On It with Offit - September 2022

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SEP | 2022 TEAMMATE SPOTLIGHT Favorite Philanthropy #1 -  St. Jude’s Research Hospital #2 - TAPS – Tragedy Assistance Program for Survivors – peer support network for families of America’s fallen military heroes Interests My grandchildren Crafts – any kind Traveling - anywhere  Favorite Offit Advisors Value Treating every client the same as a close family member – doing what is in the best interest of the client  Your philosophy on client service Every client should feel as though they are the only client. Nothing is as important as their needs. What gets you out of bed in the morning The excitement of the unexpected. You never know what today will bring. What could you give a 30-minute presentation about with no preparation? Office methods and procedures  Name one thing you’d spend more on to get the best quality Clothing and Travel – sorry but I have to name two things! Ben Offit, CFP® is featured in Baltimore Magazine as a 2023 Five Star Wealth Manager for the Sixth Consecutive Year To receive the 2023 Five Star Wealth Manager award, researched and managed by Five Star Professional, a wealth manager must meet 10 objective eligibility and evaluation criteria associated with wealth managers who provide quality services to their clients. Wealth managers do not pay a fee to be considered or placed on the final list of 2020 Five Star Wealth Managers. The Five Star award is not indicative of the wealth manager's future performance. Ben Shares Thoughts on Revamping Personal Finance to Bloomberg Report A Bloomberg survey found many professional and individual investors are still counting on the 60/40 portfolio to beat inflation in the long run, but financial planner Ben Offit of Offit Advisors thinks it’s an outdated concept. Offit says clients only need to hedge against down markets when they’re close to retiring and drawing on their portfolio. Keeping two to five years worth of expenses in fixed income guards against needing to sell stocks into a down market. The rest of the portfolio goes into equities, and “that has nothing to do with a percentage basis,” he said. Read More Deposits at U.S. banks are up nearly 30% since before the pandemic, to $17.3 trillion. The New York Times, August 25, 2021 About 1,650 “dollar stores” are expected to open this year. There are more than 34,000 such stores in the U.S., more than all Walmart, Starbucks, and McDonald’s outlets combined. The Washington Post, August 20, 2021   “The stock market is a device for transferring money from the impatient to the patient.” Warren Buffet Foreign automakers now employ more U.S. workers than domestic carmakers do. About 51% of the 999,000 U.S. workers in the motor vehicles and parts manufacturing sector are employed by companies based in other countries up from 34% in 2009. Yahoo!Finance, August 31, 2021 Manhattan is the most densely populated borough in New York City and is home to roughly 1.6 million people. With an area of nearly 23 square miles, more than 72,000 people live in every square mile. If the entire world lived with this population density, all of humanity could fit into the country of New Zealand. Overview “Status quo, you know, is Latin for ‘the mess we’re in.” Ronald Reagan 10 Steps to Become A Millionaire Americans can become millionaires in many different ways – including real estate, business, inheritance, etc.  However, I believe the surest path for most Americans is simply by saving and investing, and effectively using your company’s 401k plan.  So here is a clear 10 step path to joining the ranks of America’s 401(k) millionaires: Sign up for your 401k and do it TODAY.  If your company offers a match, ALWAYS contribute up the full match, because it is an instant 100% rate of return.  For example, if in order to get a 3% match, you need to contribute 3%, that is a 100% rate of return because irrespective of market performance, the company is putting in for you the same amount that you are.  ALWAYS CONTRIBUTE AT LEAST UP TO THE MATCH, it’s hard to beat from a rate of return perspective. After you are putting in the minimum to capture the maximum match, save as much as you can.  The only caveat here, is if you have other more important short term priorities or financial obligations.  For example, if you need to put extra money towards buying a new home, or medical expenses those may take priority.  Or if you have high interest debt, like credit card debt at 15%, it may make more sense to pay that off before putting extra money into the 401k.  Once those are paid off, redirect what you were paying towards those expenses or higher interest debt into the 401k! Take 20 minutes to see if a Financial Planner or CPA can help determine if you are better off using a Roth 401k or a Traditional 401k – the difference in taxes between now and later can really make a difference. Focus on your asset allocation and investment mix, and start with a bias towards growth and stock allocation.  Too many 401k investors hold far too much of their account in bonds, which should be kept to a minimum for those trying to accumulate long term wealth.  