Making Your Inheritance Last a Lifetime

Making Your Inheritance Last a Lifetime

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Inheriting a large sum of money can be a life-changing event, but it can also be overwhelming. Without proper planning and management, the money can quickly disappear. To make your inheritance last a lifetime and secure your financial future, consider these five strategies.


Create a Financial Plan

The first step in making your inheritance last a lifetime is to create a financial plan. This plan should include a budget, investment strategy, and long-term financial goals. Consider working with a financial advisor to help you create a plan that is tailored to your specific needs and goals. Your plan should also account for any taxes or fees associated with your inheritance, as well as any debts or obligations you may have. By creating a solid financial plan, you can plan for the future so that your inheritance is used wisely and that you are able to pursue your financial goals over the long term.


Pay Off Debts and Build an Emergency Fund

One of the first strategies for making your inheritance last could be to evaluate and pay off any outstanding debts and build an emergency fund. This may help you avoid high interest rates and fees and provide a safety net in case of unexpected expenses or emergencies. Start by creating a budget and prioritizing your debts, paying off those with the highest interest rates first. Once your debts are paid off, focus on building an emergency fund that covers at least three to six months of living expenses. This will help you avoid dipping into your inheritance for unexpected expenses.


Invest Wisely

Another important strategy for making your inheritance last is to invest wisely. Consider working with a financial advisor to create a diversified investment portfolio that aligns with your long-term financial goals and risk tolerance. Avoid making impulsive investment decisions and instead focus on a long-term strategy that balances risk and reward. Remember to regularly review and adjust your investments as needed to ensure they continue to align with your goals and risk tolerance.


Consider a Trust or Estate Planning

Consider working with an attorney on a comprehensive estate plan and possibly setting up a trust. A trust cab help protect your assets and ensure they are distributed according to your wishes. A trust can also provide tax benefits and help avoid probate court. It’s important to work with a qualified attorney to set up a trust or estate plan that meets your specific needs and goals. Keep in mind that the cost of setting up a trust or estate plan can vary depending on the complexity of your situation.


Live Within Your Means

One of the most important strategies for making your inheritance last a lifetime is to live within your means. This means creating a budget and sticking to it, avoiding unnecessary expenses, and saving for the future. It’s important to resist the temptation to overspend or make large purchases that may deplete your inheritance quickly. By living within your means, you can ensure that your inheritance lasts as long as possible and provides financial security for years to come.


The opinions voiced in this article are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which strategies or investments may be suitable for you, consult the appropriate qualified professional prior to making a decision. Stratos Wealth Partners and LPL Financial do not offer tax advice or services.

There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.


Common Retirement Investment Mistakes

Common Retirement Investment Mistakes


Only one-in-four Americans (27%) feel very confident that they will have enough money to live comfortably when they retire, according to the 2020 Retirement Confidence Survey Summary Report.⁠1 While the number is up slightly from the 2018 survey (23%), it underscores a pervasive sense of uncertainty among those approaching retirement age.

While there is no single action that can boost the collective confidence of retirees, there are several key investment mistakes that, if avoided, can help maximize retirement savings and provide confidence to those who are entering their Golden Years.

Pitfall #1: Failing to Maximize Your Contribution
If you can afford to do so, contributing the maximum amount to your employer-sponsored retirement plan will increase the chances that you’ll reach your investment goal. The earlier you start, the better; it will allow your investments, and any potential earnings to grow on a tax-deferred basis.

Pitfall #2: Failing to Develop a Concrete Plan
Establishing clear goals that incorporate a time element (number of years until retirement) is necessary to create a relevant investment plan. Without such a plan, it is difficult to understand whether your savings will provide you with the living standard to which you’ve grown accustomed and for each year of your retirement.

Pitfall #3: Short-Term Investment Mindset
The stock market fluctuates; that’s a fact. And in the short-term they face a relatively high risk of price volatility. But in the long-term stocks have historically delivered relatively stable earnings. So selling off your holdings whenever the market takes a dip is a sure way to incur losses that impact your long-term goals.

Pitfall #4: The Quest for Perfection
Buying low and selling high is evergreen advice, but trying to time investment decisions on when the market will be at its lowest or highest is risky business, often leading to missed opportunities. As per #3 above, investing for the long-term can provide a more stable investment mindset.

Pitfall #5: Eggs All in One Basket
Some investors make the mistake of investing in just one fund or asset type, thereby subjecting it to high risk should the market impact their specific holding. Spreading your investment risk over a mix of assets can help manage potential loss during these sharp market swings. The key here is diversification to offset losses in a particular asset category.

With these pitfalls in mind, you are well-positioned to avoid the common mistakes of other investors and maximize opportunities for your retirement plan.



This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes. Investing involves risks including possible loss of principal. Past performance is no guarantee of future results.

There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.

This material was prepared by LPL Financial, LLC.



The Delta Factor


The après-COVID party is in full swing. Travel is booming. Restaurants are full. Real estate is on a roll. Even used cars are a hot commodity. In 2021, the Dow Jones Industrial Average (DJIA) recently topped 35,000 and other major stock hit all-time highs.

