2020 Vision

Justin Toedtman • Jan 07, 2020

Note from MPWM: The views and market predictions expressed in this newsletter do not necessarily reflect the views of Momentum Private Wealth Management, LLC, or any of it's principals thereof.

CHEERS TO THE NEW YEAR!

We rang in a new year and a new decade; the champagne has long since popped and the confetti has been cleaned up! Our attention now turns from reflection on the 2010s to anticipation of what 2020 may hold. The bull market, which began in 2009, is now over ten years old. Judging by the incredible performance of 2019, it does not appear the bulls are quite ready to yield, however, there are those calling for the bubble to burst at any time. We find ourselves in the midst of a trade war with China. There are certainly increasing tensions with both Iran and North Korea. Stock buy-backs no doubt helped lift the market last year but are they poised to do so again this year? The Federal Reserve has not given many clues as to whether it will continue the current policy, which is currently quite favorable to investors. As we embark into an election year, the President still faces an impeachment battle. There is no shortage of themes that can serve as pitfalls for the bulls, however, many of these issues were also present last year and volatility remained relatively low. So, what is one to make of the coming year? Should we run for the hills or lean in for another strong year of market gains? Let’s gaze into the Magic 8 Ball and take a look.

AS GOES JANUARY, SO GOES THE YEAR?

January performance is widely watched as there is a belief, popularized by the Stock Trader’s Almanac, that if January shows gains, the market will be up on the year and, conversely, if January is down, the market will fall for the year. January of 2019 saw the S&P 500 rise 7.9% translating into a rise for the year of nearly 29%! How accurate is this January adage?

Unfortunately, this seasonality-based method is not very accurate. In examining the Standards & Poors 500 index (S&P 500) over the last 70 years - dating back to 1950 - the January-to-full-year correlation is 74.3% accurate. Table 1 summarizes the S&P 500 data with the decades in the columns and the year of the decade in the row. For example, the year 1950 had a January increase of 1.5% and a total year-end (YE) growth of 21.7%. 1951 had January and year-end gains of 6% and 16.3%, respectively.

Further examination of the table illustrates the January-to-year-end correlation to be less relevant in the more recent decades. 1950 through 1999 averaged eight years per decade where January set the tone for the entire year. As we transitioned into the 2000s, the correlation is nearing 50%. Based upon this, I personally would not make portfolio decisions based on the performance of January. Perhaps a more current adage is: As goes January… there goes that theory.

YOUR VOTE COUNTS

2020 is a US Presidential election year. Does it matter to the market? Unequivocally, it matters!

Table 2 illustrates the change in the S&P 500 index for every election year since 1952, broken by quarter. In these 17 election years, all but three have resulted in market appreciation during the year. The 1960 market had slight losses with the Vietnam war weighing heavily while the ‘Tech Wreck’ and ‘Mortgage Crisis’ affected 2000 and 2008, respectively.

On average, election year markets have appreciated 6.7% over the last 68 years. Casting out the three down years raises the average gains to 11.9% per year. Averaging all election years since 1952 where the incumbent President is seeking re-election, the yearly gains jump to 13.3%.

Q1 gains are more muted, especially when an incumbent is not up for re-election, while Q4 tends to show the strongest overall gains aligning with the final outcome. Wall Street tends to shy away from uncertainty. In looking at the number of volatile days, +/- 1% change between sessions on the S&P 500 index, Q1 of election years tend to have more, especially when there is no incumbent. This aligns with the Primaries, where there is more uncertainty in the candidate that will receive their party’s nomination. Usually, volatile days are less frequent in election years where the incumbent is on the ballot.

Never before has an impeached President sought re-election so we are somewhat in uncharted waters. In isolation, the fact it is an election year with an incumbent should be considered a positive sign for the market.

IT'S TIME TO PARTY LIKE IT'S 1999

Okay, it is about to get really technical so bear with me for a few minutes. The market cycles. To further confound analysts, there are cycles within cycles; meaning, the overall trend on a weekly chart may be pointing up but there is a pullback on the daily charts that makes it look like price is trending down. This causes price to appear random and unpredictable. I believe the key to successful investing is to be in the market when higher timeframes are aligned and in phase with lower ones. This is why looking across timeframes is crucial. Examining charts from 2019, show significant alignment between weekly, monthly, and quarterly timeframes. Thus, the markets rose and did so with gusto.