To get to millionaire status, you will need to be more of stock owner, not a bond lender. Don’t market time!  Every time you get paid, invest each pay period, no matter what is happening in the markets!  IGNORE THE NOISE!  Don’t pay attention to the up and down movement of your account.  Make automatic contributions each pay regardless of how the market is doing right now. If you have the cash flow to do so, accelerate your contributions as early in the year as possible.  For example, if your plan is to max out your 401k for the year, and you can do it in 6 months instead of 12 months, this gives your money more time to grow.  However, before doing this, check with your HR representative to ensure that you won’t lose any of your company match by doing this. Pay attention to costs of the funds and get familiar with the costs of each funds, and have a bias towards lower cost funds. Utilize funds that represent indexes.  For example, you could incorporate funds that represent that S&P 500 index or International Indexes.  Make sure you have diversification across the main asset classes – Large Cap, Mid Cap, Small Cap, International Developed Markets, International Emerging Markets, Real Estate, Commodities. Wait until you reach full retirement age (at least 59.5 years old) to withdraw your funds, so you won’t pay a penalty for an early withdrawal.  Let tax-deferred compounding work for you as long as possible! If you follow these tips, for a few decades, it is almost certain you will become a millionaire! Weak Second Half of August Pushes Stocks & Bonds Lower HIGHLIGHTS Market strength from July failed to continue through August as stocks and bonds declined during the month. Bonds rallied in July, but the 10-year U.S. Treasury yield rose in August. After ending July at 2.67%, the yield closed August at 3.15%, which created a challenging environment for bonds. No FOMC meeting was held in August, but the annual meeting of central bankers in Jackson Hole, Wyoming was consequential. Chairman Powell’s keynote speech reinforced his current hawkish stance and stocks tumbled. Slower growth is impacting the economy with the Fed poised to continue to hike rates. We don’t believe we are in a recession currently, but the odds of a mild recession next year have increased.   EQUITY MARKETS Equity index returns for August were as follows: The S&P 500 fell -4.08%, the Dow Jones Industrial Average declined -3.72%, the Russell 3000 slid -3.73%, the NASDAQ Composite slumped -4.53%, and the Russell 2000 Index, a measure of small-cap stocks, had the most modest declines, down -2.05%. For the first eight months of 2022, the returns in the same order were as follows: -16.14%, -12.01%, -16.92%, -24.07%, and -17.16%. After coming off a strong July, stocks could not continue that momentum through August under the pressure of rising interest rates. Stocks started the month off strong, completing close to a 50% retracement from the low point reached by the S&P 500 in mid-June. However, the second half of August proved challenging, and stocks dropped from that point to close the month in negative territory. Likewise, the VIX Index made a rather steady move higher from the mid-point of the month going from below 20 to end August at 25.87. Ongoing concerns of elevated inflation and the Fed’s aggressive response of raising rates continued to weigh on the market and create a more volatile period for stocks during the month. Although most pockets of the equity market struggled in August, growth came under particular pressure once again. The headline Russell 1000 Index fell -3.84% in August with the Russell 1000 Growth Index down -4.66% and the Russell 1000 Value Index declining a more modest -2.98%. That continued a theme seen most of the year with value outperforming growth on a relative basis and for the first eight months of 2022, those two indices were down -23.19% and -9.85%, respectively. Small caps had a better relative August compared to large caps, but in contrast to large caps, the bias favored growth. The Russell 2000 Value Index declined by -3.16% in August, while the Russell 2000 Growth Index fell a more modest -0.94%. Year to date, those indices are still down -12.17% and -22.29%, respectively. We continue to use our disciplined approach of seeking out what we believe are high-quality companies with improving business conditions and good prices, and those companies can be found in both the value and growth universe. International stocks were mixed in August as emerging markets were able to post a modest gain while developed markets declined. The MSCI ACWI ex USA Index, a broad measure of international equities, fell -3.22% for the month, and was off -18.34% so far this year. The MSCI Emerging Markets Index posted a modest gain of 0.42% but was still off by -17.49% year to date. As would be expected with the Russian invasion of Ukraine, emerging Eastern European stocks continue to be the worst regional area this year. Both U.S. and international equities have struggled this year with an aggressive Fed rate hike cycle, high inflation, and slowing economic growth. FIXED INCOME Fixed income returns were as follows for August: the Bloomberg U.S. Aggregate Bond Index declined -2.83%, the Bloomberg U.S. Credit Index dropped -2.83%, the Bloomberg U.S. Corporate High Yield Index slid -2.30% and the Bloomberg Municipal Index fell -2.19%. As would be expected, the 30-year U.S. Treasury Index had some of the worst results, dropping -4.41% for the month, while the general U.S. Treasury Index slumped -2.48%. For the first eight months of 2022, the returns for these indices in the same order were as follows: -10.75%, -13.70%, -11.22%, -8.62%, -24.97%, and -9.98%. After hitting a multi-year closing high of 3.49% on June 14, the 10-year U.S. Treasury yield moved lower from mid-June through July, but that trend reversed course in August as yields rose sharply again. Simply put, the 10-year U.S Treasury yield closed August 1 at 2.60% but closed August 31 at 3.15%. Clearly, that increase in interest rates put pressure on bond prices and returns suffered during August. While short-term returns are negatively impacted by rising rates, long-term returns for bonds have become more attractive with the higher yields being offered. Bonds have struggled this year as there has been a repricing of interest rates across the yield curve and across bond sectors under this Fed rate tightening cycle. Recall that in 2021, the Bloomberg U.S. Aggregate Bond Index recorded only its fourth annual decline since its inception in 1976 – and the worst year on record for the Agg was 1994 when it declined -2.92%. As it turns out, the year 1994 was another period when the Fed was in a rate hike cycle. We maintain our long-standing position favoring credit versus pure rate exposure in this interest rate environment. We also believe that the role bonds play in a portfolio, to provide stable cash flows and to help offset the volatility of stocks in the long run, has not changed. In fact, bonds are offering higher yields than they have in a number of years and as a result, we believe they are becoming a more attractive asset class. Source: Clark Capital Benchmark Review, September 2022 S&P 500 Index is an unmanaged group of securities considered to be representative of the stock market in general. You cannot directly invest in the index. Dow Jones Industrial Average - The Dow Jones Industrial Average is a popular indicator of the stock market based on the average closing prices of 30 active U.S. stocks representative of the overall economy.  NASDAQ Composite Index measures all NASDAQ domestic and international based common type stocks listed on The NASDAQ Stock Market. Today the NASDAQ Composite includes approximately 5,000 stocks, more than most other stock market indices. Because it is so broad-based, the Composite is one of the most widely followed and quoted major market indices. Russell 2000® Index measures the performance of the 2,000 smallest companies in the Russell 3000 Index, which represents approximately 8% of the total market capitalization of the Russell 3000 Index which includes the 3,000 largest companies in the U.S., based on market capitalization. As of the latest reconstitution, the average market capitalization was approximately $762.8 million; the median market capitalization was approximately $613.5 million. The largest company in the index had an approximate market capitalization of $2.0 billion and a smallest of 218.4 million.  Russell 1000® Growth Index measures the performance of those Russell 1000 companies with higher price-to-book ratios and higher forecasted growth values.  Russell 1000® Value Index measures the performance of those Russell 1000 companies with lower price-to-book ratios and lower forecasted growth values.  Government bonds are guaranteed by the U. S. Government and, if held to maturity, offer a fixed rate of return and fixed principal value. Securities offered through Kestra Investment Services, LLC (Kestra IS), Member FINRA/SIPC. Investment Advisory Services offered through Kestra Advisory Services, LLC (Kestra AS), an affiliate of Kestra IS. Offit Advisors is not affiliated with Kestra IS or Kestra AS. Offit Advisory Services, LLC is a tax firm but neither Kestra IS nor Kestra AS provide legal or tax advice and are not Certified Public Accounting firms.For more information on the Five Star Wealth Manager and the research/selection methodology go to: www.fivestarprofessional.com. Investor Disclosures: https://bit.ly/KF-Disclosures 6990 Columbia Gateway Drive Suite 150 Columbia, MD 21046, US Phone + Fax:  410 600 PLAN (7526) E – Office@OffitAdvisors.com W- www.OffitAdvisors.com   To schedule an appointment with us, click here! The opinions expressed in this commentary are those of the author and may not necessarily reflect those held by Kestra IS or Kestra AS. The material is for informational purposes only. It represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. It is not guaranteed by Kestra IS or Kestra AS for accuracy, does not purport to be complete and is not intended to be used as a primary basis for investment decisions. It should also not be construed as advice meeting the particular investment needs of any investor. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. Want to change how you receive these emails? You can update your preferences or unsubscribe from this list.

