has typically calmed down a bit, and markets start to gain some traction. Opportunities to invest will present themselves throughout the year.

But first, it's important to evaluate the risk in your portfolio. That's because the large-cap stocks that carried 2023's big returns, including the big rally at the end of the year, will likely cool off.

If you've owned any of the "Magnificent 7" stocks over the past year or two—Apple, Microsoft, Alphabet, Amazon, NVIDIA, Tesla and Meta Platforms—those stocks could be seriously overweighted in your portfolio right now. And given their inflated prices, they could do a nosedive during the periods of volatility and set you back significantly.

In my view, small- and mid-cap stocks are poised to have a strong year. They were largely overlooked last year, and broadly speaking they're priced attractively. Furthermore, smaller-cap stocks tend to benefit strongly from falling interest rates, and it's widely believed that the Federal Reserve is done raising rates and will start cutting them in 2024.

As for new investments, there's plenty of opportunity, and many companies could become more efficient and profitable thanks to the widening adoption of artificial intelligence. I believe AI could spur the next growth wave of corporate profits. As always, we want to wait for an attractive price before buying any stock. In the meantime, you might want to park your cash in three-months Treasury bills, which are currently yielding an attractive 5.45%.

Don't hesitate to reach out to us if you'd like to review the risk level of your investment portfolio and identify the stocks that could power your portfolio for the coming year.

Passed in 2019 and taking effect in 2020, the SECURE Act, was aimed at boosting retirement savings—a worthy goal at a time when too few people are saving enough for their later years. But it also killed what were known as stretch IRAs, creating serious consequences for heirs. The SECURE Act didn't ban stretch IRAs for everyone; exceptions exist for spouses, minors, and some disabled individuals. But plenty of families have been affected by the law, and many more will be in the future.

Stretch IRAs, also known as multigenerational IRAs, were an estate planning strategy that allowed the original owner's beneficiaries to inherit a traditional, tax-deferred IRA and take annual required minimum distributions (RMDs) based on their own life expectancy, not the original owner's. RMDs are just what they sound like: The government wants taxes to be paid, and for taxes to be paid, withdrawals must be made. So it requires chunks of money to be withdrawn every year starting at age 73. The stretch strategy was so valuable because it prolonged the tax-deferred growth of the account, often for decades, while limiting the taxes due every year.

Now that stretch IRAs are gone, most non-spouse inheritors must withdraw the entire IRA balance within 10 years. This speeds up tax revenue for the government, but it also means bigger tax bills and less time for IRA money to grow. Adding to the tax pain for heirs is the fact that adult children are often in their peak earning years—and thus in higher tax brackets—at the time they receive an inheritance.

One way that IRA owners can help their heirs out is by converting their traditional IRA to a Roth IRA. The funds in Roth IRAs grow tax-free, and are withdrawn tax-free. Converting an IRA to a Roth does trigger a tax bill, so it's necessary to have cash available to pay it; alternatively, some opt to convert their IRA over two years, thus splitting up the tax hit. The Roth conversion strategy has proven quite popular as a fallback in the wake of the SECURE Act. That testifies to the fact that even with the tax bill, families that make use of it are likely to come out way ahead.

Please don't hesitate to get in touch with us if you'd like to learn more about transferring wealth to the next generation tax-free.