Here’s some good news: because all market movement is connected across timeframes, it follows distinct rules. Since there are rules, it has been my experience, that probable outcomes can be anticipated. To draw an analogy, eclipses occur because of geometrical relationship between the sun, Earth, and moon. Eclipses follow rules and one cannot occur if the moon is out of phase. Similarly, the market rarely will have a significant down-move if the higher timeframes are strong. The market seeks balance and harmony and, therefore, the higher timeframes would have to cycle into phase to support a selloff. The crash of 1987, the tech bubble popping in 200o, and the disastrous selloff in 2008 all had similar high timeframe formations that were in phase and supported the selloff. Want some great news? At the time of this writing, I do not believe there is a significant risk of the bull run ending in the near-term! Let me show you.

Market analysts utilize indicators to help them interpret the market and make predictions. An example of a simple indicator is a moving average of price. When price is above its moving average, it is a bullish sign. There are indicators to measure various market components, some are leading and some lagging. Over the past two decades, I have personally developed and built numerous market indicators and systems to aid my own personal market analysis. Momentum Private Wealth Management now has access to these sophisticated, analytical tools of which, three are highlighted in the charts below. In simplest terms, they measure the underlying strength of the market as well as the strength of a trend.

There is a lot to absorb in Chart I but it illustrates the current strength of the S&P 500.

Price bars are in the top half of the charts.
Proprietary market indicators are in the sub-charts in the lower half.
Chart A is the monthly chart - each bar represents a month’s time.
Chart B is the weekly chart - each bar represents a week’s time.

In chart A, we can plainly see price is generally trending upwards. #1 with the red circle encapsulates the Q4 pullback in 2018. It also illustrates how the timeframes are connected. Over the course of several weeks (chart B red circle), price fell rather dramatically. This equates to only three bars on the monthly chart (A).

Moving our attention to #2, the two histograms in chart B fell below zero and the red line moved above the green line in the bottom sub-chart, all bearish signs; however, the same indicators in chart A stay above zero and the green line remains above the red, all bullish signs. This is a classic counter-trend formation. The strength of the higher timeframe, in this case the monthly, temporarily yields to the lower timeframe (the weekly) but overcomes the downside pressure as it has greater support. It is important to note that some of the underlying strength is removed from the higher timeframe in this move. This is how markets ultimately change trend. The weekly (chart B) cycles through the down move and the indicators once again realign to resume the uptrend.

Callout #3 draws attention to the similarity of patterns and what can be expected in the near-term given the strength of the weekly chart. The current indicator formation at #3 in the weekly chart (B) are similar in formation to those on the monthly chart (A) at #3. It is reasonable to believe this move will continue for the next several weeks and likely longer given the supporting strength of the monthly.

Are you still with me? It is heady information indeed that has taken me years and years to fully understand. The main point is cycles are predictable with the right tools and currently the market appears to be strong.

What lies to the right of the current price bar is always a mystery since it is embedded in the future. An analyst only has the indicators and their patterns to rely upon. Finding a similar pattern that occurred in the past gives us a reliable forecast of what may transpire in the future. In examining the S&P 500 index, I found a very similar chart formation that may be a useful guide in predicting how this next year will play out. (Note: these same patterns occur across all markets and timeframes. This example is not an isolated association.)

Rewinding all the way back to 1999, I found weekly and monthly formations that are extremely similar to what the charts show at the beginning of 2020. The benefit of examining the charts from 21 years ago is we can see what happened and use that as a blueprint for today’s strategy.

Chart 2 looks complicated but I will walk through the components and explain how what happened in 1999 will likely be similar to what we see in 2020 and 2021.

Similar to the earlier charts we walked through, price is in the top half of the four distinct charts. The same indicators as before are in the lower half of the charts. The S&P 500 index is in all four charts.