10 Steps to Become a Millionaire

Originally Published in Fulton Living Magazine

Americans can become millionaires in many ways – including real estate, business, inheritance, etc.  However, I believe the surest path for most Americans is simply by saving and investing, and effectively using your company’s 401k plan.  So here is a clear 10-step path to joining the ranks of America’s 401(k) millionaires:

1. Sign up for your 401k and do it TODAY.  

2. If your company offers a match, ALWAYS contribute at least the full match, because it is an instant 100% rate of return.  For example, to get a 3% match from the company, you need to contribute 3%, which is a 100% rate of return. Irrespective of market performance, the company is putting in for you the same amount that you are.  ALWAYS CONTRIBUTE AT LEAST UP TO THE MATCH, it’s hard to beat from a rate of return perspective.

3. After you are putting in the minimum to capture the maximum match, save as much as you can.  The only caveat here, is if you have other more important short-term priorities or financial obligations.  For example, if you need to put extra money towards buying a new home, or medical expenses those may take priority.  Or if you have high interest debt, like credit card debt at 15%, it may make more sense to pay that off before putting extra money into the 401k.  Once those are paid off, redirect what you were paying towards those expenses or higher interest debt into the 401k!

4. Take 20 minutes to see if a Financial Planner or CPA can help determine if you are better off using a Roth 401k or a Traditional 401k – the difference in taxes between now and later can really make a difference.

5. Focus on your asset allocation and investment mix and start with a bias towards growth and stock allocation.  Too many 401k investors hold far too much of their account in bonds, which should be kept to a minimum for those trying to accumulate long-term wealth.  To get to millionaire status, you will need to be more of a stock owner, not a bond lender.

6. Don’t market time!  Every time you get paid, invest each pay period, no matter what is happening in the markets!  IGNORE THE NOISE!  Don’t pay attention to the up and down movement of your account.  Make automatic contributions each pay regardless of how the market is doing right now.

7. If you have the cash flow to do so, accelerate your contributions as early in the year as possible.  For example, if your plan is to max out your 401k for the year, and you can do it in 6 months instead of 12 months, this gives your money more time to grow.  However, before doing this, check with your HR representative to ensure that you won’t lose any of your company match by doing this.

8. Pay attention to costs of the funds and get familiar with the costs of each funds and have a bias towards lower cost funds.

9. Utilize funds that represent indexes.  For example, you could incorporate funds that represent the S&P 500 index or International Indexes.  Make sure you have diversification across the main asset classes – Large Cap, Mid Cap, Small Cap, International Developed Markets, International Emerging Markets, Real Estate, Commodities.

10. Wait until you reach full retirement age (at least 59.5 years old) to withdraw your funds, so you won’t pay a penalty for an early withdrawal.  Let tax-deferred compounding work for you as long as possible!

If you follow these tips, for a few decades, it is almost certain you will become a millionaire!

The opinions expressed in this commentary are those of the author and may not necessarily reflect those held by Kestra IS or Kestra AS. The material is for informational purposes only. It represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. It is not guaranteed by Kestra IS or Kestra AS for accuracy, does not purport to be complete and is not intended to be used as a primary basis for investment decisions. It should also not be construed as advice meeting the particular investment needs of any investor. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security.

