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While we know that having a long-term, trusted relationship with an investment advisor can help a lot of people reach their financial goals, it’s not for everyone.  Some people may be better off managing things on their own, and that’s okay.  However, if you’re unsure if it’s time to start working with an investment advisor, there are a few questions you should ask yourself.

If you want to avoid outliving your money, investing can be a great way to continue growing your money as you approach retirement.  In the year 2020, the technology of robo-advisors certainly exists, and is an option for investors. However, the one-on-one, hands-on approach and personal advice and guidance you get when working with a real-life investment advisor often times will offer better insight and clarity into the investment process.

From your needs and objectives to your risk tolerance and timeframe, there are a variety of factors your investment advisor will consider when creating an investment strategy.  All of those factors playing into the larger life goals of your financial plan. However, before you hire an investment advisor, it’s important to ask yourself these four key questions first.

How Complicated is My Financial Situation?

Investment advisors can be helpful in all types of situations, but naturally they bring more to the table for a more complicated financial situation. Things like inherited stock, investing the assets of your small business, or retirement income planning require more in-depth insight. Even if you’re simply looking for straightforward simple investment advice, many investment advisors offer advice that could save you some time and money in the long-run. Especially if you’re about to experience a transition — such as the birth of a child, a divorce, or retirement — teaming up with an investment advisor can help guide your decisions as you enter new financial territory.

Do I Need Additional Financial Help?

When looking for someone who can help you invest your money, you can either hire someone who purely specializes in investment management, or you can find someone who offers comprehensive financial planning services. Here at Mullooly Asset Management, we lead with financial planning, and that helps us determine a number of different factors within a client’s investment strategy.  Financial planning helps identify which goals to prioritize, and how to go about reaching those goals.  It helps a client have a well-rounded financial picture when their investment strategy aligns with their financial planning goals.  That leads us to the next question.

What Are My Goals?

This may seem like an obvious question, but some people overlook this critical question and end up in an undesirable situation. Realizing your goals BEFORE you get started investing is crucial.  If you know your goals, you will have a more accurate idea of how much risk you need to take versus how much risk you’re willing to take.  Knowing your goals can also help you remain invested through difficult stretches in the market if you know what that money is for, and you know you have a longer time horizon.  If you’re someone who is certain you want to invest for the long haul, then hiring an investment advisor can give you the accountability you need to achieve your investment objectives. It’s always a good idea to identify your expectations of the experience first before you get wrapped up in a long-term commitment.

How Much Will This Cost?

No investment advisor works for free.  There are a handful of different ways that different advisors get paid.  If you’d like to see how our fees are structured here at Mullooly Asset Management, click this link here!  For some people, they would rather save the money and do it themselves. However, an investment advisor is valuable in that they can educate you, as well as apply their knowledge, to help you make smarter investment decisions. At the end of the day, an investment advisor is an investment in itself, so you’ll want to think carefully about what you’re willing to pay for the value they can provide you.

While working with an investment advisor is not for everyone, we believe that the right relationship can provide tremendous value over the span of a client’s financial life.  If you’d like to learn more about how we help our clients here, click this button to schedule an initial meeting.  There is no cost or obligation.

When we think of financial health, a few things come to mind. The overall financial plan you put together with your financial planner is the most important.  What are some of the other factors besides your financial plan? Your investments, the Dow Jones Industrial Average performance, the stock market as a whole, the economy, the country’s employment status and so on. A lot of these aspects are intertwined, but they are not the same thing by any measure.  Understanding how these different factors work can make your retirement here in Monmouth County much smoother.

Financial well-being can be described a number of ways. This speaks to why so many investors think of the stock market and the economy as the same thing. However, the stock market does not define economic health as a whole. As we’ve seen with COVID-19, stocks are back on the rise, but many families – and the country as a whole – are still facing the effects of business closures, increased unemployment and more. So why is this? We’re going to take a look at the main definitions of the economy and the stock market.  This will help us understand how they’re different.

What Is the Economy?

The definition of the economy is “the wealth and resources of a country or region, especially in terms of the production and consumption of goods and services.” The most basic way to understand the health of the economy is through Gross Domestic Product (GDP). GDP measures the value of goods and services while factoring inflation into the equation. As a result, understanding the health of the economy can be thought of in terms of the growth rate of real GDP, meaning whether or not it’s increasing or decreasing.

Economic Health in Terms of GDP and Employment 

Employment may rise as production and consumption increase. To keep up with increased demand, companies and factories might hire more employees. With more people employed and getting paid, more people have money to spend in general. It’s not always a guarantee that employment will rise alongside GDP.

What Is the Stock Market? 

The stock market can be defined simply as “a stock exchange.” It is the buying and selling of ownership shares in a corporation. The stock market is made up of buyers and sellers and is not necessarily indicative of every business, worker and family. It is only indicative of those who own stock.

Some of the main indexes used to understand how the market is performing only track a small percentage of stocks. The Dow Jones Industrial Average tracks 30 of the largest companies in the US. The S&P 500 Index tracks the 500 largest companies in the US. The Nasdaq Composite Index tracks a mix of 3,000 stocks across the technology, biotechnology and pharmaceutical sectors.

How Has COVID-19 Impacted the Stock Market and the Economy?

“Progress” in the stock market and “progress” in the economy can mean two very different things. This recent pandemic is a perfect example of that. The stock market, the major indexes including the S&P, the DJIA and the Nasdaq Composite index all have surged since the market downturn in March. On the other hand, GDP decreased by 5% in 2020’s first quarter, and as of June 2020, the number of unemployed individuals rose to 12 million since February. We take a look at a few reasons why there is such a disconnect.

Reason #1

When considering the make-up of the S&P, the DJIA and the Nasdaq, the stock market isn’t representative of all who make up the U.S. economy. The publicly traded companies that make up the stock market look very different from the number of small businesses all around the country who have faced a very different reality over the last few months.  The stock market is only indicative of part of the overall economy.

Reason #2

The stock market’s performance as a whole only represents a portion of the U.S. employment market. A study conducted by the National Bureau of Economic Research showed that the wealthiest 10% of households in the United States were in control of 84% of the total value of stock shares, bonds, trusts and business equity and over 80% of non-home real estate. This was true despite the fact that half of all households owned a portion through mutual funds, trusts or various pension accounts. Therefore, the stock market may not display an equal distribution between those who make up the economy as a whole.

Reason #3

It’s long been understood that at times, investors may be driven by emotional or reaction decision-making. As a result, their behavior may not be mimicking the economy’s current state nor affairs happening in real-time.

While the stock market may reflect some changes in the economy and vice versa, the status of one does not show the entire portrait of the other. At times, they can tell entirely different stories, as is the case with COVID-19. Considering other factors such as unemployment can provide a fuller depiction of the state of the economy.

It’s important to construct a financial plan that can weather any stock market environment and any phase of an economic cycle.  A financial planner can help you make the necessary decisions to come up with a plan you’re comfortable with.  Comfortability is key when planning your retirement here at the Jersey Shore.  If you don’t have a financial planner, we would be happy to speak with you.  Click here to schedule an appointment today.  There is no cost or obligation.