Chart A is the monthly chart with the vertical red line representing the close on 1/3/2020.
Chart B is the weekly chart with the same closing date as A.
Chart C is the monthly chart with the vertical red line rewound back to March of 1999.
Chart D is the weekly chart also centered on the March 1999 time period.

Looking at charts A and C first, we see that in both price is moving up to the left of the red vertical lines. The angle varies a bit but both are definitely increasing. You will also notice the indicators in the sub-charts are also generally similar in formation - the histograms are higher than the colored lines and the green line in the bottom sub-chart is above the red. Everything points to a strong, bullish market prior to the vertical red lines.

Moving our focus to point #1, we see a price pullback in both charts. Last year’s was a little briefer than in 1998 but both had price dips that pulled down the indicators as highlighted in callout #2 with the red ellipses. This indicates a pause point where the markets are out-of-phase between timeframes.

This pull back is more accentuated in point #3 in charts B and D. Because weekly bars make up the monthly bars - and it takes more of them - the decline at point #3 appears more exaggerated. If we were only looking at the weekly charts, we might have proclaimed in both instances the bull run was over, however, we would be wrong because the higher timeframe usually always wins the battle and the monthly indicators at point #2 (charts A and C) never dipped below zero indicating significant underlying strength in the move.

Points #4 and #5 on the monthly charts (A and C) and weekly charts (B and D), respectively, show the similar pattern of today compared to March of 1999. They are not identical but are very, very close. The weekly chart of today (B) at point #5 is less steep and more drawn out than chart D because of the choppy price pattern. All the same, it is in a strong formation.

After the vertical red line in chart C, price continues to rise until the last half of 2000. While this price increase looks fairly fluid on the monthly chart, you can see it is somewhat choppy on the weekly chart (D).

This is how market topping begins. The weekly chart continued to cycle in and out of phase with the monthly slowly drawing the indicators down below their support levels. Point #6 on chart C with the blue ellipse is a definitive warning sign the move is most likely over. The bull move is tired and will succumb to any strong force on a lower timeframe. You can see that price quickly fell once the indicators crossed the zero lines in chart C. That was the ‘Tech Wreck’ warning sign. In late 2007, there was a very similar formation and it is something we will continue to monitor through the new year.

I have a few final thoughts on where we are today in relation to 1999. First, in the late 1990s, semiconductors fueled a lot of the technology boom. This sector is often considered to be a leading indicator to both growth and recession. As highlighted in the recent ‘Closing out a Decade’ newsletter, it was highlighted that five of the top ten S&P 500 performers in 2019 were in the semiconductor space. The PHLX Semiconductor Sector index (SOXX) is extremely strong, suggesting continue economic expansion into the new year.

Secondly, the proprietary indicators that were developed are designed to compare markets and timeframes in an apples-to-apples manner. The underlying strength indicator is about half the value of the same indicator in March of 1999. This is both good and bad. It is good because a slower appreciating market tends to go farther but it is bad because it will take less energy from the lower timeframes to influence it.

Finally, the weekly S&P 500 index chart is very strong right now thanks to an incredible Q4 of 2019. When markets go up (or down) too quickly, they tend to need to adjust. Think of a rubber band that is stretched too far, the tension needs to be reduced or it will break. I believe in the near-term it will continue to climb, as stated earlier, but it will need to pause and consolidate before continuing a healthy, well-supported climb higher.

PREDICTION IS DIFFICULT, ESPECIALLY IF IT IS ABOUT THE FUTURE

Will the markets rise in 2020? If so, by how much? I will tell you on 12/31/2020. In all seriousness, no one knows for sure whether the markets will go up or down. What I believe is: the broader US markets are poised to go up because many indicators suggest further price appreciation. As pointed out earlier, it is an election year and that tends to translate into an up market. Interest rates are currently low - about half of what they were in 1999 - which favors equities. Corporate buybacks, while slowing, will likely inject hundreds of millions back into the markets again this year. China continues to inject stimulus into their economy, which bodes well for the US and the global economy as a whole.

