Month: December 2023

Notepad with plans for the next year and the inscription - 2024 goal, plan, action

Why are New Year’s Resolutions So Hard To Keep?

Written by Minich MacGregor Wealth Management on December 21, 2023. Posted in Articles, News, Uncategorized.

As you know, this is a time of year when many people make New Year’s resolutions. Lose weight, stop smoking, save more, learn a new skill, get more sleep, visit a new place, get finances in order, etc. You name it, chances are, someone has resolved to do it.

As financial advisors, people often come to us for help with any financial resolutions they have – or resolutions that require some change in their financial situation to achieve. But often, people come only after they have tried and failed to keep those same resolutions on their own.

This got us thinking: Why are New Year’s resolutions so hard to keep? In most cases, our resolutions are good for us. We want to do them. So why aren’t they easier?

There are many reasons for this, but one of the most important can be best explained by Aesop’s classic fable about…

The Dog and His Reflection

It happened that a Dog, after much hunger and long labor, had finally procured for himself a chunk of meat, and was carrying it home in his mouth to eat in peace. On his way home, the Dog had to cross a fallen tree trunk lying across a running brook. As he crossed, he looked down and saw his own reflection in the water beneath. Thinking it was another dog with an equally large piece of meat, he made up his mind to have that also. So, he snapped at the reflection in the water. But as he opened his mouth, his own meat slipped out, fell into the brook, and was never seen by the Dog again.

While some have interpreted this fable to be a warning against greed, we look at it a little differently. Despite being halfway to his goal – enjoying a nice meal – the Dog became distracted by a different goal, and in pursuing that, lost sight of his own.

In our experience, this happens to most of us every year. We set a goal we want to achieve, something we truly care about. But it takes time to accomplish our resolutions, and it’s very easy to get distracted by the newest, shiniest things. For example, imagine someone resolves to save $200 per week, so that they can finally take that trip to the Caribbean they’ve always dreamed of. But after doing this for three months, they see another person enjoying the latest iPhone that came out, so they decide to go for that instead. After all, the Caribbean will always be there. So, they spend all the money they’ve saved – and suddenly, they’ve sabotaged their own resolution.

This happens on a larger scale, too. we’ve seen people who dream of a retirement spent in the sun…only to go chasing shadows instead. We’ve seen people with grand plans to start their own business one day…only to spend their time watching television.

Of course, there’s nothing wrong with buying a new iPhone or relaxing in front of the TV. But to truly change our lives for the better, we must learn discipline. We must hold ourselves accountable. We must keep our eye on what’s truly important, and not be distracted by reflections.

There are several ways we can do that. Here are a few we’ve found to be especially helpful:

Be specific with your resolutions. People who set specific goals are more likely to achieve them. For example, instead of resolving to save money, resolve to save $200 per week.
Put it in writing. Write down your resolutions and post them in a place where you will see them every day. This will help remind you of what you’re working towards, so you won’t end up like the Dog in the fable.
Set realistic goals. Set goals that are within your reach, and don’t try to take on too much at once. Be mindful of your finances and schedule. Account for the fact that sometimes, you need to kick back and relax or spend money on a whim. In addition, take your time. There’s no prize for finishing first, and anyway, to quote another one of Aesop’s fables, slow and steady wins the race.
Develop a plan. This is so important. Create a timeline with steps toward your goal. Set deadlines for each and cross them off as you go. This will help you generate both the momentum and the motivation you need to continue.
Ask for help. Whether it’s with a financial professional or a life coach, if you find yourself struggling to reach your goals, don’t think you need to do it alone! Find someone who can help keep you focused and accountable.
Reward yourself. Acknowledge even the smallest of achievements. Keeping resolutions is hard work, and you should be proud of everything you accomplish!

Regardless of what you do, always remember The Dog and His Reflection. It can make all the difference.

Good luck and Happy Holidays!

Questions You Were Afraid to Ask #11

Written by Minich MacGregor Wealth Management on December 21, 2023. Posted in Uncategorized.

The only bad question is the one left unasked. That’s the premise behind many of our recent letters. Each covers a different investment-related question that many people have but are afraid to ask. In the next few messages of the series, we want to address some questions we’ve been hearing lately about recent investing trends. We’ll start with…

Questions You Were Afraid to Ask #11:
What does it mean to invest in cash?

Sometimes, an investor will see a headline that mentions the word “cash.” Here are some examples just from the last year or so:

“Cash is king again.”

“Warren Buffett sits tight on cash.”

“No more ‘cash is trash’ billionaire hedge fund manager says.”