On It with Offit - August 2022

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AUG | 2022 Offit Advisors' New Columbia Office is Officially Open for Business! Meet With Us Great Moments from the OA Summer Outing Enjoy our recap of a fantastic evening at the Blackwell Barn & Lodge. Time-Sensitive Financial Planning Tips for MD Residents If you are a Maryland Resident and have incurred at least $20,000 in undergraduate or graduate student loan debt, and you still have at least $5,000 in outstanding student loan debt, you can apply for the Maryland Student Loan Debt Relief Tax Credit.  Apply before September 15th, 2022! If you are a business owner in Maryland with employees on payroll, you may be required to offer your employees a way to save for retirement starting September 2022!  Maryland will require employees to remit employee contributions deducted from payroll into a Maryland Retirement Savings Program Trust IRA and employees are automatically enrolled to contribute 3% of their compensation or a business owner must sponsor their own retirement plan.  Exempt business are those that have less than 10 employees, Startups that have operated less than two years, or businesses that offer or have offered within the past two years a payroll-based retirement savings plan such as a 401k or Simple IRA.  Employers are not required to make matching contributions.  If you have questions about this or want to start a retirement plan for your business, contact us today! - More than 500 food delivery drivers were surveyed about their job and found that most of them judge us on what we buy, most have been accused of stealing packages, and 80% say they’ve eaten some of the food they’re delivering. Car and Driver, June 4, 2022 - Japan has such a punctual culture that if a train is delayed five minutes or longer, you are handed a delay certificate at the arriving station to verify for your teacher or boss why you were late. Morning Brew, May 28, 2022 In 2021, the House Energy and Commerce Committee estimated that CO2 emissions from digital mining for bitcoin and Ethereum were equivalent to the tailpipe emissions from more than 15.5 million gasoline-powered cars on the road every year. Other estimates put this figure much higher. Axios, Jan 19, 2022 New home sales plunged in April, falling 16.6% from March. New home sales, which make up more than 10% of all U.S. home sales, are tracked when contracts are signed while existing home sales are tracked when contracts close. That makes new-home sales a leading indicator of where the market is headed. Bloomberg, May 24, 2022 - More than 500 food delivery drivers were surveyed about their job and found that most of them judge us on what we buy, most have been accused of stealing packages, and 80% say they’ve eaten some of the food they’re delivering. Car and Driver, June 4, 2022 The average four-year-old child laughs 300 times a day. By contrast, it takes more than two months for the average 40-year-old adult to laugh that many times. Hidden Brain Podcast On a typical day in the United States, more people ride on New York City’s subway than fly in airplanes. Morning Brew, May 28, 2022 - “It’s true hard work never killed anybody, but I figure, why take the chance.” Ronald Reagan   July Provided a Much-Needed Reprieve for Stocks and Bonds HIGHLIGHTS After enduring the worst six-month start to a year since 1970, the S&P 500 bounced back with strong gains in July – its strongest month since 2020. Furthermore, bonds also enjoyed solid results as yields continued to fall from their mid-June peak. The 10-year U.S. Treasury yield ended June at 2.98% following a multi-year closing high of 3.49% on June 14th. Rates continued to drop in July, ending the month at 2.67%. This sharp decline in rates helped bonds advance in July. For the second straight month, the Fed made a bold move by raising the Fed Funds Target Rate by another 0.75%. The Fed has raised rates by 225 basis points since March. Strong market gains leading up to and following the FOMC meeting seemed to reflect that this hike was largely priced into the market. U.S. economic growth has moderated in light of tighter financial conditions. Inflation readings remained high and manufacturing slowed, but the job market continued to make solid advances. The housing market is starting to feel the impact of higher mortgage rates as home market activity has slowed as well. We believe the economy is going through a growth scare, but we still expect positive economic growth for all of 2022. Corporate earnings will be important to monitor as earnings estimates have come down only modestly so far this year and more reductions might be necessary as the economy slows.   EQUITY MARKETS Stocks behaved much better in July with gains across the board. As stocks advanced, volatility dropped to its lowest level since April. While this reprieve in the stock market was welcomed, the broad equity indices are still well below levels from the beginning of the year. We had expected a more volatile and challenging first part of 2022 and a more constructive market in the latter part of the year. One month does not make a trend, but the second half of 2022 has clearly started on much stronger footing than the first half of the year. Concerns still exist about this Fed rate hike cycle and how much that might slow economic growth, even to the point of a potential recession. Inflation also remains elevated and midterm elections loom. However, much of that seems to have already been discounted in stock prices, and as investors look beyond these near-term challenges, opportunities exist. Style and size were consequential in July with growth and small/mid-caps rebounding the strongest compared to large-cap value. Gains were enjoyed across the board, but those areas that had been under the most pressure so far this year enjoyed the best results in July. With very little fanfare, the S&P 500 closed the month +12.6% from its closing low on June 16th. We still believe that the value/growth disparity that reached a peak in 2020 will likely continue to shift as we move through 2022 with value improving on a relative basis. That has clearly been the case so far this year, but July saw a shift to this trend. However, we believe value will still likely outperform growth on a relative basis over the near future. This better relative performance of value stocks so far this year has coincided with a rise in interest rates, which can put pressure on growth stocks. Likewise, as rates have dropped from their mid-June highs, growth stocks have rebounded. We continue to use our disciplined approach of seeking out what we believe to be high-quality companies with improving business conditions at what we believe are good prices, which those companies can be found in both the value and growth universe. The numbers for July were as follows: The S&P 500 gained 9.22%, the Dow Jones