But an uninvited guest has crashed the party. Her name is Delta, and she’s out to spoil the fun. The Delta variant of the COVID-19 virus has spread rapidly around the globe. It now accounts for the overwhelming majority of new cases in the U.S. Its high rate of transmission has brought about a new wave of infections across the country. As of August 18, the number of new Covid-19 cases had risen to levels not seen since February. Ditto hospitalizations. Although the overall caseload remains well below levels seen at the peak of the pandemic, infections have skyrocketed in a number of areas, and some states are seeing record numbers of new infections.1

Critical Reaction

The first to react to the Delta wave was, unsurprisingly, Wall Street. Stocks fell sharply on July 19 following the announcement of pandemic stats, with the DJIA tumbling over 700 points, its biggest decline in almost 10 months. Prices quickly recovered and the index went on to post new highs, although volatility has since tested those highs.

More concerning is what effects the upsurge of infections might have on the economy. Even before the rebound in COVID cases, shortages of labor, computer chips, and other goods were holding back a full recovery. A new surge could bring about renewed supply chain delays. The reopening of schools and offices could be postponed or even cancelled. Already, Apple decided to delay the planned reopening of its sprawling Cupertino campus. Many other companies have followed suit.

More importantly, restrictions are being reimposed across the country on dining, entertainment, and travel. Although lockdowns and full closures seem unlikely at this stage, the uptick in cases has brought about a return to enforced social distancing, mask mandates, and restrictions on public gatherings in many areas — all of which impacts consumer confidence and demand.

Is the Party Over?

With over 70% of U.S. adults now vaccinated,2 no one expects the economic fallout to approach last year’s recession. But the Delta wave is likely to affect different areas differently.

In some southern and Midwestern states, new vaccinations have plateaued and rates remain stubbornly low, even after a recent Delta-inspired uptick. Unless they improve further, higher infection and hospitalization rates could derail economic recoveries in those areas.

State and local restrictions will also play a role. The CDC tightened its mask guidance in late July, and many areas have reinstated some restrictions. Los Angeles County and San Francisco in California have reinstituted mask mandates and other restrictions, and towns and cities in other states have followed suit. What’s more, a growing number of government jurisdictions and businesses now require workers to show proof of COVID-19 vaccination or submit to regular testing. How all these moves will impact the economy is unknown, but they are likely to have some effect on consumer spending and confidence.

Delta’s long-term impact on the economy will ultimately depend on how widely it spreads, vaccination rates, and how effective the vaccines are in preventing serious illness. To date, the vast majority of new cases, hospitalizations, and deaths have been with unvaccinated people. But breakout cases are growing, and soaring infection rates could spur the emergence of ever-new variants, which could eventually become more resistant to existing vaccines and boosters. That’s a sobering thought, but one to keep in mind as you plan for an uncertain future.





1New York Times, Coronavirus in the U.S.: Latest Map and Case Count, July 26, 2021.

2CDC, COVID Data Tracker, August 19, 2021. Represents adults 18 or older that have received at least one dose.

This material was prepared by LPL Financial. This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that they views or strategies discussed are suitable for all investors or will yield positive outcomes. Investing involves risks including possible loss of principal. Any economic forecasts set forth may not develop as predicted and are subject to change. All performance referenced is historical and is no guarantee of future results. All indexes are unmanaged and cannot be invested into directly.

 This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.

 All company names noted herin are for educational purposes only, and not an indication of trading intent or a solicitation of their products or services. LPL Financial doesn’t provide research on individual equities.



The Greening of Wall Street


The green revolution is upon us. Like it or not, the world is shifting away from fossil fuels toward renewables. Solar and wind farms are sprouting up across the globe. The major car companies are phasing out gas-powered vehicles and transitioning to hybrids or plug-ins. And the Biden administration has announced major green initiatives to support renewable energy and reduce carbon emissions.

This quantum shift has not gone unnoticed by Wall Street. In fact, investing in green businesses has taken off. A few electric car and solar companies have seen their stock prices soar as more and more investors view them as the wave of the future. Funds specializing in green and other socially responsible investments — called impact, sustainable, or ESG funds — have proliferated, allowing investors to pursue a broad-based green investing strategy. According to the Forum for Sustainable and Responsible Investment, there are now over 800 registered investment companies offering funds with ESG assets, including 718 mutual funds and 94 ETFs.1 U.S.-domiciled assets under management using ESG strategies grew from $12.0 trillion at the start of 2018 to $17.1 trillion at the start of 2020, up 42%.2

What’s Driving Growth?

Several factors are behind this dramatic growth — first and foremost, demographics. Millennials, at over 70 million strong, are coming of age and now outnumber baby boomers. This new generation is the heir to a huge asset transfer now in progress, and millennials seek to make a difference in society through the investments they make. But investor interest is also growing broadly. A recent Morningstar report found that 72% of the U.S. population expressed at least a moderate interest in sustainable investing, while a Morgan Stanley survey determined that 85% of all individual investors were interested in sustainable investing, up 10 percentage points from 2017.3

Green technologies have also become cheaper. The prices of some products have fallen dramatically, making them competitive with traditional technologies. The cost of solar power, for instance, has decreased by 80% in the past decade. That of lithium batteries is falling by 20% a year.4

What’s more, many countries are going greener. The U.S., EU, and China are setting “net-zero” emissions targets, and early this year, the Biden administration rejoined the Paris Accord, which aims to reduce greenhouse gas emissions and limit global warming.

