The stock market just finished a wild week, punctuated by an 830-point drop in the Dow Jones Industrials average on Wednesday. Here's what you need to know.

The volatility was triggered largely by the Federal Reserve's ongoing interest-rate hikes. Investors fear that rising rates will hurt companies' earnings in a few different ways. When consumers with variable loans must pay more interest on the loans, they have less money to spend on new goods and services. That can translate into lower sales for companies that provide everything from cars to computers. Companies are impacted directly because higher interest rates make it more expensive for them to borrow money or refinance old debt. Revenue that would have dropped to their bottom-line profits instead must be diverted to pay that extra interest.

Rising rates are bad for bond investors too. That's because the issuance of new bonds at the higher rates decrease the value of the old, lower-interest bonds investors may already own. As those longer-term bonds fall in value, investors who sell their holdings before they mature will have to eat a loss. If for example you own 10-year bonds paying 5%, and rates go to 7%, you'll lose 10% of the market value of that investment unless, of course, you hold it to maturity.

Rising rates also dampen the value of real estate because as mortgage lenders charge higher and higher rates, fewer buyers can afford to borrow.

While this rising interest rate environment will be tricky, there will continue to be opportunities for investors. But buyers will have to be more selective: Buying a broad index mutual fund or ETF largely worked as stocks rose in tandem over the past decade or so.

Certain banks, for instance, may do well as rates rise; higher long-term interest rates equate to higher profit margins on loans. And with Republicans in control in Washington, banks are less heavily regulated, which could help profits.

Rising rates could also cause more companies to merge. Mergers generally create cost savings, which boosts profits and raises stock prices.

A word of caution: There are no gimmes in Markets like the current one. Skilled, stock pickers are needed to find the diamonds in the rough. You should work with an investment advisor who is not only knowledgeable but also experienced. Remember, it's been more than 10 years since the last cycle of Federal Reserve interest rate increases ended. The countless advisors who have entered the industry since then have zero knowledge of what it's like to navigate in an environment like this.

Please don't hesitate to contact us with questions about investing and the markets.

We're in the longest bull market in history, but all good things eventually come to an end.

One of the more likely ways that the nine-plus-year bull market might end is a scenario where the Federal Reserve raises interest rates too quickly. Rapidly rising rates would make it harder for consumers to pay off variable rate debt. That pain would ripple through the economy, eventually hurting companies' sales and reversing the direction of the economy and the stock market.
However the stock market suffers a serious reversal, you can rest assured that it will happen eventually. Corrections and even bear markets are entirely normal. Research shows that corrections of at least 10% occur on average 2.27 times per year, and bear markets, where prices fall at least 20%, occur an average of .73 times per year.

Due to the age of the current bull market—more than nine years—many investors have started to think about pulling their money out of stocks at some point before the next big dip. I can't say emphatically enough that doing so is almost always a mistake.

Investors get into trouble when they believe they can "time the market"—getting in before prices rise, and getting out before prices fall. But anticipating changes in the market is extremely difficult because each up and down cycle is different. Too often, investors get out of the market too soon, only to watch it continue to rise, or they get out too late, having locked in losses. And they almost always get back into the market well after it's been rising, which means they've lost out on gains.

Market timing helps to explain why individual investors tend to badly underperform the market. For the 10 years through 2017, the average stock fund investor earned 4.8%, while the S&P 500 returned 8.50%, according to research firm Dalbar. That's a huge gap in performance.

The key to successful long-term investing isn't trying to predict when you should buy or sell. It's exercising patience and discipline. Successful investing starts with developing a diversified portfolio that is right for your personal goals, time horizon and comfort level with investment risk. Then, it's primarily a matter of letting the markets do their work. Yes, there will be short-term ups and downs. But over the long term, stocks have always gone higher, benefiting investors who are wise enough to ride them out.

Please contact us if you'd like to learn more about the keys to successful investing.

Rising interest rates are said to be the enemy of bond investors--and since we're not in an environment of rising rates, many people are wary of buying bonds at all.

However, there are good reasons to avoid going to that extreme, as I'll explain.

One reason rising interest rates are a big deal right now is that they've been so low for so long. To support the recovery after the Great Recession, the Federal Reserve lowered a key interest rate, known as the Federal Funds Rate, to near zero. It stayed there through 2015, but has gradually risen to its current 1.91%.

And the Fed has signaled its intention to continue raising interest rates. As rates climb, the value of existing bonds falls, because newly issued bonds pay higher rates. A five-year bond paying 5% is obviously less attractive than a five-year bond paying 6%. Bonds with longer maturities lose more value, because their owners are stuck with more years of getting paid the old, lower interest rate.

What's important to understand is that your bond only loses value if you choose to sell before it matures. If you hold it until maturity, you will get your principal back, assuming that the issuer is in good standing.

