Published by Taylor Financial Group
Happy New Year! We hope you all had a wonderful time celebrating the end of 2017 and welcoming 2018. As we start this New Year, we know you’re probably thinking about new resolutions and goals. So are we! In particular, we’ve been thinking about how we can best help you save and invest your money to help you pursue your short and long-term goals.
Before we talk about some of our investment ideas for 2018, we first want to point out a few important things to keep in mind. For starters, we need to remember that the Fed will likely raise interest rates several times throughout this New Year. The good news is that rising interest rates are a sign of a strong economy. But it also means we can expect some changes in the stock market, including increasingly expensive markets, the return of volatility, and a possible resurgence of commodities. Investing may cost you more, so you need to be extra careful about how and where you invest.
The 401(k) Plan – Max Out Your Contributions
We have always encouraged our clients to invest in their company sponsored 401(k) plans, because we know what a great savings tool it can be. And we continue to encourage it, especially since the IRS has raised the annual contribution limit to $18,500 ($24,500 if you’re 50 years of age or older). Not to mention that this contribution limit does not include the amount your employer matches. Many employers offer match programs, where they will match your contribution dollar for dollar up to a certain percentage. That’s essentially free money! If you haven’t taken advantage of your 401(k) plan and maxed out your contributions in the past, we urge you to do it this year! You won’t regret it. And also remember that most employers are now offering the opportunity to make after tax contributions to 401(k) plans up to $55,000 total in contributions.
Alternative Investments May Start Making Sense Again – Keep Your Portfolio Diversified
Although the stock market has been good to investors during the last eight years, alternative investments, which include private equity, real estate, commodities and hedges, shouldn’t be forgotten. They’re basically the opposite of conventional investment types, like stocks, bonds and cash. While the stock market and other conventional investments might be great investment vehicles and have performed extraordinarily well, they shouldn’t necessarily be your only investment vehicles moving forward. We think alternative investments are a great way to diversify the portfolio, especially since they are not normally impacted by the equity market. So, if the market experiences losses, the alternative investment potentially serves to offset the loss and create a balance in the portfolio, which may come in handy during the next several years.
International and Emerging Markets – Other Countries Pay Too
Investing in international and emerging markets essentially means that you are investing in developing countries, many of which have participated in the synchronized global growth story. And this has its benefits. The two main benefits are the potential for high growth and the obvious diversification – economic downturns in one country or region can be offset by growth in the other. In the past year, we’ve been advising more clients to diversify their portfolios with international and emerging market investments, and we intend to continue that trend this year because we have seen the benefits firsthand. Obviously, like with any investment, there are also associated risks, including political risk, economic risk, and currency risk. But we monitor and manage the risks closely and believe that overseas markets are providing good value at this time.
Commodities – Basically Good (Get it?)
A commodity is a basic good (now do you get it?) that can be imported and exported and is interchangeable with other commodities of the same type. They are most often used as inputs in the production of other goods or services. Some examples of commodities include oil and natural gas, gold, beef and grains. In the last year, we started inserting commodities into clients’ portfolios for the first time since the financial crisis. And we continue to think this is a good idea for most clients. Stay tuned!
Cash Access – Everyone Needs Some Cash Sometimes
We don’t love leaving cash un-invested. But having easy access to some cash is necessary and important. It’s a matter of being ready for the unexpected. That’s why we always encourage our clients to open up a line of credit, which can give you access to cash you may need, without having to keep your cash sitting in a regular bank account, wasting its investment potential.
We’re always considering new (and old) investment ideas, and trying to figure out how to most effectively manage our clients’ portfolios. After all, that is our job! So, anytime we think of something new, we’re sure to share it with you. In the meantime, if you have any questions about these investment ideas or anything else, give us a call right away. We want to make sure you’re lined up to work toward reaching your goals in 2018.
Kiplinger, The 5 Best Investments You Can Make in 2018, December 2018
Investopedia, Alternative Investment / Commodity, December 2017
Ameriprise, Emerging Markets 101, December 2017
Distributions from traditional employer sponsored retirement plans are taxed as ordinary income and, if taken prior to reaching age 59 ½, may be subject to an additional 10% IRS tax penalty.
Additional risks are associated with international investing, such as currency fluctuations, political and economic stability, and differences in accounting standards.
Direct trading of commodities in Advisory Accounts is not permitted by CWM, LLC. Direct trading of commodities is not permitted for Cetera Advisor Networks LLC representatives.
The views stated in this letter are not necessarily the opinion of Cetera Advisor Networks LLC and should not be construed directly or indirectly as an offer to buy or sell any securities mentioned herein. Due to volatility within the markets mentioned, opinions are subject to change without notice. Information is based on sources believed to be reliable; however, their accuracy or completeness cannot be guaranteed. Past performance does not guarantee future results.