What About Returns?

Proponents of green investing have always had to combat the notion that socially conscious investments underperform the broader universe of investments. Yet there is a growing body of evidence that suggests otherwise. In fact, a number of different studies show that sustainable funds have had comparable, or even higher returns than traditional funds. For 2020, analyses by Morningstar and Morgan Stanley indicate that ESG funds comfortably outperformed their peers. A longer-term study of ESG fund performance from 2004 to 2018 by Morgan Stanley indicated there is “no financial trade-off in the returns of sustainable funds compared to traditional funds, and they demonstrate lower downside risk.”5

Tips for Green Investing

Investing with a conscience is not that different from investing just for profit. It involves another layer of thinking and analysis, but otherwise calls for the same scrutiny that should be applied to traditional investing.

  1. Define your objectives. Being ‘socially responsible’ is a broad mandate. Different funds, companies, and strategies may stress different objectives. Some may focus on environmental factors, some on social or corporate governance. And some may be very specific. So before you choose which best suits your goals, make sure you identify what those goals are.
  2. Strike a balance. Although, in the aggregate, ESG funds have kept pace with the broader market, many individual funds or stocks have not. When researching candidates, you will want to strike a balance between performance and social objectives, and set limits as to how far you are willing to compromise on one objective to meet the other.
  3. Diversify. Just like with a traditional portfolio, green investors should also diversify their portfolios by risk and asset class, targeting an asset allocation that is in keeping with their investing time horizon and appetite for risk. ESG funds can now be found in all major asset classes, permitting investors to diversify while pursuing social causes.
  4. Work with a professional. There are thousands of companies and funds that support green causes. Choosing among them while also adhering to an investment strategy that suits your non-social goals can be complex, so you may want to work with your financial professional to assure that your choices address your unique circumstances and needs.


1Source: US/SIF, Sustainable Investing Basics, retrieved June 3, 2021.

2Source: US/SIF, 2020 Report on US Sustainable and Impact Investing Trends, November 2020.

3Source: CNBC, ‘Sustainable investing’ is surging, accounting for 33% of total U.S. assets under management, December 21, 2020.

4Source: The Economist, The Green Meme, May 20, 2021.

5Source: US/SIF, Financial Performance With Sustainable Investing, retrieved June 7, 2021.


Socially Responsible Investing (SRI)/Environmental Social Governance (ESG) investing has certain risks based on the fact that the criteria exclude securities of certain issuers for non-financial reasons and , therefore, investors may forgo some market opportunities and the universe of investments available will be smaller.


An investment in Exchange Traded Funds (ETF), structured as a mutual fund or unit investment trust, involves the risk of losing money and should be considered as part of an overall program, not a complete investment program. Amounts invested in mutual funds and ETFs are subject to fluctuations in value and market risk. Shares, when redeemed, may be worth more or less than their original cost.                       


This material was prepared by LPL Financial. This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that they views or strategies discussed are suitable for all investors or will yield positive outcomes. Investing involves risks including possible loss of principal. Any economic forecasts set forth may not develop as predicted and are subject to change. All performance referenced is historical and is no guarantee of future results. All indexes are unmanaged and cannot be invested into directly.


This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.

Inflation is on the horizon

Is Inflation on the Horizon?


The specter of inflation has long been absent from the American economy. In fact, inflation, as measured by the Consumer Price Index (CPI), has remained below 4% since 2008, has averaged only 1.74% in the past 10 years, and came in at a tepid 1.36% for 2020.1 Rather than inflation, policy makers in recent years have been more concerned with the prospect of deflation — a drop in prices — especially at the outset of the pandemic, when the inflation rate dipped below zero for three consecutive months.

But the tide may be about to shift. With the end of the pandemic in sight, renewed fears of inflation have emerged, as fiscal stimulus kicks in and the economy bounces back.

  • The yield on the 10-year U.S. Treasury bond has increased 71 basis points since the start of the year, from 0.93% on December 31, 2020 to 1.64% on March 12, 2021, stoked in part by inflation fears.2
  • A post-pandemic surge in demand is expected by many economists, as vaccinated consumers come out of hibernation and the economy reopens.
  • Restaurant, travel, and entertainment businesses are poised to bounce back, and then some, as people celebrate their refound freedoms and make up for lost time.
  • Huge stimulus packages have injected trillions into the U.S. economy, with the latest topping $1.9 trillion in aid.
  • Record low mortgage rates have helped bring about a thriving housing market, and all the spending that goes with it.
  • A booming stock market has made investors feel richer and more likely to spend.
  • Oil demand is set to tick up as people start commuting and traveling again.
  • Major infrastructure spending, a top priority of the Biden administration, is in the wings and would add further stimulus.

Not So Fast

While all these factors point to possible price hikes, a return to a 1970s-style inflationary cycle is not likely. For one thing, the U.S. economy still has a ways to go before fully recovering from the pandemic. Unemployment remains above 6%, and GDP is still well below its pre-pandemic level. A full recovery is generally not expected until 2022.

