Welcome back to Part Seven of our “Back to Basics” series .. we hope you’ve enjoyed the First Six which started with all about “The Emergency Fund” in Part 1 … Part 2 being “Protection Planning” and Part 3 discussing All about Debt Planning or “The Good the Bad and the Ugly of Debt”, Part 4 Retirement Planning … Part Five, Back to Basics Education Planning, Part Six, Estate Planning Made Easy and now, the next to last Review… Investing – Not to Worry we will keep this simple and straight forward…
As a reminder this is a high level Financial Planning Education like overview, starting with the basics of and we will continue into advanced topics in order of Planning Importance.
Investing – It’s Not that Hard – Many Make Paralysis through Analysis
The most important part, save as early and as much as you can and make sure you can make it through the bad times without hitting the eject button.
Investing, specifically investing in the capital markets, can sometimes seem extremely confusing and often times can have paralysis through analysis.
In the spirit of staying with our back to basics theme, we are once again going to lay this out and have what we think very easy to understand format.
Stocks versus Bonds
While we realize there are many different types of investments, for the subject of this series were just going to keep it straight forward and talk about the basic two stocks and bonds.
Stocks a.k.a. Equities
These investments can be made via indexes, individually, mutual funds or various other wrappers .. the most important thing to understand about stocks also known as equity investments, are they for ownership of publicly traded companies.
The second most important thing to know that this asset type is they can be volatile. Major indexes can endure drop by 40 even 50% at times.
Allocations to these instruments should be made with this in mind.
All of the above being said, generally the younger and longer-term … the greater an allocation can be made to these higher volatile but generally greater returning vehicles.
Bonds a.k.a. Fixed Income
Just like stocks, bonds can be wrapped in indexes, mutual funds, individual and there are various different types.
Bonds are the tortoise, whereas stocks are the hare. Generally bonds have a much lower risk profile and therefore are much less volatile, especially with higher quality bonds.
Lower quality bonds, also known as high-yield bonds have characteristics more similar to stocks and should be thought of that way during allocations.
The Most Important Part of Investing – KISS
While many analysis dig so deep into investments that it makes your eyes glaze over, there are really two important parts of investing. KISS – Keep is simple silly
- 1. Save as much as you possibly can, and s early as you can.
- 2. Make sure your allocation above is such that during rough rainy times, a.k.a. slowdown/recession you do not eject and sell. Our human nature of fight or flight will take you out of your investment portfolio at exactly the wrong time if you are over allocated to risky investments.
There you have it…. The keys to investing and investment!
John A. Kvale CFA, CFP
Founder of J.K. Financial, Inc.
A Dallas Texas based fee only
Financial Planning Total Wealth
Management firm.
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February 2022 Financial Planning and Capital Market Review – By John Kvale CFA, CFP
Hello and Welcome to our February 2022 … Financial Planning and Capital Market Update!
If you are too busy to read, feel free to listen as we describe our post and thoughts in friendly podcast audio format as well as Video!
Newbies –
We like to articulate our thoughts and review on a Monthly basis our Financial Planning Tips, Capital Markets thoughts and current events!
Hope you enjoy!
February 2022 Video
YouTube
Financial Planning Tip(s)
Third In Back to Basics Series – “Debt Planning”
The third post of a neat (well we think so) new idea, series we discuss “Protection Planning” !
This series is a review of the basics, and will serve as somewhat of a semester study of the Financial Planning foundations all the way to more advanced topics later in the series…. We plan on a mid month release of each part and somewhere south of double digit parts…. possibly with a video added to each for additional insights…. thanks in advance for sharing with those who may find this series helpful….
In this Debt Planning section we cover from a high level …
The Good, the Bad and the Ugly Forms of Debt
Yes there are some debts that or ok, but there are also some that are very much sinners….
Review that Social Security Statement
In this annual reminder post, receiving a weekend email alert directly form the Social Security Administration our review was set in motion and a new post was born….
Happily as mentioned in the post, the SSA had updated the site and there are really neat new features such as a graph for delayed benefits and a neat spousal calculator.. Well done guys!
Please be sure to take 5 minutes and review that your hard earned earnings are being credited to your Social Security Benefit/Number!
Capital Market Comments
Interest Rates Jump Ahead of Fed – Short Term Pressure on Bonds Long Term Gain
While this post concerning how the bond markets, more specifically the two year and ten year treasuries front run the FOMC (Federal Open Market Committee) we also want to remind that such movement, especially seen in the two year treasury puts pressure (lowers) on the value of the bond but also ups the income from the bond……
So initial headwind, and eventual tail wind…yay
Re-Review “The Anatomy of a Slowdown/Recession” the Snap Back
With market jitters creating headlines and lower values, in this post we reviewed our luckily timed lead article in our Q 1 2022 Newsletter article, called the “Anatomy of a Slowdown”
The main purpose of the article and the re-run is to remind everyone INCLUDING OURSELVES, slowdowns (markets dropping in value) do occur, and while we don’t want them to, they do anyway!
In this post, we review three very large what we coined snap backs…. large rallies of 5%-to over 10% which are for some reason very confusing during slow down times and also tend to totally ignore headlines…
No idea for sure WHY they happen, just know they do … thought worth reminding as some great questions came in on the subject.
Have a Great Day, Talk to You at the End of March! Going fast this year!!!
John A. Kvale CFA, CFP
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Posted in Audio, Back to Basics, Clients/Clients Only, Education, General Financial Planning, Investing/Financial Planning, Market Comments, Monthly Review, Podcast, Retirement Planning, Video
Tagged 10 Year Treasury, 2 Year Treasury, Back to Basics, Bonds, FOMC, Interest Rates, Recession, Retirement Planning, Slowdown