“How much of an investment portfolio should be in cash?”

Headlines like these often bewilder new investors. But even experienced investors sometimes wonder: “What does it mean to invest in cash?” After all, we don’t usually think of the word “cash” in relation to investing. For most people, cash is the stuff you keep in your wallet. So, what gives?

This is a textbook example of an intelligent question people are often afraid to ask.

Fortunately, “investing in cash” is a fairly simple concept. It means to invest in a type of short-term security for a set period of time in exchange for one or more interest-rate payments.

Certificates of deposit (CDs), money market accounts, and treasury bills are three examples. These securities are known as “cash equivalent” investments, but the word “cash” alone is often used as an umbrella term to cover all the various types. That’s because these types of investments are very liquid. That means the funds inside them can be converted to actual cash – money you can spend at a moment’s notice – quickly and easily compared to stocks, bonds, or investment accounts like a 401(k) or IRA. (Stocks and bonds aren’t always easy to sell, and depending on the timing, you may sell for a lower amount than what you paid for. Meanwhile, withdrawing the money from an IRA or 401(k) before you retire can trigger financial penalties from the government.)

That’s why these types of securities are referred to as “investing in cash.” They still provide a return – hence the investing part – but also a level of liquidity close to actual, physical currency.

Cash investments are handy if you have money that you:

Want to keep safe. Money markets and certificates of deposit are historically stable investments and are often insured up to a certain point by the federal government.
Want to earn a return on. In the form of interest rate payments, which are generally higher than with a basic savings account.
Want easy access to within a relatively short period of time. Most money markets have a maturity of six months or less. Treasury bills mature within one year or less. CDs, meanwhile, usually have a maturity of 6 months to a few years.

That said, there are some downsides to investing in cash. For one thing, if your focus is on growing your money, there are usually much better options. That’s why many investors often shun putting too much money into cash. They feel there are more productive ways to invest. And while they are very liquid compared to other securities, there are still penalties if you withdraw the money from a CD before maturity. (Money markets don’t have an early withdrawal penalty, but many banks and credit unions will charge monthly fees if the balance falls below a certain minimum.)

With all this in mind, why have we seen so many headlines about “cash” in recent years? It all has to do with interest rates. As you probably know, the Federal Reserve has been gradually hiking rates for much of the past two years to bring down inflation. When the Fed raises rates, banks and credit unions usually follow suit. As a result, some cash investments have been paying higher interest rates than normal. This, coupled with a volatile stock market, has caused cash to gain in popularity with some investors.

How long this trend continues is impossible to know. And it’s worth emphasizing that cash, like all securities, is an investment that is sometimes right for some people in some situations…not always right for all people all the time. So, if you’re interested in cash investments, be sure to talk about it with a qualified financial professional first to make sure it’s right for you.

In the meantime, now you know what it means to “invest in cash.” In our next post, we’ll discuss another recent investing trend. Have a great month!

Our Newest CERTIFIED FINANCIAL PLANNER™

Written by Minich MacGregor Wealth Management on December 12, 2023. Posted in News, Posts, Uncategorized.

John Wooden, the legendary coach from UCLA, once said, “Success comes from knowing you did your best to become the best you are capable of becoming.”

Why are we sharing this quote with you right now? Because a valued member of our team at Minich MacGregor Wealth Management just took a huge step toward becoming the best.

Andrew Pallas just became a CERTIFIED FINANCIAL PLANNER™!

Now, there are many different credentials and designations in financial services. But earning your CFP^®, as it’s known, is a big deal. In our opinion, the CFP^® is one of the highest and most important certifications a financial advisor can earn. It is a mark that the holder has the education and expertise to help people from all walks of life be able to effectively manage their money, plan for retirement, and work toward their financial goals.

Of course, Andrew always had the talent for doing these things. Now, he also has the training.

We are so proud of what Andrew has accomplished because we know how much work it took. To become a CERTIFIED FINANCIAL PLANNER™, he had to complete demanding courses in various aspects of finance, including investing, tax planning, retirement planning, estate planning, risk management, government regulations, and more. Then, Andrew worked to pass a grueling, six-hour long test to prove what he learned. (A test that, on average, only 65% of people pass.¹) Of course, this was all on top of the thousands of hours of professional experience Andrew had to acquire first. The result is an even greater ability to serve you and our other clients!

Andrew has consistently impressed us with his desire to help clients, learn new skills, and be the best financial professional possible. We’re so lucky to have him on our team. So, please join us in congratulating Andrew on this accomplishment. And as always, please let all of us here at Minich MacGregor Wealth Management know if there is ever anything we can do for you!