For another, different structural factors have conspired to keep inflation low in recent years, and they likely will help contain a rise in the future as well.

  • Global competition in goods and labor markets has had a negative effect on prices.
  • Technological advancement has brought down the price of goods and services. It’s also increased labor productivity, reducing unit labor cost.
  • An aging population has helped keep prices in check, in that elders tend to spend less in general.
  • The Federal Reserve has shifted away from its inflation-hawk policies, and kept interest rates low.
  • Since inflation has been so low for so long, inflation expectations are low, and businesses are less inclined to increase prices as a matter of course.

This is not to say that inflation won’t edge up in the coming months. Many economists predict a surge in late spring, when year-over-year comparisons will be magnified by the negative readings in 2020. But they also predict that inflation will eventually settle back toward the Fed’s 2% target.

Staying Ahead of Inflation

For many, inflation fears are less about an uptick in today’s prices than they are about an erosion in the value of tomorrow’s savings. Over time, even a moderate amount of inflation can take a toll on an investment portfolio. That’s why it’s important to maintain a growth element in your investment mix.

Over the long run, stocks may provide the best potential for returns that exceed inflation. While past performance is no guarantee of future results, stocks have historically provided higher returns than other asset classes. Between 1926 and December 31, 2020, the annualized return for a portfolio composed of stocks in the S&P 500 index was 10.34% — well above the average inflation rate of 2.86% for the same period. The annualized return for long-term government bonds, on the other hand, was only 5.76%.3

Keep in mind that stocks do involve greater risk of short-term fluctuations than other asset classes. Unlike a bond, which promises a fixed return if you hold it until maturity, a stock can rise or fall in value based on daily events in the stock market, trends in the economy, or problems at the issuing company. But if you have a long investment time frame and are willing to hold your ground during short-term ups and downs, you may find that stocks offer the best chance to stay ahead of inflation.


1Source: Federal Reserve Bank of Minneapolis, Consumer Price Index, 1913-, retrieved February 23, 2021.

2Source: U.S. Department of the Treasury, Daily Treasury Yield Curve Rates.

3Source: DST Retirement Solutions, LLC, an SS&C company. Stocks are represented by the S&P 500 index. Bonds are represented by a composite of returns derived from yields on long-term government bonds, published by the Federal Reserve, and the Bloomberg Barclays U.S. Government Long index. Inflation is represented by the change in the Consumer Price Index. Past performance is no guarantee of future results.


This material was prepared by LPL Financial. This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that they views or strategies discussed are suitable for all investors or will yield positive outcomes. Investing involves risks including possible loss of principal. Any economic forecasts set forth may not develop as predicted and are subject to change. All performance referenced is historical and is no guarantee of future results. All indexes are unmanaged and cannot be invested into directly.

Two different approaches to investing or growth and value

Growth vs. Value: Two Approaches to Stock Investing


Growth vs. Value: Two Approaches to Stock Investing

For growth stock investors, it’s been a heady time. Growth stocks recorded a total return of 33.5% for the year ended December 31, 2020, significantly eclipsing value’s 1.4% showing. And over the past five years, growth has outperformed value by an average of over 8 percentage points.1

Does this mean that value investors should rethink their strategy? Probably not. As history has shown, leadership between growth and value tends to shift back and forth, depending on the stage of the market and economic cycle. Which of the two outperforms the other is ultimately attributable to their fundamental characteristics.

Growth and Value Defined

Growth stocks represent companies that have demonstrated better-than-average gains in earnings in recent years and that have the potential to continue delivering high levels of profit growth.
Key characteristics of growth funds include:

  • Higher prices than the broader market. Investors are typically willing to pay high price-to-earnings multiples with the expectation of selling shares at even higher prices as the companies continue to grow.
  • High earnings growth records. While the earnings of some companies may be depressed during periods of slower economic improvement, growth companies may have the potential to achieve high earnings growth in different economic environments.
  • More volatile than the broader market. The risk in buying a given growth stock is that its lofty price could fall sharply on any negative news about the company, particularly if earnings disappoint on Wall Street.

Value fund managers look for companies that have fallen out of favor but still have good fundamentals. The value group may also include stocks of new companies that have yet to be discovered by investors.

Key characteristics of value funds include:

  • Lower prices than the broader market. The idea behind value investing is that stocks of good companies will bounce back in time if and when their true value is recognized by other investors.
  • Priced below similar companies in their industry. Many value investors believe that a majority of value stocks are created due to investors’ overreacting to recent company problems, such as disappointing earnings, negative publicity, or legal problems, all of which may raise doubts about the company’s long-term prospects.
  • Somewhat less risk carried than the broader market. However, as they take time to turn around, value stocks may carry more risk of price fluctuation than growth stocks.

Growth or Value… or Both?

Which strategy — growth or value — is likely to produce higher returns over the long term? The battle between growth and value investing has been going on for years, with no definitive winner. History shows us that growth stocks, in general, have the potential to perform better when interest rates are falling and company earnings are rising. However, they may also be the first to be punished when the economy is cooling. Value stocks, often stocks of cyclical industries, may do well early in an economic recovery but are typically more likely to lag in a sustained bull market.