Of course, there are headwinds. The geopolitical state of the world is precarious at the moment with trade wars and legitimate tension between the US and other counties. We have been in a tremendous bull run which seems to be accelerating. “Blow off tops” can definitely change the market very quickly. Quite simply, the market cannot keep going up forever.

In coming newsletters, I plan on dissecting market sectors and delving into potential movers. I will spend a little time with FAANG (+ Microsoft) as well. I have also turned my attention to crude oil - not because of recent news events with Iran - but because of its price movement. I noticed this initially in examining the Energy sector, which incidentally was the weakest of 2019. I am starting to warm up to Energy in a big way and will discuss it more in the coming weeks.

Over my years of study and investing, I have learned to weigh most heavily on what the market is doing right now and take what opportunities are presented. Right now, the market is going up. Personally, I believe - for all of the reasons outlined above - the market will continue to do so in the short- to medium-term. I would not be surprised if we saw the S&P 500 index appreciate between 18% and 22% this year. That would put the index around 3900. We can revisit this on December 31st to see how it played out.

CLOSING THOUGHTS

Many investors become extremely worried the moment they start losing money, however, when they are making money there is often less scrutiny given to performance because… well, they are making money. I encourage you assess your portfolio and ask the question, “did I fully maximize my investment potential?” The S&P 500 index grew nearly 29% last year. After factoring out risk attributes, how does your portfolio index to that?

If reading through my explanation of how charts work made you glaze over, don’t worry. Technical analysis is not for everyone but I live and breath it. You can still take advantage of sophisticated analysis and tools by contacting Austin.

The New Year is a perfect time to review your portfolio and talk to a professional you trust to ensure your investments are working toward your long-term goals. The most important thing is to have a solid plan. If you currently have no plan or feel your current plan can be improved, MPWM can help!

Here’s to your health, wealth, and happiness in 2020.

Do you have a prediction for 2020? I would love to hear your thoughts so be sure to comment below!

If you are not having frequent conversations with your wealth or investment advisor about market strategies, investment management, or financial planning opportunities, you should be. Momentum Private Wealth Management specializes in Wealth Management as well as Comprehensive Financial Planning. Feel free to reach out to Austin directly at 512.416.8085 or austin@momentumpwm.com. You can also find out more information about MPWM at: www.momentumpwm.com.

The views and market predictions expressed in this newsletter do not necessarily reflect the views of Momentum Private Wealth Management, LLC, or any of it's principals thereof.

Justin Toedtman is a market strategist and contributing editor to Momentum Private Wealth Management. For the last 20 years, his focus has been on technical analysis and market strategies.

The information on this site is provided “AS IS” and without warranties of any kind either express or implied. To the fullest extent permissible pursuant to applicable laws, Momentum Private Wealth Management, LLC (referred to as “MPWM”) disclaims all warranties, express or implied, including, but not limited to, implied warranties of merchantability, non-infringement, and suitability for a particular purpose.
MPWM does not warrant that the information will be free from error. None of the information provided on this website is intended as investment, tax, accounting or legal advice, as an offer or solicitation of an offer to buy or sell, or as an endorsement of any company, security, fund, or other securities or non-securities offering. The information should not be relied upon for purposes of transacting securities or other investments. Your use of the information is at your sole risk. Under no circumstances shall MPWM be liable for any direct, indirect, special or consequential damages that result from the use of, or the inability to use, the materials in this site, even if MPWM or a MPWM authorized representative has been advised of the possibility of such damages. In no event shall MPWM have any liability to you for damages, losses, and causes of action for accessing this site. Information on this website should not be considered a solicitation to buy, an offer to sell, or a recommendation of any security in any jurisdiction where such offer, solicitation, or recommendation would be unlawful or unauthorized.