¹ “Historical Stats,” CFP Board, https://www.cfp.net/-/media/files/cfp-board/cfp-certification/exam/historical-stats.pdf

Holiday Market Recap

Written by Minich MacGregor Wealth Management on December 6, 2023. Posted in Uncategorized.

Happy holidays! We wanted to drop one more update on how the markets are doing before you “settle down for a long winter’s nap.”

As you know, the markets endured some cold weather earlier in the fall. In September, the S&P dropped 4.9%.¹ The autumn chill continued in October, when the markets dropped 2.2% and even briefly dipped into correction territory.² (Defined as a drop of 10% or more from a recent peak.)

In November, however, the markets found something to be thankful for: A better-than-expected inflation report. The result was a major bounce back, with the S&P 500 climbing 8.5% for the month.³

As you know, the U.S. experienced historically high inflation for most of 2021 and 2022. Things peaked in June of 2022 when the Consumer Price Index – which measures the year-over-year price change of a wide variety of common goods and services – reached 9.1%.⁴ Since then, a combination of rising interest rates and improving supply lines gradually cooled prices down all the way to 3% this past June.⁴ (For reference, the Federal Reserve, which is tasked with keeping prices stable, aims for a 2% rate of inflation.)

Over the next three months, however, inflation crept back up to 3.7%, largely due to a rise in oil prices.⁴ This spooked the markets badly, as it worried investors that the Federal Reserve would keep raising interest rates, or at least keep them higher for longer. It also caused an influx of money into bonds. This drove up bond yields while simultaneously draining the stock market.

In October, however, inflation fell back to 3.2%.⁴ This was slightly better than expected, and it proved to be a shot of adrenaline for investors. Most analysts feel it means the Fed will not raise interest rates for the foreseeable future, as it appears inflation may already be coming back down again without the need for further rate hikes.

So, what does this all mean for us? Well, it’s undoubtedly good news, but it also signals a need for caution.

For one thing, it’s important to remember that cooling inflation does not mean that goods and services are getting cheaper. (That’s called deflation, and it can be even worse economically than inflation.) It simply means that prices are rising less and slower. Except under extraordinary circumstances, inflation is always going to be around. Low and stable inflation, the kind the Fed wants to see, is normal. As a result, though, cooling inflation tends to excite economists more than consumers, who may still feel profound sticker shock at the grocery store, the gas pump, or even when shopping online. That’s important because it can have a direct impact on consumer spending.

Spending is the lifeblood of our economy. That’s especially true around the holidays. Investors will be closely watching consumer spending as we round out the end of the year. If higher interest rates and still-higher-than-normal prices put a winter chill on holiday spending, investors may take it as a sign of an economic slowdown. That would certainly affect the markets negatively. On the other hand, if spending goes up or at least remains stable, we may see this market rally continue.

Either way, we should be prepared for more volatility in the months ahead. You see, we’re in an environment where the markets are hinging on every bit of new data and the release of every government report. In such times, investor sentiment can swing one way and then the other very rapidly. That makes the markets something like a swinging door. So, as we enter a new year, we must continue to be mindful when we step through the door…so that we never get taken by surprise or hit square in the face.

In the meantime, it’s always nice when the markets enter the holidays on an upswing. So, our advice to you? Forget all the noise and focus instead on what matters most: Spending time with family and friends. Devote more care to hanging your stockings by the chimney – our team will be here to mind everything else.

As one year draws to a close and a new one approaches, we will continue to monitor the markets carefully. If there are any changes we need to make or developments we need to inform you of, we will do so…even faster than a reindeer-driven sleigh. And, as always, please let us know if you have any questions or concerns. We may not be able to slip down a chimney to answer them, but our door is always open…and our inbox, too!

Happy holidays!

¹ ”S&P 500 dips after US inflation data, ending weak third quarter,” Reuters, https://www.reuters.com/markets/us/futures-climb-treasury-yields-ease-ahead-key-inflation-data-2023-09-29/

² “Wall St closes higher on eve of Fed decision,” Reuters, https://www.reuters.com/markets/us/futures-mixed-after-previous-sessions-rally-fed-meet-focus-2023-10-31/

3 “Goldilocks meets Santa as global stocks power to best month in three years,” Reuters, https://www.reuters.com/markets/global-markets-monthend-2023-11-30/

⁴ “12-month percentage change, Consumer Price Index,” U.S. Bureau of Labor Statistics, https://www.bls.gov/charts/consumer-price-index/consumer-price-index-by-category-line-chart.htm