Growth vs. Value Take Turns (2)

growth vs value


For long-term investors, a balanced approach may be most appropriate. Combining both growth and value stocks, or stock funds, may allow you to take advantage of different economic cycles and smooth out returns over time. Talk to your financial professional to see how you might best position your portfolio.



1Source: DST Retirement Solutions, LLC, an SS&C company. Based on total returns of the S&P 500 Growth and Value indexes.
2Source: ChartSource®, DST Retirement Solutions, LLC, an SS&C company. Based on 12-month rolling returns from 1990 to 2019. Growth and value stocks are represented by composites of the S&P 500/Barra Growth and Value indexes and the S&P 500 Growth and Value indexes, which are unmanaged indexes generally considered representative of growth and value large-cap stocks. It is not possible to invest directly in an index. Index performance does not reflect the effects of investing costs and taxes. Actual results would vary from benchmarks and would likely have been lower. Stock investing involves risk, including loss of principal. Past performance is not a guarantee of future results. (CS000047)
Investing in mutual funds involves risk, including loss of principal.


This material was prepared by LPL Financial. This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that they views or strategies discussed are suitable for all investors or will yield positive outcomes. Investing involves risks including possible loss of principal. Any economic forecasts set forth may not develop as predicted and are subject to change. All performance referenced is historical and is no guarantee of future results.

federal debt

Should Investors Worry About Federal Debt?


The National Debt Is at Record Levels. Should Investors Be Concerned?


For years, the mounting federal debt burden has been a major point of contention between political parties, economists, and fiscal planners. Some claim the escalating debt is a time bomb — a mortgage on America’s future. Others see it as justifiable and sustainable — even helpful in stimulating long-term growth. Over time, both sides have flip-flopped, so that today, fiscal conservatives and spending hawks can be found on both sides of the aisle.

Meanwhile, the number keeps growing. In fact, the U.S. national debt has grown every year since 1957, when it was a mere $217 billion, or 57% of gross domestic product (GDP) at the time.1 Today, the figure has grown to over $26 trillion, or 98% of GDP, and is on target to exceed GDP in 2021.2 Debt ceilings imposed by Congress over the years have done little to stop the advance, as they are temporary, and each party justifies its own reasons for borrowing more.

And this year, massive pandemic aid packages have catapulted debt levels into the stratosphere. The Congressional Budget Office (CBO) projects a federal budget deficit of $3.3 trillion in 2020 alone, more than triple the shortfall recorded in 2019. At 16% of GDP, the deficit in 2020 would be the largest since 1945 and well above its 50-year average of 3%.2

Are Deficits Necessarily Bad?

Traditional thinking views federal debt as a necessary evil — helpful in some ways but harmful in others. On the plus side, borrowing is a channel for governments to stimulate the economy, and to respond to shocks like the current pandemic. It’s also much more politically palatable than raising taxes. On the downside, however, excessive borrowing can slow income growth and crowd out other spending priorities. It can also cause interest rates to rise and ignite inflation, in effect, placing a burden on future generations.

The new thinking — or rationale some may call it — is that deficits don’t matter that much, as long as interest rates and inflation remain low. The justification is that today’s borrowing and spending will stimulate tomorrow’s economy, generating more tax dollars, which can then be used to pay down the debt.

But both sides agree on one thing: at some point the debt burden gets too big to sustain. Net interest expense on debt held by the public was about $375 billion in 2019, or 8.5% of total federal outlays — not an onerous burden. And, at 98% of GDP, total outstanding U.S. debt pales in comparison to an estimated 237% of GDP in Japan, where inflation is low and unemployment remains well under 5%. But then there’s Argentina or Greece, to name just two examples, which in the past incurred so much debt that they defaulted on interest payments, restructured, and had to endure painful austerity programs to get back in the black.

Few today question the need to stimulate the economy in the face of the economic ravages brought on by the pandemic. And at today’s exceptionally low interest rates, borrowing is cheap. But at some point, interest rates may rise and the debt service will become much more expensive.

The Takeaway for Investors

The real downsides of deficits for investors are rising interest rates and inflation. When interest rates increase, bond prices fall. Stock prices also tend to fall in a rising rate environment. Meanwhile, inflation erodes the value of just about any investment and can take a particularly hard toll on retirees or anyone living on a fixed income. There is also the possibility of future tax hikes to pay for the mounting debt.

If and when any of this might happen is unclear. The U.S. dollar is in the enviable position of being the world’s reserve currency, and investors domestically and across the globe continue to gobble up U.S. Treasuries, even at today’s historically low rates. That means that demand for U.S. debt remains strong and interest rates are likely to remain low. What’s more, deflation is more of a concern right now than inflation. But if inflation were to kick in and the Federal Reserve needed to raise rates, it would likely coincide with a much stronger economy that would make debt payments easier to bear.

So, for now at least, the deficit does not pose an immediate problem for investors. But it’s worth keeping an eye on as the country, and the world, get back on their pre-pandemic feet.


1Source: The Balance, US National Debt by Year Compared to GDP and Major Events, July 30, 2020.

2Source: Congressional; Budget Office, An Update to the Budget Outlook: 2020 to 2030, September 2020.