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Mastering the Backdoor Roth IRA: A stealthy strategy for smart investors

10 Apr, 2024

You’ve been eyeballing the Roth IRA and like the idea of tax-free growth but there's a problem: your income exceeds the limit for contributing directly to a Roth IRA. Enter the ‘Backdoor’ Roth IRA strategy- a clever maneuver that allows high earners to enjoy the benefits of a Roth IRA without income limits. There are some important caveats so let’s dive into the strategy. Roth IRA Contribution Limits If you file taxes as a single person, your Modified Adjusted Gross Income (MAGI) must be under $153,000 for tax year 2023 and $161,000 for tax year 2024 to contribute to a Roth IRA, and if you're married and file jointly, your MAGI must be under $228,000 for tax year 2023 and $240,000 for tax year 2024. If your Modified Adjusted Gross Income is above these limits then you are ineligible for a direct Roth IRA contribution and might consider utilizing the backdoor Roth IRA strategy. Step by Step Guide to Executing the Backdoor Roth IRA Contribution Step 1: Open a traditional IRA at your custodian of choice. Ensure they are aware of, and allow for Backdoor Roth IRA conversions. Step 1.5: If you do not already have a Roth IRA, then also open a Roth IRA at the same custodian. Step 2: Make a NON-DEDUCTIBLE contribution to your traditional IRA for the tax year of your choice. Reminder- you have until the Tax Filing Deadline to make a prior year IRA contribution. The contribution limit for 2023 is $6,500 for individuals under 50 and $7,500 for individuals over 50. Important Notes: DO NOT MIX tax-deferred IRA assets with Non-Deductible IRA assets. If you have a rollover IRA or Traditional IRA with tax-deferred assets in them, at ANY custodian, then you must be aware of the pro-rata rule for the conversion amount. Step 3: Instruct the custodian to convert your contribution from the Non-Deductible IRA to your Roth IRA. Important Notes: If you are subject to the pro-rata rule, you WILL owe taxes on any converted amount that is pre-tax. Timing: it is advisable to convert the non-deductible contribution to the Roth IRA as soon as possible. Benefits of the Roth IRA Roth IRAs enjoy a lifetime of tax-free growth! Building up what I call the ‘triad’ of investment accounts- Taxable, Tax-Deferred and Tax-Free will provide you with the greatest flexibility once in retirement for distributions and tax management. No Required Minimum Distributions Unlike Traditional IRAs, Roth IRAs are not subject to Required Minimum Distributions over the original owners lifetime. This gives you the ability to let the assets grow and use only if needed. ·Estate Planning Benefits Even with SECURE ACT 2.0 changes, Roth IRAs are a fantastic estate planning tool. In Conclusion The backdoor Roth IRA. Strategy is another useful tool that allows high earners to continue saving in tax-free accounts. It is essential that you work with a financial professional to review the pro-rata rule as well as help determining the future legislative changes that may limit the future ability to perform backdoor Roth IRA contributions. When you need reliable financial planning for your small business in Cedar Park, TX, contact Momentum Private Wealth Management at 512-416-8085 today!

Maximizing Tax Efficiency in Retirement: Harnessing the Power of Roth Conversions