The reason most portfolios should include bonds, even when interest rates are rising, is that bonds play an important diversification role. Historically, in periods where stocks have fallen significantly, bonds have served as a cushion against steep losses.

To own a stock-only portfolio, devoid of bonds, would be to put all of your eggs in one basket. This doesn't mean you should stick your head in the sand in terms of the impact rising rates can have on bonds. It just means you have to make adjustments.
There are two things to consider. First, select bonds that you are comfortable holding to maturity. Don't think of your bond holdings as a piggy bank that you can break open if a need for cash arises unexpectedly. By holding to maturity, you'll earn the interest payments, or "coupon," and get your principal back unless the issuer defaults.

Second, consider investing in bonds with shorter maturities. As described above, a shorter-term bond won't lose as much value as rates rise, because they don't keep the buyer's money tied up as long.

So what percentage of your portfolio should bonds comprise? Which types of bonds, with which maturities, should you own? The answer depends on your individual situation—what your goals are, what your investing timeframe is, how comfortable you are with risk, and so on. Please feel free to give me a call if you'd like to discuss the best options for you.

You may have heard that now is a bad time to invest your money in the market. And on some level that may feel true.

Stocks are expensive, meaning there may be a correction at some point. Interest rates are rising, which could slow down the economy and impact stocks. And we're entering a trade war with China, which could also hurt the economy. Many investors have recently asked me whether they should simply wait for a stock market correction so that they can buy stocks "on sale."

My response is that the best time to be in the market is always NOW. I'm not talking about the money that you'll need in the next year or two—that should be in a safe, liquid instrument like a money-market fund or CD. I'm talking about your long-term money, the money you won't need for at least five years. Here's why that long-term cash should be put to work in the market now.

Many investors assume they'll know when to invest following a correction. But there's no starting gun when the market hits bottom. The market may keep dropping, with fear and pessimism setting in. Given that scenario, will you really have the stomach to get back in early enough?

Conversely, what if the market keeps going up for the next year or two, a scenario that is quite plausible? You'll potentially lose out on significant gains while you wait, wait, wait for that correction. It's almost impossible to gauge the stock market peak, just as it's almost impossible to get the low point right.

Finally, let's look at what many investors would consider a worst-case scenario: You get into the market now, and it crashes tomorrow. Surprisingly, history shows that you'd still come out ahead.

Let's say that you invested a lump sum in the stock market on the very last day before the massive correction began in October of 2007. You'd be back in the black in four and a half years (if you continued reinvesting dividends), after one of the worst bear markets in history.

Now, what if you had waited until that correction to invest your money—you remember, the "buying on sale" strategy. Researchers have found that between 1926 and 2016, investors who waited to invest until a correction occurred had earned just half of the market's return five years later. The lesson: Time IN the market beats TIMING the market.

If you are nervous about entering the market at this point, it's natural. One way to get in without losing sleep is to use what's know as dollar-cost averaging. This refers to putting a pre-determined portion of your cash into stocks each month. Dollar-cost averaging ensures that if there is a market crash in the near term, you will have invested at least some of your money at lower prices.

Each investor is different, both in terms of their financial goals and their ability to tolerate risk. It's important to meet regularly with a good financial advisor to make sure you're making the right decisions for your long-term financial security. Please don't hesitate to contact us if you have any questions.

The last stock market crash, in 2008, is becoming more of a distant memory every day.

Since the spring of 2009, we've been in a market that has gone increasingly higher. And in periods like last year, it did so with very few significant dips along the way. This year, however, volatility has returned. And while that doesn't mean a bear market is around the corner, market experts say it's just a matter of time.

The biggest thing investors need to be wary of, however, isn't the market. It's the experience level of those who are guiding you through it. Think about it: If your advisor is under 30, he or she has zero experience navigating through a serious market downturn. If they're under 40, it's likely they've only been through that one downturn and then a long period with the wind at their back.

Robo-advisors, too, have yet to be tested. They were all created during the current bull market, so they've benefitted from easy conditions the entire time. And if you're a DIY investor using a discount brokerage, chances are the nearly decade-long market rise has made you a little complacent.

I feel strongly about this topic, because as a two-decade veteran of the business, I've learned what it takes to succeed in different market conditions—and I know that many investors and advisors are simply unprepared.

If you might be flying through rough weather, you want a captain who is a seasoned navigator. That's almost always a human financial advisor, who should be:

• An industry veteran who has been through multiple market cycles
• A competent and ethical professional
• A true advisor, rather than a stockbroker presenting himself as an impartial guide.

BrokerCheck will give you a snapshot of a broker's employment history, regulatory actions, and investment-related licensing information, arbitrations and complaints.

The Securities and Exchange Commission's public disclosure site can provide you with background information on a financial advisor and details about the practice and what kinds of clients they typically serve. It's always best to work with an advisor who's experience in serving people that fit your financial profile.

Please contact us if you'd like to discuss how to prepare your investment portfolio for changing market conditions.