This material was prepared by LPL Financial. This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that they views or strategies discussed are suitable for all investors or will yield positive outcomes. Investing involves risks including possible loss of principal. Any economic forecasts set forth may not develop as predicted and are subject to change. All performance referenced is historical and is no guarantee of future results.


Irrational Exuberance

Irrational Exuberance: Stocks and the Economy


Stocks and the Economy: Irrational Exuberance

When Federal Reserve chairman Alan Greenspan made his famous pronouncement on the stock market back in 1996, the economy was strong and the Internet bubble was just starting to inflate. In fact, “irrational exuberance” would seem to be a more fitting label for today’s market.

Between March 23 and June 8, the S&P 500 rose over 44%, putting it less than 5% shy of its all-time high set in February. Meanwhile, the Dow Jones Industrial Average topped 27,500, just 7% short of its record and the NASDAQ Composite hit new highs. Although markets have taken some jolts since then, stocks are still doing surprisingly well.1

The economy, however, presents a very different picture. Unemployment in the U.S. skyrocketed to 14.7% in April and then fell slightly to 13.3% in May, still the highest levels since the Great Depression. Institutional loan default rates are up sharply, and bankruptcy filings are expected to follow suit, especially among retailers. The Congressional Budget Office expects second quarter Gross Domestic Product (GDP) to tumble by 12%, its largest drop since the early 1930s, and the Federal Reserve has cautioned that it could take time for the economy to bounce back, especially if second-wave virus outbreaks emerge. In fact, many economists are calling for a drawn out recovery, with fits and starts, as secondary waves of infections keep some businesses shuttered and scare consumers away from stores and travel.

To put the disparity in perspective, consider some recent bear markets and their economic fallout. In the 2007-2009 financial crisis, the S&P 500 lost 56% of its value. Yet unemployment never topped 10%, and GDP fell only 2.5% in 2009. Or, consider the dotcom bust, when the S&P 500 fell 49% (and the NASDAQ Composite lost three quarters of its value). The ensuing economy saw unemployment top out at 6.3%, while annual GDP growth remained positive.

Clearly, the current market would seem to be at odds with economic reality. But there are several different factors at work here.

Stocks Are Not the Economy

As Nobel Prize winning economist, Paul Samuelson, famously quipped back in the 1960s: the stock market has predicted nine of the past five recessions. Paul Krugman, another Nobel laureate, suggests three rules when considering the economic implications of stock prices: “First, the stock market is not the economy. Second, the stock market is not the economy. Third, the stock market is not the economy.”2

As both men emphatically point out, the dynamics driving stocks differ from those driving the economy. The major market indexes such as the Dow Jones Industrial Average (DJIA) or the S&P 500 reflect a limited segment of the economy, and the majority of stocks are owned by a small percent of the population. The widely followed DJIA, for instance, is composed of just 30 blue-chip stocks. Even the broader S&P 500 index contains only the largest of U.S. companies. Small businesses, which represent the lion’s share of U.S. businesses and employ almost half of Americans working in the private sector, have little representation in stock indexes. Yet it is those smaller businesses, many with limited cash reserves, which are taking the biggest economic hit from the pandemic.

Stock index prices are also driven largely by constituent companies’ earnings and profits, which may have little to do with economic metrics such as unemployment. Furthermore, stocks are highly sensitive to interest rates and monetary policy changes, which typically take much longer to be felt in the economy.

Government Moves to Shore Up the Economy Have Been Unprecedented

The optimism of investors in the face of economic freefall may be justified in part by the bold steps taken by the Federal Reserve and Congress to stem the fallout from lockdowns and closings. The Federal Reserve has slashed interest rates, increased the money supply, and taken different measures to support capital markets. For its part, Congress has passed unprecedented stimulus legislation, boosting weekly unemployment checks by $600, and passing such bills as the CARES Act. Meanwhile, the Small Business Administration is also supporting businesses through its Paycheck Protection Program. Collectively, such moves — and many others by state and local governments — not only provide immediate relief to millions of companies and workers, they also send the message to investors that the government is willing to take whatever steps are necessary to get the economy back on track.

Stocks Are Still the Investment of Choice

Long before the coronavirus struck, anyone seeking return was turning to stocks. Yields on bonds and cash had been historically low for years. Now, with recent interest rate cuts, that trend is more pronounced than ever. As of June 1, the interest rate on 10-year U.S. government bonds was only 0.66%, down from more than 3% in late 2018.3 After inflation is factored in, that works out to a negative return. Meanwhile, higher-yield bonds are riskier than ever as cash-strapped issuers may struggle to make interest payments. So it’s no wonder that capital continues to gravitate toward stocks — even in the face of economic turmoil — since they appear to be the only game in town with potential for return-hungry investors.

The Road Ahead

Whether stocks will continue on a divergent path from the economy is anyone’s guess. Ultimately, the longer-term health of both the stock market and the economy will largely hinge on the success in slowing and stopping the pandemic. But any resolution will take time, and there will likely be bumps in the road.

Also keep in mind that trying to time the market’s ups and downs is a losing game. Anyone heeding Greenspan’s warning back in 1996 would have missed out on three of the best-performing years in recent stock market history. So stick to your plan, expect volatility, and consult with a professional before making any major financial decisions.




1Google Finance.

