Fixed investments going higher
Growing Business Across the Pond
Carly Snyder and CAG Marketing recently traveled to Germany to help a client with a product launch. I can remember the first time I met with Carly to discuss my business, I was struck with the realization that I had been operating the business within a self-constructed mental fence, and suddenly the fence was torn down. It seems fitting that within her first year of CAG Marketing she is helping clients expand to new markets. While she was over there, she snapped a picture of a gas station. Keep in mind they sell gas in liters in Europe. If you feel bad about filling up at the pump in the U.S., maybe this will make you feel better! Invest in energy anyone? You can email Carly Snyder at csnyder@crosbyadvisory.com or visit marketingcag.com.
Fixed interest products going higher
Money market mutual funds invest in highly-liquid, near term debt or credit instruments and are designed to be low risk. Money market funds are priced so that one (1) share is valued at $1.00. Our Schwab money market presently pays around 3% with rates going higher as the Federal Fund Rate continues to climb. Money market funds can be a great place to store cash in uncertain times as they can be sold and liquidated in one trading day. The trend of competitive rates within fixed or contractually guaranteed products will continue to rise in the near-term. Fixed annuities, for example, can now be purchased with interest rates of 5% or higher. One of our favorite short-term products for those who qualify is still our single premium indexed life contract because it provides contractual interest, tax-deferred growth, no surrender charge period, and of course a tax-free death benefit.
Retiring in the next two years with a pension? Consider this year.
Pension plans are required to recalculate their lump sum options to pension holders at least annually. Typically, that lump sum doesn’t change much from year to year, especially over the past decade when interest rates remained historically low. With annuities, the future value of money is less if interest rates are high. Conversely, the future value of money is high when interest rates are low. Since interest rates have risen dramatically, pension holders are likely going to find their lump sum option drops upon 2023s recalculation period. If you are sitting on the fence about retirement, it would be worth your due diligence to run the numbers. Keep in mind there are other variables to consider when choosing to retire aside from pension options, so don’t decide solely on pension payouts. It is estimated that 15 to 20% of Americans have a pension, if you are one of them, your financial advisor can help you choose the right option for you. Nate discusses this topic in a recent Dynamic Growth Podcast. You can listen to it here.
Active Management Back in Favor
Since 2009 Vanguard and BlackRock have made a fortune marketing passive investment funds to investors bolstered by accommodative monetary policy by the Federal Reserve. Their marketing push was backed by the fact that it is very hard to beat the overall market during a bull market. The period from 2009 to 2021 marked the longest bull run in history. Then something happened. The prepackaged advice some retirees would get is to place 60% of their portfolio in stocks and 40% in bonds. This way when stocks have a poor year you can pull income from bonds without having to sell investments at a loss. Bonds apparently didn’t get that memo, as they have suffered their worst year in our lifetime (no matter how old you are). The combination of inflation, and rising interest rates have produced double-digit losses in mid and long-duration bonds. Set-and-forget strategies work when asset classes behave as they are expected. When they don’t, having an active hand guiding the ship for other alternatives has proven valuable in 2022.
Reminder: For investors with non-qualified (non-IRA) accounts the end of the year is a great time to sit down with your advisor to review tax loss harvesting opportunities. Current tax law allows some investors to offset capital gains and income. Note that if you have taxable income under $41,675 (single filer) or $83,350 (joint filer) you are already in the 0% bracket for capital gains.
Disclaimer: This newsletter is for informational purposes, represents the opinions of CAG, LLC and should not be taken as direct investment advice without a consultation. Keep in mind that investing involves risk, including the potential loss of principal. CAG, LLC has ownership in CAG Marketing and NMD Insurance.
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