Industrial Average advanced 6.82%, the Russell 3000 rose by 9.38%, the NASDAQ Composite rallied 12.39%, and the Russell 2000 Index, a measure of small-cap stocks, jumped 10.44%. For the first seven months of 2022, the returns in the same order were as follows: -12.58%, -8.60%, -13.70%, -20.47%, and -15.43%. Looking closer at the impact of style and the clear relative outperformance of growth in July, the headline Russell 1000 Index advanced 9.31% in July while the Russell 1000 Growth Index rallied 12.00% and the Russell 1000 Value Index gained 6.63%. For the first seven months of the year, those two indices were down -19.44% and -7.08%, respectively. Growth outperformed value in July, but value has shown better relative results for the majority of the year. Small caps had a better overall July than large caps, with the bias favoring growth in this space as well. The Russell 2000 Value Index advanced 9.68% in July, while the Russell 2000 Growth Index rallied 11.20%. Year to date, those indices are still down -9.30% and -21.55%, respectively. International stocks were mixed in July and clearly lagged U.S. markets. The MSCI ACWI ex USA Index, a broad measure of international equities, rose 3.42% for the month, and was off -15.63% year to date. The MSCI Emerging Markets Index actually slid modestly lower in July, down -0.25% and was off by -17.83% year to date. As would be expected with the Russian invasion of Ukraine, emerging Eastern European stocks have been the worst regional area this year.   FIXED INCOME The yield on the 10-year U.S. Treasury continued to move lower in July after hitting a multi-year closing high of 3.49% on June 14th. The market focus seems to be shifting toward recession fears compared to inflation worries. As a result, bond yields further out on the yield curve have declined, but short-term rates, due to the ongoing Fed tightening cycle, have moved higher. The yield curve has been flattening over the last several weeks, a more typical outcome one would expect during a Fed tightening cycle. Overall, the 10-year U.S. Treasury ended June at 2.98% and dropped to 2.67% by the close of July. It is worth remembering that the 10-year yield ended 2021 at 1.52%, so this year has seen rates move significantly higher. Although bonds have been under pressure so far this year, the last several weeks have been better for bond results as rates have turned lower. Fixed income returns were as follows for July: the Bloomberg U.S. Aggregate Bond Index gained 2.44%, the Bloomberg U.S. Credit Index rose by 3.04%, the Bloomberg U.S. Corporate High Yield Index rallied 5.90% and the Bloomberg Municipal Index gained 2.64%. The 30-year U.S. Treasury Index gained as yields fell and advanced 2.70% for the month, while the general U.S. Treasury Index gained 1.59%. For the first seven months of 2022, the returns for these indices in the same order were as follows: -8.16%, -11.19%, -9.12%, -6.58%, -21.51%, and -7.69%. Clearly, bonds have struggled this year as there has been a repricing of interest rates across the yield curve and most bond sectors. Recall that in 2021, the Bloomberg U.S. Aggregate Bond Index recorded only its fourth annual decline since its inception in 1976 – and the worst year on record for the Agg was 1994 when it declined -2.92%. As it turns out, the year 1994 was another period when the Fed was in a rate hike cycle. We maintain our long-standing position favoring credit versus pure rate exposure in this interest rate environment. We also believe that the role bonds play in a portfolio, to provide stable cash flows and to help offset the volatility of stocks in the long run, has not changed. Source: Clark Capital Benchmark Review, August 2022 S&P 500 Index is an unmanaged group of securities considered to be representative of the stock market in general. You cannot directly invest in the index. Dow Jones Industrial Average - The Dow Jones Industrial Average is a popular indicator of the stock market based on the average closing prices of 30 active U.S. stocks representative of the overall economy.  NASDAQ Composite Index measures all NASDAQ domestic and international based common type stocks listed on The NASDAQ Stock Market. Today the NASDAQ Composite includes approximately 5,000 stocks, more than most other stock market indices. Because it is so broad-based, the Composite is one of the most widely followed and quoted major market indices. Russell 2000® Index measures the performance of the 2,000 smallest companies in the Russell 3000 Index, which represents approximately 8% of the total market capitalization of the Russell 3000 Index which includes the 3,000 largest companies in the U.S., based on market capitalization. As of the latest reconstitution, the average market capitalization was approximately $762.8 million; the median market capitalization was approximately $613.5 million. The largest company in the index had an approximate market capitalization of $2.0 billion and a smallest of 218.4 million.  Russell 1000® Growth Index measures the performance of those Russell 1000 companies with higher price-to-book ratios and higher forecasted growth values.  Russell 1000® Value Index measures the performance of those Russell 1000 companies with lower price-to-book ratios and lower forecasted growth values.  Government bonds are guaranteed by the U. S. Government and, if held to maturity, offer a fixed rate of return and fixed principal value. Securities offered through Kestra Investment Services, LLC (Kestra IS), Member FINRA/SIPC. Investment Advisory Services offered through Kestra Advisory Services, LLC (Kestra AS), an affiliate of Kestra IS. Offit Advisors is not affiliated with Kestra IS or Kestra AS. Offit Advisory Services, LLC is a tax firm but neither Kestra IS nor Kestra AS provide legal or tax advice and are not Certified Public Accounting firms.For more information on the Five Star Wealth Manager and the research/selection methodology go to: www.fivestarprofessional.com. Investor Disclosures: https://bit.ly/KF-Disclosures 6990 Columbia Gateway Drive Suite 150 Columbia, MD 21046, US Phone + Fax:  410 600 PLAN (7526) E – Office@OffitAdvisors.com W- www.OffitAdvisors.com   To schedule an appointment with us, click here! The opinions expressed in this commentary are those of the author and may not necessarily reflect those held by Kestra IS or Kestra AS. The material is for informational purposes only. It represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. It is not guaranteed by Kestra IS or Kestra AS for accuracy, does not purport to be complete and is not intended to be used as a primary basis for investment decisions. It should also not be construed as advice meeting the particular investment needs of any investor. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. Want to change how you receive these emails? You can update your preferences or unsubscribe from this list.