15 Mar, 2024

Retirement planning isn't just about saving money; it's about optimizing your financial strategies to ensure your hard-earned savings go the distance. One powerful tool often overlooked is the Roth conversion. By strategically converting traditional retirement account funds into Roth accounts before required minimum distributions (RMDs) kick in, retirees can potentially save a significant amount in taxes while enjoying greater flexibility and control over their retirement income. Understanding Roth Conversions Before diving into the strategy, let's understand what Roth conversions entail. A Roth conversion involves transferring funds from a traditional IRA or 401(k) to a Roth IRA. Unlike traditional retirement accounts, Roth IRAs offer tax-free growth and tax-free withdrawals in retirement, provided certain conditions are met. The Pre-RMD Window of Opportunity Once you reach the age of 72 (or 70½ if you reached that age before January 1, 2020), the IRS requires you to start taking RMDs from traditional retirement accounts. These distributions are taxed as ordinary income, potentially increasing your tax liability in retirement. However, before reaching this age, retirees have a window of opportunity to strategically convert funds to a Roth IRA. Benefits of Roth Conversions Before RMDs 1. Tax Diversification: Roth conversions allow retirees to diversify their tax liabilities. By having both traditional and Roth accounts, retirees gain flexibility in managing their tax burden in retirement. 2. Tax-Free Growth: Funds converted to a Roth IRA grow tax-free, providing a valuable hedge against future tax rate increases. This tax-free growth can significantly enhance retirement savings over time. 3. Reduced RMDs and Taxable Income: By converting funds to a Roth IRA before RMDs kick in, retirees can potentially reduce the size of their RMDs and, consequently, their taxable income in retirement. This can help minimize tax implications and preserve more of your retirement savings. 4. Estate Planning Benefits: Roth IRAs offer attractive estate planning advantages, as distributions to beneficiaries are tax-free. By converting traditional retirement account funds to Roth IRAs, retirees can leave a tax-free inheritance for their heirs. Implementing a Roth Conversion Strategy 1. Evaluate Tax Implications: Before executing a Roth conversion, it's crucial to assess the tax implications. Consider factors such as your current tax bracket, future income projections, and potential impact on Medicare premiums. 2. Convert Strategically: Rather than converting all funds at once, consider a gradual conversion strategy over several years. This allows you to manage tax liabilities more effectively and stay within lower tax brackets. 3. Utilize Low-Income Years: Take advantage of years when your income is lower, perhaps due to part-time work, early retirement, or other factors. Converting funds during these years can minimize the tax impact. 4. Consider Partial Conversions: You don't have to convert your entire traditional IRA balance at once. Opt for partial conversions that align with your tax planning goals and financial needs. 5. Consult a Financial Advisor: Roth conversions involve complex tax considerations and financial planning strategies. It's advisable to consult with a qualified financial advisor or tax professional to tailor a conversion plan that aligns with your specific circumstances. Conclusion Roth conversions offer retirees a powerful tool to optimize tax efficiency in retirement. By strategically converting funds from traditional retirement accounts to Roth IRAs before RMDs kick in, retirees can potentially save a significant amount in taxes while enjoying tax-free growth and greater flexibility in managing their retirement income. However, it's essential to approach Roth conversions with careful planning and consideration of individual financial goals and tax implications. With the right strategy in place, retirees can harness the benefits of Roth conversions to enhance their retirement savings and financial security. Get in touch with us today to embark on your journey towards financial empowerment and prosperity. We are here for you and your family for years to come. Visit our website or contact us at 512-416-8085 today!

