Your Financial Haven

Brexit Doesn’t Have to Be Your Financial Exit

If you’re still wondering what “Brexit” means for you and your future, you are not alone. Same thing goes for which direction stocks, bonds and the economy are headed these days.

Alarming ups and downs – mostly downs – that began last summer have onlookers from Main Street to Wall Street scratching their heads. Thankfully you don’t have to worry as long as your financial plan is at work. Let me explain.

Since the most recent crisis in 2008, we have enjoyed years of a rising stock market and an expanding economy. Then, last August and again in December, stocks fell drastically with a few partial rebounds. The economy also slightly slowed down in the last three months of 2015.

Even with slowed growth, the economy still seemed strong enough for the Federal Reserve banking system to raise its interest rate target last December for the first time in nearly a decade. Yet factors that help the U.S. grow don’t always help other countries.

For example, domestic oil production has skyrocketed in recent years due to new technology. That has hindered the economies of Saudi Arabia and Russia, which rely on their own oil production. Financial turmoil in China due to rampant corporate debt and a weak manufacturing sector has hurt the world’s second largest economy, ­as well as less advanced countries in Asia and Latin America.

So here we are today with a surprising move by the United Kingdom last month that shocked the world—its historic referendum to leave the European Union in a bid to gain greater control over its economy. Global stocks stumbled while safer assets like U.S. Treasury bonds surged in value. Uncertainty over Brexit even weighed on the Federal Reserve’s decision to hold rates steady this summer.

Yet the real concern about Brexit is that the U.K.’s decision might prompt more countries in the EU to follow suit and break away from the regional economic system. Greece, for instance, has a high debt burden and floated the idea of leaving last year during tense bailout negotiations. Ultimately, trouble in Europe’s economy could affect both China and the U.S.

As a result of all these factors, the Federal Reserve continues to rethink its plans to continue raising interest rates. Furthermore, these issues show how complex financial matters can be, and why it doesn’t pay to take shortcuts in pursuit of “easy money.”

Stocks typically rise in value over the long term while bonds usually return their principal plus interest for investors who hold them through maturity. On average, both U.S. and global stock indexes have more than doubled in value since the heart of the financial crisis in 2008. Looking at market patterns over previous decades, it is expected that ups and downs are par for the course with investing.

Ideally, during investment cycles, stocks and bonds will not move in the same direction at the same time so that diversification works to your advantage. That was certainly the case after 2008, as stock prices climbed while low yields and interest rates kept bond investors at bay. At some point, stocks and bonds may switch places as far as which asset class is on top. Stocks and bonds “taking turns” in that manner has helped many investors balance growth and protection.

Millennials and GenXers who stay the course, while also regularly contributing a portion of their paycheck to stocks and bonds in their retirement accounts over the years, can buy investments at bargain prices when the market is down, averaging out the portfolio’s total return to account for investments purchased at market highs.

For Baby Boomers who are pre-retirees or retired investors planning to tap or are tapping into their nest eggs, it’s a good time to see how your stock investments are helping you stay above inflation while your bonds provide income to fund your retirement paycheck.

While uncertainty is still in the air, Brexit does not have to be your financial exit.

Photo Credit: 123RF.com

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The Gift of a Lifetime for Father’s Day & Men’s Day

Father's Day & Men's DayLooking to give the men in your life the gift of a lifetime for Father’s Day and Men’s Day?

The gift that comes to mind as a financial planner will yield a substantial return on your investment. It will not break the bank or collect dust like the usual gifts—ties, cologne, or socks.

Give your cherished man what he really wants—to feel valued and to be treated as valuable by those they love.

Value his character. Let him know how much you value him. Praise his positive attributes—his wisdom, courage, determination, and dedication. Sincerely complimenting his gifts, talents, and strengths encourages him and keeps him focused in his personal and professional life. It also keeps him grounded and motivated to make good decisions for the benefit of all.

Value his efforts. As a man makes his way in life, he may face situations, systems, or people that seem to be aligned against him. Responsibilities and challenges in the workplace can become a see-saw of competition and cooperation. Along the way, he experiences both gratifying achievements and difficult disappointments.

Recognize the effort that he expends each day, regardless of the outcome. Tell him that you appreciate him for who he is, and not just for what he does. Cherish his enduring faithfulness when his job and responsibilities are not easy or rewarding.

Value his achievements. Understand that his achievements don’t have to be big to be appreciated. Don’t limit your celebration to when he earns a title, promotion, or salary increase; acknowledge the little things. Cheer him on and take joy in his accomplishments. Compliment him in front of your friends. Let him know that all of his successes are important to you.

Invest in the men in your life by recognizing their value and appreciating their worth. Reinvest the dividends from your investment in them as a continuous gift that will last their lifetime.

 

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