2New York Times, Crashing Economy, Rising Stocks: What’s Going On?, April 30, 2020.

3U.S. Department of the Treasury, Daily Treasury Yield Curve Rates, June 1, 2020.


This material was prepared by LPL Financial. This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that they views or strategies discussed are suitable for all investors or will yield positive outcomes. Investing involves risks including possible loss of principal. Any economic forecasts set forth may not develop as predicted and are subject to change.

References to markets, asset classes, and sectors are generally regarding the corresponding market index. Indexes are unmanaged statistical composites and cannot be invested into directly. Index performance is not indicative of the performance of any investment and do not reflect fees, expenses or sales charges. All performance referenced is historical and is no guarantee of future results.


The Standard and Poor’s 500 Index (S&P500) is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.


Dow Jones Industrial Average is the most widely used indicator of the overall condition of the stock market, a price-weighted average of 30 actively traded blue chip stocks, primarily industrials. The 30 stocks are chosen by the editors of the Wall Street Journal. The Dow is computed using a price-weighted indexing system, rather than the more common market cap-weighted indexing system.


The NASDAQ-100 is composed of the 100 largest domestic and international non-financial securities listed on the NASDAQ Stock Market. The index reflects companies across major industry groups including computer hardware and software, telecommunications, retail/wholesale trade and biotechnology, but does not contain securities of financial companies.


Gross Domestic Product (GDP) is the monetary value of all the finished goods and services produced within a country’s borders in a specific time period, through GDP is usually calculated on an annual basis. It includes all of private and public consumption, government outlays, investments and exports less imports that occur within a defined territory.



The CARES Act and your Savings Plan

The CARES Act and Your Retirement Savings

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Think Twice Before Tapping into Your Retirement Savings

New legislation — the CARES Act — permits qualified individuals to take early distributions from their retirement assets, such as their 401(k) or individual retirement account (IRA) — penalty free. The rules – which sunset after 2020 – are designed to help the many cash-strapped Americans who have suffered financially as a result of the coronavirus epidemic. But tapping into your retirement savings has its costs, and there may be better ways to shore up your short-term cash flow.


The Act permits qualified individuals to take distributions of up to $100,000 from their IRA or workplace retirement savings plan (if allowed by the plan) without incurring the 10% additional tax on early distributions that would otherwise generally apply to distributions made prior to age 59½. Amounts withdrawn may be repaid within three years, if desired. Note, however, that ordinary income taxes apply to all pretax funds withdrawn, although taxpayers may elect to report the income over three tax years instead of one.

These coronavirus-related distributions may only be made to a “qualified individual” on or after January 1, 2020, and before December 31, 2020. A qualified individual includes anyone who has been diagnosed with the SARS-CoV-2 virus or with coronavirus disease 2019 (COVID-19) by a test approved by the Centers for Disease Control and Prevention, or whose spouse or dependent has been diagnosed. It also includes individuals who experience adverse financial consequences as a result of: being quarantined, furloughed, laid off, or having work hours reduced due to SARS-CoV-2 or COVID-19; being unable to work on account of a lack of childcare due to the virus or disease; closing or reducing hours of a business owned or operated by the individual due to the virus or disease; or other factors as determined by the Treasury Secretary.

The Act also relaxes rules on borrowing from a retirement plan account. If authorized by the plan, qualified individuals may borrow as much as $100,000 or 100% of their vested account balance. These limits are effective from March 27, 2020 to September 22, 2020.

Additionally, qualified individuals with an outstanding loan (on or after March 27, 2020) may delay loan repayments due during the period from March 27, 2020 to December 31, 2020 for up to one year.

Consider the Costs

Withdrawing or borrowing money from your retirement account may seem like an easy way to shore up your short-term cash flow, but there are long-term costs to consider. Most notably, if you withdraw funds and don’t repay them, you’ll be reducing your retirement nest egg, perhaps significantly. And making up for withdrawn balances means contributing more — potentially much more — down the road. That’s because time is a critical ally when saving for retirement. The more time your contributions and earnings have to grow, the better the chance you will be able to reach your retirement savings goals.

If you don’t withdraw the funds altogether, but just borrow them from your plan, you must generally pay back the loan within five years, or earlier if you lose your job or leave your employer voluntarily before the loan is paid back. Otherwise, it will be considered a taxable distribution, requiring you to pay income tax on the amount of the loan. What’s more, current law protects funds held in a qualified plan from creditors in the event of a bankruptcy. So if you are experiencing extreme financial difficulty, keeping funds in your qualified plan may be one way to limit the damage. Even if you’re allowed to defer some loan payments because of the CARES Act, you’ll want to weigh the potential downsides before borrowing.

There May be Better Alternatives

As any financial professional will attest, borrowing from your future to fund today’s temporarily negative cash flow is generally not a good strategy. Instead, consider other sources of funds such as:

  • Short-term loans
  • Tapping into a home equity line of credit
  • Borrowing from friends or relatives

You also may want to consider ways to reduce current costs until your cash flow improves.

  • Reduce credit card payments by consolidating balances on a low-rate card
  • Contact current lenders to arrange for a temporary payment freeze
  • Cut back on discretionary expenses and make a budget

Also keep in mind that the provisions of the CARES Act are temporary. So if the economic fallout from the coronavirus epidemic has left you strapped for cash, try to maintain a long-term focus and stick to your plan.



