The One Thing You Need to Know About Investing

Steve Meves, Senior Vice President/Chief Investment Officer, Wealth Managementmevess_bus009xqc

Investing is about using the money you’ve saved to purchase an asset that will hopefully appreciate over time. The key word in that last sentence is “time.” Giving your investments sufficient time to grow, regardless of what you are investing in, is the hard part. It’s also a key ingredient to building wealth.

Market Movements Are Noise

The financial markets go up and down, sometimes within the same day. But throughout history, they’ve kept climbing. The indexes we use to measure investment results—the Dow Jones Industrial Index and the S&P 500 Index—reflect this jagged climb. It’s this historical proof of resilience through wars, political mayhem and underperformance that allows professional wealth managers to remain calm in the face of sell-offs. They’ve seen the charts and looked at the data on market closes. And, they know that sell-offs end with recoveries. These recoveries may take time, but eventually they occur and have led to a resumption in the historical upward trend.

Go Long

The mistake many investors make is in assuming they need to do something when markets sell off. That’s only natural. It hurts to see your account balances decline, even if it’s a short-term occurrence. Our brains are hard wired to feel the pain of a loss—in this case money—more intensely than we feel the joy of a gain. It’s why we are intuitively risk averse. No one likes the way they feel when they lose.

When markets do sell off—whether during a day, over several weeks or even months—we all impulsively want to avoid further pain by selling. Some even want to anticipate the loss by selling before markets ever start selling off.

Taking evasive action may feel good in the short run, but it can destroy investment results in the long run, because you need to be right about the market continuing to go down when you are out of the market. More importantly, you also need to be in the market during its recoveries in order to benefit. It’s hard to know on any given day the kind of day it will be.

When Is the Right Time to Invest?

When you are an investor and take a long-term view, any time can be the right time depending on what you are investing in. Therefore, it’s advisable to have access to wealth managers who actively monitor markets daily to determine when it makes sense to pull back on investing in securities, or types of securities, and when to add more. It’s also our job to keep emotions like loss avoidance from endangering your overall goals so that your portfolio is diversified over different types of assets. That way, it’s better positioned to withstand volatility in any one type of asset.

In the end, the secret to successful investing is to remain focused on why you invest: to build wealth over time.

For more information on how our goal-driven wealth management services keep you on task over the long term, visit us here or call 630-801-2217. We can’t wait to talk to you about what we can do for you today.

 

Non-deposit investment products are not insured by the FDIC; not a deposit of, or guaranteed by, the bank; may lose value.

What You Should Know About Retirement

Jacqueline Runnberg, CFP®, Vice President/Wealth Advisor

Runnberg_2015 (1)For most, retirement is what you save for. It’s an activity that keeps you focused on accumulating assets and making long-term investment decisions. But, it’s hard to know how much to save and if you’ve saved enough. To do that, you need to know what your retirement will look like and when it will begin—things that are different for everyone.

To help you gain clarity, here are some factors to consider as you think about what you want to happen next, after the saving stops.

➢ Be realistic: Age 62 might be a little premature for retirement.
Although the age of 62 is still associated with retirement, if your birthday is between 1943 and 1954, your full retirement age for Social Security purposes is actually 66. The age increases gradually for those born in subsequent years, until it tops out at 67 for those born in 1960 or later.

While you can still initiate benefits at age 62, they will be seriously discounted (between 25% and 32.5%) from your full retirement age benefit for those born after 1942.1

This is why retiring early may not make financial sense—quite a bit of money could be left on the table, unless you’ve saved enough to cover expenses in the early years of your retirement without Social Security benefits.

➢ Think long term: Savings (and benefits) need to last longer than ever before.
According to the Social Security Administration, a man who reaches age 65 can expect to live, on average, until age 84.3. A woman can expect to see age 86.6. But, these are just averages. One-fourth of 65-year-olds will live past 90 and one-tenth can expect to live past 95.2 This means you’ll need a strategy for how your savings can be invested (and withdrawn) in a way that lasts your lifetime, a period that could rival the number of years you spent working.

➢ Rethink expenses: Your retirement spending level may not change as much as you think.
It’s entirely possible your expenses in retirement won’t change so much as what you spend your money on. And, that is likely to keep changing. For instance, in early retirement more of your budget will probably be devoted to entertainment and travel than in the past. If your health needs change, entertainment and travel expenses may fall as home care and medical needs rise.