Can I Make a Deductible IRA Contribution?

As financial advisors, we sometimes see mistakes in contributions to IRAs and Roth IRAs. While saving for your retirement is a good thing, you want to be mindful of the rules and doing it correctly.

An unfortunate mistake we see sometimes is people contributing towards IRAs and being fully aware that their deduction may not be eligible based on various reasons.  Typically if one has a retirement plan at their job, that is the best place to get a tax-deduction because it is not contingent upon other factors like an IRA can be.

This chart can help explain the various paths to determine if your contribution is actually eligible for a deduction.

Money and Your Financial Purpose

I have often seen some of the best financial planning clients – the ones who save and invest regularly, protect their assets, care about their futures and families, and are meticulous about being on track with their finances, and struggle to transition into retirement.  

They have done a tremendous job and deserve credit for putting themselves in the fortunate financial position they are in.  They have saved and lived within their means for so long, so starting to spend and use their money that they have accumulated feels so foreign to them.  They aren’t necessarily depriving themselves, but they aren’t necessarily enjoying their position to the fullest either.

But the reality is that none of us will live forever, and everyone’s day will eventually come, and no one gets a reward for being the richest person in the graveyard.  There are also many people who may have an underlying feeling or inkling as to what their purpose in life is or how they may want to use their money, but they don’t fully pursue it.  I feel there are many people who are fortunately successful with their money, but they also need to be more successful in not missing their opportunity to live their lives and enjoy a life of significance, right now!

I believe part of my role as a Financial Planner and Advisor for clients is to help them utilize their money as a tool to help them enjoy life and realize their life’s purpose.

It’s their money, they have busted their butt to earn, save, and grow it, and as long as they are not jeopardizing their own financial security, they deserve to enjoy their money and utilize it towards fulfilling their life’s purpose today.

If one reaches the point of financial security and can afford to utilize their money, while not disrupting their financial independence, they should strive to take advantage of their position and look for daily opportunities to enjoy life, pursue their dreams, and live their purpose.  For example: 

1. If you want that extra tall coffee at Starbucks, go get it!

2. If you have always dreamed of going to Fiji, go now!

3. If you have always wanted to help your Son or Daughter launch a business idea that they have had but couldn’t afford to pursue it, help them now!

