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­­Diversified Asset Management, Inc - Eye On Money July/August 2024

We invite you to check out the new issue of Eye On Money! Inside are articles on:

Protecting yourself financially. Life can be risky at times. Jobs can be lost. People can fall ill. Financial markets can be volatile. Here are six things you can do to help minimize the toll that negative events may take on your finances.

Student loan repayment tips.  Don’t miss this one if you or someone in your family recently graduated from college and has federal student loans to repay.   

New exceptions to the tax penalty on early 401(k) withdrawals.  These exceptions may help you avoid an early withdrawal penalty if you need to withdraw money from a retirement account before age 59½.

Charitable gifts that pay you an income. Life income gifts can help you fulfill your philanthropic goals and generate an income stream for yourself or others.

Also in this issue, you can learn about how investing can make you money, things to do before you travel abroad, and required minimum distributions. Plus, you can take an armchair tour of Morocco, learn about five scenic byways you may want to explore this summer, and see how much you really know about Miami.

Please let us know if you have questions about anything in Eye On Money.

­­Diversified Asset Management, Inc - Eye On Money May/June 2024

We invite you to check out the new issue of Eye On Money! Inside are articles on:

Catching up on retirement savings. Steps you can take to help get your retirement savings on track to your retirement goal.

Summertime tax and financial tips.  A few ideas to help you make the most of your summer.   

What to know about Social Security before you begin benefits.  Don’t miss this one if you are thinking about claiming your Social Security retirement benefits soon!

Financial incentives for making your home more energy efficient. Planning to make energy-efficient improvements to your home this summer? There are two federal tax credits that may help you recoup part of the cost of making those improvements.

Also in this issue, you can learn about avoiding federal tax on unused 529 plan funds, generating income in retirement, and checking the status of your tax refund. Plus, you can travel vicariously to Lake Lucerne, Switzerland, discover what’s on this spring, and see how much you know about the upcoming Olympics in Paris.

Please let us know if you have questions about anything in Eye On Money.

­Diversified Asset Management, Inc - Eye On Money March/April 2024

We invite you to check out the new issue of Eye On Money! Inside are articles on:

Planning your estate. No matter your age or the size of your estate, it is important to have an estate plan in place to help protect your family’s future, as well as your own. Here are a few things to know about creating one.

Education tax credits.  If you pay college tuition for yourself, your spouse, or a dependent and your income is under a certain limit, you may be eligible to claim a tax credit for part of the qualified education expenses you pay. There are two credits available. Here’s how they compare.   

Roth IRA.  Don’t miss this one if you are saving for retirement! We’ll tell you how Roth IRAs work and why you may want one.

2024 contribution limits. The annual limits have increased for 2024. Here’s how much you may be able to contribute to your retirement and health savings accounts this year.

Also in this issue, you can learn about exchange-traded funds, health savings accounts, and important financial deadlines. Plus, you can travel vicariously to Chiang Mai, Thailand, discover places to savor the sight and scent of flowering trees and shrubs this spring, and see how much you know about Seattle.

Please let us know if you have questions about anything in Eye On Money.

Don’t Get Fed Up: Why Watching the Federal Reserve Won’t Help Your Investments

In today’s financial landscape, many investors obsess over the actions of the Federal Reserve, hoping to predict market movements based on changes in interest rates. However, relying too heavily on Fed watching can be a costly mistake. While the Federal Reserve’s decisions do impact interest rates, the reality is that the market often anticipates these actions long before they occur. By the time the Fed actually raises or lowers rates, markets have already adjusted, and any potential gains from trading on this information are gone.

Take, for example, the behavior of Treasury yields. Over the past year, while the Fed’s target range has remained constant, the 10-year Treasury yield has fluctuated significantly. This divergence illustrates that factors beyond the Fed’s control influence interest rates, making it difficult for investors to consistently profit by predicting Federal Reserve decisions.

Moreover, reacting to Fed announcements encourages short-term thinking. Successful investing, particularly in the bond market, is less about predicting what central banks will do next and more about maintaining a disciplined, long-term approach. By focusing on sound investment principles—such as diversification and risk management—investors can build resilient portfolios that thrive in various interest rate environments.

Instead of trying to predict the Fed’s next move, investors should focus on broader market fundamentals. Market pricing already reflects expectations about interest rate changes, so any advantage from being one step ahead is fleeting. The real value comes from understanding that long-term returns are driven by a wide range of factors, including economic growth, corporate earnings, and global demand.

In summary, don’t get too caught up in the hype of Fed watching. While the Federal Reserve plays an important role in the economy, its decisions are just one of many factors influencing the markets. By maintaining a long-term perspective and avoiding the temptation to react to short-term news, investors can improve their chances of achieving sustainable success.

#Investing #FederalReserve #MarketTrends #WealthManagement #BondInvesting

Why You Should Invest in All the Sectors, Not Just One

Investors often try to predict which sector will be the next big winner. Whether it’s energy, technology, or healthcare, there’s always a temptation to bet on the “hot” sector and hope for outsized returns. But data from 2014 to 2023 tells a different story: no single sector consistently outperforms. In fact, sectors that are at the top one year often end up at the bottom the next.

For example, energy was the best-performing sector in 2016, 2021, and 2022, but it also delivered the worst returns in six of the last ten years. Similarly, the technology sector, which many consider a growth engine, ranked first in 2023 but came in ninth out of eleven sectors just a year earlier.