➢ Sweat the details: It’s what you can’t control that you most need to plan for.
Both inflation and health care costs can seriously impact your financial footing in retirement. Any financial strategies you develop will need to be flexible enough to accommodate these factors. They are also the reason you can’t afford to be a conservative investor—you will need to keep a portion of your assets growing if these factors are to be addressed. You’ll also need a withdrawal strategy that can tolerate the unknowns as well as the knowns.

Retirement Is Another Beginning
Retirement is really more like the last quarter of a game that is likely to see multiple overtimes. That’s why envisioning what your retirement will look like and how you will sustain it over three to four decades is so critical while it’s still early in the game.

This is something our wealth management professionals can assist you with. Working together, we can create a plan that helps ensure what you save over your working life will support the retirement you envision and deserve.

 

1 Social Security Administration website, retrieved November 3, 2015.
2 Social Security Administration website, retrieved November 3, 2015.

Non-deposit investment products are not insured by the FDIC; not a deposit of, or guaranteed by, the bank; may lose value.

Women and Wealth: What You Need to Know

Jacqueline Runnberg, CFP®, Vice President/Wealth Advisor

Jacqueline Runnberg“Girl power!” isn’t just an empowered cry from the 1990s girl band rock scene. It speaks to the current reality: the growing influence of women as wealth creators and decision makers.

Today, women are more likely to achieve higher levels of education and participate in the workforce at a similar rate to men. They also head up a growing number of households due to divorce, lifestyle choices and longer lifespans. In fact, it’s estimated that 95 percent of women will be their family’s primary financial decision maker at some point in their lives.[1]

In the U.S., women currently control about $11.2 trillion—39 percent of this country’s investable assets.[2] By 2030, it’s expected that at least two-thirds of the nation’s wealth will be in the hands of women.[3]

Yet for all this financial firepower, women tend to lag men when it comes to planning for their financial futures.

What Makes It Different for Women

When it comes to investing, women are said to be more conservative investors who are generally inclined to take less risk. This isn’t entirely a bad thing—men generally take too much risk. But, being too conservative can leave women unprepared to meet their income and health care needs later in life.

Unlike men, women also tend to put more emphasis on objectives and planning and are better savers. These are also very good tendencies for ensuring that wealth takes care of family members. But often, this planning isn’t being expanded to accommodate their own needs, needs that arise from longer life spans.[4]

Thinking About Tomorrow

Runnberg InfographicAmong the realities we try to make our clients more aware of is that women tend to live longer, which leads to the need for their invested wealth to last longer. Women often outlive their husbands. And if they are single, their longer life span makes them even more vulnerable to the high cost of health care than men and puts them in even greater need for planning.

Addressing these issues can extend beyond money. It can require a Plan B, should it not be feasible to count on other family members to step in if a single or widowed woman becomes incapacitated.

As part of a bank trust company, we can provide more encompassing services than many financial advisors. These include serving as a trustee, settling estates and ensuring bills are paid and medical and household services are received when a client becomes temporarily or permanently incapacitated.

It’s all part of the holistic range of services we can provide our clients to help them feel empowered, confident and secure when it comes to talking about, understanding and then planning and investing for their family’s future needs as well as their own.

[1] Heather R. Ettinger and Eileen M. O’Connor, “Women of Wealth: Why Does the Financial Services Industry Still Not Hear Them,” Family Wealth Advisors Council, 2011.
[2] Sylvia Ann Hewlett and Andrea Turner Moffitt with Melinda Marshall, “Harnessing the Power of the Purse: Female Investors and Global Opportunities for Growth,” Center for Talent Innovation, 2014.
[3] Heather R. Ettinger and Eileen M. O’Connor, “Women of Wealth Study: Why Does the Financial Services Industry Still Not Hear Them,” Family Wealthy Advisors Council, 2011.
[4] Jean Chatzky, “Why women are better investors than men,” fortune.com, posted April 10, 2015, retrieved September 18, 2015.

Non-deposit investment products are not insured by the FDIC; not a deposit of, or guaranteed by, the bank; may lose value.