4. If you have always wanted to help end poverty or end cancer, do something about it today!

If you or someone you know may fit this description, please share that you have worked hard to climb up to the mountain top, and hopefully you have had a great guide or Advisor along the way to help you reach the Summit.  Enjoy your journey along the way to the top, but also don’t forget to enjoy the view once you get there.

A Simple Truth; Stay Invested.

Hello Loyal Readership!,

Today I want to discuss some cliché but truthful facts about the market and keep it simple.

If we look back and we look forward, history has shown us that market continues to rise over time, but it is not a straight line, it is a wavy line.  I fully expect this trend to continue in the future.  Take a look at the graphic below illustrating various domestic, global, and economic events we have been through, but despite all of these unnerving moments the market continues to rise over time and someone who had invested $1 in the S&P 500 in 1970 would have $80 in 2021 just by staying invested.

A disciplined investor looks beyond the concerns of today to the long-term growth potential of markets.

The problem is most investors get in their own way.  They see the current investment “apocalypse du jour” and react.  This is not to not be sensitive to whatever the event that is going on – these are real events affecting people’s lives, but just not their long-term portfolio.  For example, when oil prices quadrupled in the mid-70’s many investors were tempted to exit the market and “cut their losses”.  But those that don’t get in their own way experience the gains that the market features by just saddling in and riding for the long term.  As you can see in the graphic below, over the last 20 years, the “average investor” only received a 2.9% rate of return while the S%P 500 did 7.5%.

 The final piece I want to share as to why you need to stay invested is because the best days occur without warning, often near the worst days.  So if you ride out the worst days, you will subsequently closely capture the best days.  But if you miss the best days, that has a lasting impact on your growth.  

 Stay invested.  It’s a simple truth.

Taking Advantage of Market Volatility

Hello Loyal Readership!

I hope this message finds you well today. I know that no one enjoys the volatile periods of market, but if looked at through a different perspective, once can actually use this to your possible positive financial planning advantage!

Here are some of the top to tips to consider in a down financial market, AKA – right now!

1. Roth IRA conversion – if you have the opportunity to convert some of your pre-tax accounts into post-tax accounts and pay the tax now, but never pay the tax again, this could be an opportune time to do it. If you do it today, and convert now with lower values in your portfolio, you would pay tax on a lesser dollar amount today in exchange for a future earnings on your portfolio to never be taxed again.

2. Tax loss harvesting – if you have a non-qualified (non-retirement account) you can sell out some of your holdings that may have taxable losses and buy something similar but not the same and put a loss on your tax return. This can help you offset any positive gains in your portfolio that you would otherwise have to pay tax on.

3. Rebalance your portfolio – sell what may be high in your portfolio and buy back into what is low ie. If the designed allocation on your portfolio featured 80% stocks and now stocks represent only 62% of your portfolio, you can rebalance now instead of waiting

4. Contribute and invest more now! – with market values being lower today than they were just weeks ago, this is a buying opportunity to buy securities at a discount and “on sale”. Who doesn’t like to buy things on sale?

5. Appreciate the value of being diversified – over recent years with the S&P 500 and tech stocks being the top performing asset classes, people would say there are no need to own other asset classes. The value of having a broadly diversified portfolio with other aspects to diversification is being demonstrated now.  For example, energy was one of the worst performing asset classes of the last decade, but this year it is the biggest winner.  If you have a diversified portfolio there can be segments that do better than others in different market cycles.

7. Non-market correlated assets – there is value to having some parts of your overall wealth strategy in buckets that are non- market correlated – meaning that they don’t go down when the market goes down. This is especially true of those who are very near to approaching retirement.

7. Front- load, if you can – if you have the opportunity to put more into your 401k at your job or your IRAs or Roth IRAs, now is a great time do it.  Why not put more in now when share prices are more on sale!

8. Speculative investment fads are showing they were just fads! – Crypto, NFTs, SPACs – we have said it here and will say it again most of these will go to zero.  If you got caught up in the hype over the past couple of years, now may be a time to re-think and re-position your strategy now and moving forward.

If you found any of this helpful, or have questions about any of the above strategies, please let us know and we will be glad to help you.