This unpredictability is a key reason why a diversified investment strategy—one that includes exposure to all sectors—is far more effective in the long run. Holding a broad range of sectors ensures that when one underperforms, the others in your portfolio can help balance the impact. Essentially, diversification reduces risk while still offering the potential for strong returns.

Investing across multiple sectors also allows you to capture returns as they emerge from different parts of the economy. Each sector experiences growth at different times, depending on a variety of factors such as technological innovation, global demand, and economic conditions. By holding a diversified portfolio, you’re positioned to take advantage of these sector-specific opportunities without the need to time the market.

The key takeaway for investors is simple: sector picking is fraught with risk. Instead of trying to predict which sector will be next to outperform, focus on a diversified approach that includes all sectors. This will position you for success in both rising and falling markets, helping you build wealth steadily over time.

#Investing #Diversification #SectorInvesting #WealthManagement #PortfolioStrategy

1971: The Dawn of Science-Based Investing and the Birth of Index Funds

The world of investing experienced a seismic shift in 1971, when a new approach grounded in scientific research began to change the way we think about markets. Before this period, investing was largely speculative, and stock-picking was considered an art rather than a science. But as the use of computers became more prevalent, researchers began analyzing vast amounts of stock market data to uncover patterns and inefficiencies.

One of the most influential breakthroughs came from Eugene Fama, whose Efficient Market Hypothesis (EMH) posited that markets quickly incorporate all available information, making it impossible for investors to consistently outperform the market by picking stocks. This concept led to the rise of index funds, which aimed to capture market returns without the need to outguess the market.

At the time, investment options were limited, opaque, and expensive, with many portfolios concentrated in only a few stocks. The innovation of index funds, which simply tracked a broad market index like the S&P 500, provided a transparent and cost-effective way for investors to diversify their portfolios. This not only democratized access to investing but also held money managers accountable in a way that hadn’t been possible before.

David Booth, the founder of Dimensional Fund Advisors, was part of the early days of this revolution. In the 1970s, he collaborated with notable academics to create some of the first index funds. Over the years, Booth and his colleagues refined this concept, leading to the development of Dimensional Investing, which aims to go beyond traditional indexing. While index funds match the market, Dimensional seeks to outperform by emphasizing dimensions of the market that have historically shown better returns, such as small-cap stocks or value stocks.

Today, the principles that were born in 1971 continue to drive innovation in the financial industry. The introduction of index funds paved the way for greater transparency, lower fees, and better outcomes for investors. By following the science, modern investors can avoid the pitfalls of market speculation and instead focus on long-term success.

#Investing #IndexFunds #FinancialScience #EfficientMarkets #GeneFama #WealthManagement

How Much Impact Does the President Really Have on the Stock Market?

With every presidential election, investors, business owners, and financial professionals debate the potential effects of the incoming administration on the stock market. Headlines are often filled with speculation, but how much does the president truly influence market performance? Based on an extensive review of nearly 100 years of market and economic data, it becomes clear that while political events can create short-term volatility, the president’s overall impact on the stock market is relatively minor in the grand scheme of things.

The Big Picture: U.S. Equities Over Time

Since 1926, U.S. equities have followed a consistent upward trajectory, with notable long-term growth irrespective of political changes. From Calvin Coolidge to Joe Biden, markets have shown resilience and adaptability, growing despite wars, economic recessions, and global crises. The data confirms that over the long term, markets tend to rise, regardless of whether a Democrat or Republican occupies the White House.

This trend highlights a crucial insight for investors: focusing on short-term political fluctuations can often lead to misguided decisions. A long-term investment strategy, on the other hand, has proven to be a more reliable path to wealth accumulation.

Presidential Policies vs. Economic Factors

Although presidential policies such as tax reforms, trade deals, and regulatory changes can certainly influence specific sectors of the economy, other broader factors often play a more critical role in determining market trends. Global economic conditions, technological advancements, monetary policies, and consumer behavior tend to have a more pronounced effect on market performance than election results alone.

For example, the significant market downturn during the Great Depression, which began under Herbert Hoover’s presidency, was a result of global economic factors far beyond the control of any one administration. Similarly, the dot-com bubble in the late 1990s and the 2008 financial crisis were influenced by economic cycles and financial practices rather than solely by presidential decisions.

The Importance of a Long-Term Strategy

The key takeaway from this century of data is that maintaining a long-term investment strategy is essential to financial success. Attempting to time the market based on political events is a risky approach that could lead to missed opportunities. A diversified portfolio, designed to weather market volatility, can help investors stay focused on their long-term goals, regardless of the political climate.

Investors should also be mindful that many aspects of the U.S. economy, such as corporate earnings, interest rates, and innovation, have a far greater impact on market performance than who sits in the Oval Office. As history shows, the stock market’s long-term growth trajectory remains intact, even during periods of political uncertainty.

Conclusion

While it’s natural to be concerned about how elections and political leadership might impact financial markets, the data provides a reassuring message: U.S. equities have consistently grown over the long term, regardless of who holds office. The key for investors is to focus on a sound, long-term investment strategy and avoid reacting to short-term political shifts.

By understanding the bigger picture, investors can build resilience in their portfolios, weathering market volatility and achieving long-term financial goals.

#Investing #StockMarket #WealthManagement #LongTermInvesting #PresidentialImpact #FinancialPlanning #MarketTrends