Navigating Economic Trends: A Guide to Investment Management in Austin

16 Feb, 2024

Investment management is a key factor regardless of the fluctuations of economic times. Staying abreast of economic trends is paramount. Whether you're a seasoned investor or just dipping your toes into the market, understanding how economic shifts can impact your investments is crucial for long-term success. Here at Momentum Private Wealth Management, we recognize the significance of staying ahead of the curve. Let’s delve into the impact of economic trends on investment management, focusing specifically on what you need to know in Austin, Texas. The Intersection of Economic Trends and Investment Management Economic trends play a pivotal role in shaping investment strategies and decisions. From fluctuating interest rates to changes in consumer behavior, various factors can influence the performance of investment portfolios. As such, investors need to be proactive in analyzing economic indicators and adapting their investment approaches accordingly. In Austin, a thriving economic hub renowned for its vibrant tech scene and rapid growth, staying attuned to economic trends is particularly important. The city's dynamic ecosystem is subject to both local and global economic forces, making it imperative for investors to navigate these fluctuations strategically. Key Economic Trends Impacting Investment Management in Austin Tech Industry Dynamics: Austin's status as a burgeoning tech hub has propelled its economy to new heights. With the presence of major tech companies and a robust startup culture, the performance of the tech sector significantly influences investment opportunities in the region. Tracking trends such as technological innovations, funding rounds, and industry disruptions is essential for investors looking to capitalize on Austin's tech-driven growth. Real Estate Market: The real estate market in Austin has experienced remarkable growth in recent years, fueled by factors such as population influx, job opportunities, and favorable business conditions. However, rapid expansion also brings challenges such as housing affordability concerns and infrastructure strain. Investors must monitor real estate trends, including housing inventory levels, rental rates, and commercial developments, to make informed decisions about property investments. Economic Diversification: Austin's economy is characterized by its diversification across various industries, including technology, healthcare, manufacturing, and entertainment. This diversification enhances resilience and mitigates risks associated with sector-specific downturns. Investors can capitalize on this economic diversity by building well-balanced portfolios that encompass multiple sectors, thereby reducing exposure to volatility in any single industry. Interest Rate Fluctuations: Like the broader economy, interest rate fluctuations can significantly impact investment performance in Austin. Changes in interest rates affect borrowing costs, inflation expectations, and the attractiveness of certain asset classes. For instance, rising interest rates may lead to lower bond prices but could present opportunities for sectors such as financial services. Investors should closely monitor monetary policy decisions and economic indicators to gauge the direction of interest rates and adjust their portfolios accordingly. Strategies for Navigating Economic Trends in Austin Diversification: Building a diversified investment portfolio is a fundamental strategy for mitigating risk and maximizing returns, especially in a dynamic economic environment like Austin. By spreading investments across different asset classes, sectors, and geographical regions, investors can minimize the impact of localized economic downturns and capitalize on growth opportunities in diverse industries. Active Monitoring: Staying informed about economic trends requires continuous monitoring of relevant indicators and data points. Investors should leverage resources such as financial news outlets, economic reports, and industry analyses to stay ahead of market developments. Additionally, partnering with a reputable wealth management firm like Momentum Private Wealth Management provides access to expert insights and personalized guidance tailored to your financial goals. Long-Term Perspective: While short-term fluctuations may create volatility in the market, maintaining a long-term perspective is key to successful investment management. Instead of reacting impulsively to every economic trend, focus on your overarching investment objectives and stick to a disciplined strategy. By staying committed to your long-term financial plan, you can weather temporary market disruptions and position yourself for sustainable growth over time. Flexibility and Adaptability: Economic trends are inherently dynamic, requiring investors to remain flexible and adaptable in their approach. Be prepared to adjust your investment strategies in response to changing market conditions and emerging opportunities. A proactive stance towards portfolio rebalancing, asset allocation, and risk management can help you optimize your investment performance and navigate economic uncertainties effectively. When it comes to investment management, understanding the impact of economic trends is essential for making informed decisions and working towards achieving financial success. In Austin, a thriving economic hub characterized by innovation and growth, staying attuned to local and global economic dynamics is particularly crucial. By leveraging strategies such as diversification, active monitoring, long-term perspective, and flexibility, investors can navigate economic trends with confidence and position themselves for prosperity in the dynamic landscape of Austin's economy. At Momentum Private Wealth Management, we're committed to helping our clients navigate these challenges and capitalize on investment opportunities tailored to their unique financial goals. Get in touch with us today to embark on your journey towards financial empowerment and prosperity. We are here for you and your family for years to come. Visit our website or contact us at 512-416-8085 today!

three women are sitting at a table in a restaurant looking at a laptop .

Financial Planning for Small Business Owners in Cedar Park, TX: Setting Up for Success

19 Jan, 2024

One of the most critical parts of long-term success is financial planning. Professional financial planning in Cedar Park, TX, keeps your business on track, creates plans for the future, and helps you reach sales goals.