This material was prepared by LPL Financial.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual security. To determine which investment(s) may be appropriate for you, consult your financial professional prior to investing.

This information is not intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor.

Managing your finances during COVID

Managing Finances during COVID19

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Smart Financial Strategies for Unexpected Events

A once-in-a-lifetime event such as the coronavirus pandemic forces us to reassess many things we may have taken for granted. Most of us take our personal good health for granted. Many of us assume we will always get by financially, that we will always be able to earn money in some way, and that, in a worst-case-scenario, the government will be there to step in and help.

But assumptions are always there to be challenged. And adverse situations always should teach us some lessons. What lessons can we take away from the current crisis that will help us better prepare for an event that appears suddenly and upends many of our day-to-day activities? Specifically, what steps should we take to ensure that we will have enough money set aside to see us through another crisis? What can we do going forward so that we will be able to pay our bills and handle unforeseen expenses if we lose our jobs? Why is it a good idea to limit our debt burden, and how can we achieve this goal?

Here are some ideas that could jump-start your thinking.

Spend Less Than You Earn

It’s easier said than done. But it is one of the most effective ways of building up your savings and your personal wealth. You may have to reevaluate what you consider important — especially if shopping has always been enjoyable for you. You can still shop, just not as often and only for items that you or your family members truly need.

Set yourself a goal of setting a percentage of your pay aside for savings. If need be, start small so you don’t get discouraged. Then, increase the percentage you save after a few months.

Look for Ways to Boost Savings

Now that you have decided to spend less than you earn, you can start to look seriously at ways to increase your savings. For example, you may be able to find some extra cash by shopping around for better rates on your utilities, cell phone service, and auto or home insurance. If your credit score is good, you may be able to find a credit card with a lower interest rate than you currently pay. And, if you can afford the closing costs, refinancing your mortgage could potentially unlock some solid savings.

If you do not have a budget, now is the time to create one. A budget can help most people organize and control their spending. If you track your spending for a few months, you can use that information to cut back on impulse buying and spending on nonessential items and redirect that money to savings and investments.

Be sure to direct some of that money to your own emergency fund. An emergency fund should be used to pay for unexpected, large expenses so you don’t have to borrow the money. Financial experts say that, ideally, your emergency fund should be able to cover six months of living expenses — including mortgage and auto payments. It sounds like a lot to save, but you may be surprised how much you can save when you focus on that goal.

Take Control of Your Debt

Debt is like savings in reverse. When you are in debt, you keep paying interest on goods and services that you probably consumed two or three years ago. If you carry consumer debt, now is the time to get a handle on that situation. You are not in a good place if:

  • Your credit card balance is growing
  • You are paying only a minimum on your bills
  • You are missing payments or paying late.

For every loan and credit card you carry, find out how much you owe, the interest rate, and the payment schedule. You can use this information to figure how much money you can afford to put toward paying down your debt and how long it will take. These strategies can help:

  • Pay off the card with the highest interest rate first;
  • Transfer your balance to a card with a lower interest rate; and/or
  • Pay more than the minimum amount. Paying more than the minimum is critically important since the less you pay, the greater the interest will be and the longer it will take to pay off your balance.

Every few months, check your expenses to see if you can find other funds to use to reduce your debt. If possible, consider part-time work and use what you earn to pay off your debts. In the meantime, do not take on additional debt. Try using cash (or your debit card) instead of credit for as many transactions as possible.

Protect Your Earning Power

If you are a working parent, your family’s financial well-being is tied closely to your ability to make a living. If you were to have an accident or fall ill, your disability could destabilize your finances. If you do not have a private disability income insurance policy, consider getting one. The payments from the policy would help pay for critical everyday expenses when your disability prevents you from working and collecting a salary. Before you purchase insurance, though, make sure you understand the policy’s definition of disability and all the other policy terms.


You also may want to name someone you trust to make financial and health care decisions if you become unable to make them for yourself. Talk to your attorney to learn more about the options available in your state. And you might consider setting up a living trust that allows the trustee of the trust to handle your financial affairs if you cannot.

Review Your Investing Strategy

Finally, remember that risk is a given in investing. Some investments carry a higher risk of loss than others. However, riskier investments typically offer higher potential returns than more conservative alternatives. When you invest you have to decide how much investment risk you can comfortably handle while seeking higher returns, and choose your investments accordingly. It helps to review your investing approach and your tolerance for possible investment losses at least once a year.

Facing the Future

Every crisis is different. However, those who think ahead and have some strategies in place to deal with the financial aspects of a crisis are potentially more likely to do better than those who do not plan.


This material was prepared by LPL Financial.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual security. To determine which investment(s) may be appropriate for you, consult your financial professional prior to investing.

The cost and availability of Life Insurance depend on many factors such as age, health, and amount of insurance purchased. In addition to premiums, there are contract limitations, fees, exclusions, reductions of benefits, and charges associated with policy. And if a policy is surrendered prematurely, there may be surrender charges and income tax implications. Any guarantees are contingent upon the claims-paying ability of the issuing company.