Investment Management for Retirement Planning: Maximizing Your Nest Egg

22 Nov, 2023

Are you worried you won't have enough money for retirement? Investment management can help determine how much you need and the best approach to save enough money. Keep reading to discover how to maximize your nest egg. How Much To Save The first step to maximizing your nest egg includes knowing how much you should save. Decide what you want your retirement to look like and make a list of things you want to do and how you want to live. Then, do your best to estimate what things will cost once you retire, considering an average inflation rate of 3.22%. Once you know your projected expenses, determine any sources of income you'll have, including investments, pension funds, and social security. The difference between your expenses and your income is how much you should save. Generally speaking, some experts have suggested that you may need as much as $2 million to live a 'comfortable retirement,' those these numbers can vary wildly depending on your spending habits. Financial professionals may also recommend you spend around 70-85% of your current income per year once you are retired. Tips for Saving Enough Money Whether your goal is $2 million or more, saving enough money can feel overwhelming. However, with the following tips, you can maximize your savings potential. Set an Age Goal Determine what age you think you'll be able to retire. While working longer allows you more time to save, it also reduces the amount of time you have to enjoy retirement. Conversely, if you retire too early, you'll depend on your savings for a while before you can draw from social security, which means you'll need to save even more money. The average age of retirement is between the ages of 65 and 66 which is around the age at which the Social Security Administration assumes retirement. This gives you significant time to save, avoids drawing from your savings too quickly, and still gives the average person over a decade to enjoy retirement. Pay Off Your Debts While not always possible, prioritize paying off your debts before you retire. If you continue to pay off your debts after retirement, focus on the high-interest ones first, which often include credit cards, personal loans, and car payments. Also, prioritize student loan payments. If you still have student loan debt in retirement, the government can garnish up to 15% of your social security payments if you fall behind. Maximize Contributions Good investment management guidelines suggest you maximize your contributions to your retirement accounts. If you're traditionally employed, your workplace probably offers some form of tax-advantaged retirement account. IRAs and 401(k)s remain two of the best methods for saving for retirement. While contributing the maximum allowable amount gives you less money to live off short term, it sets you up for success after retirement. The maximum you can contribute changes each year based on inflation rates and other economic factors, but in 2023, the IRS allowed a maximum contribution of $22,500, and for those savers who are 50 or older may contribute up to $30,000 depending on the plan. This is called the 'catch-up provision.' But contributing to these accounts doesn't just have long-term benefits. When you contribute to your 401k or IRA, you may be eligible to deduct the amount from your total taxable income, meaning you'll lower your taxable income for that year. Use Employer Match As part of their benefits, many employers match your 401(k) contributions up to a certain percentage of your total paycheck. The average employee match equals just under 5%. This means if you make $2,000 every paycheck and opt to automatically deposit 5% of it, you'll contribute a total of $200 toward your retirement: $100 from you and $100 from your employer ($2,000 x 0.05 x 2). Keep in mind your employer won't match the maximum if you don't contribute that much. For example, if your employer offers a 5% match, but you only contribute 3% of your total paycheck, you'll receive a 3% match instead of the 5% match. While that extra 2% gives you less paycheck to live off, you have to think long-term and realize how much money you'll miss out on for retirement. If you make $2,000 every paycheck, that extra 2% equals $80 a month. Throughout a 40-year career, that's $38,400 from your employer you've missed out on ($80 x 12 months x 40 years = $38,000) plus the potential growth! Remember, employer matches are a guaranteed 100% return on your money.. Consider how good investing could multiply that money. Diversify the Investments Whether you invest in your retirement accounts or other investments, diversity is one of the first rules of good asset management. This means instead of putting all your money into one asset class, consider investing in a well diversified portfolio which may include different countries and sectors of the investable market. Financial experts consider a diversified portfolio a more impactful investment strategy as the goal would be to lower your overall risk for the level of return. Certain asset classes do not provide an equally higher level of return for the risk. Regularly Review and Adjust One key way to maximize your nest egg requires regularly reviewing your investments, assessing their performance, and adjusting as needed. If one area of your portfolio underperforms,determine whether or not you need to redeploy those assets into another area of the portfolio. Don't consider investments something you fund and then forget about. While you'll still likely grow your nest egg, you won't maximize it without purposeful attention. You can also vary your risk as you near retirement, and many people prefer to invest aggressively when they're young and take a less aggressive approach as they near retirement. Minimize Fees Many investments have underlying fees- called expense ratios. Depending on whether or not the investment is actively managed by the management company, these fees can often near or exceed 1% depending on the fund. Large underlying expense ratios can erode returns over a long period of time so be sure you are invested in a manner that suits your needs and if you are paying large expense ratios, the fund is producing excess returns to demand that fee. Keep Learning While your financial manager can handle most of your investments, stay informed by reading a financial journal or other reputable sources. This can help you understand your investment portfolio and help drive the conversation with your advisor about the risk you are willing to take vis a vis your goals. Contact Your Wealth Management Experts for Help At Momentum Private Wealth Management, we take our duty of investment management seriously. We take time to learn your goals and help you build wealth while navigating a volatile market. To learn more about our investment management services or to speak with a wealth management specialist, call 512-416-8085 today.

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