Personal Finance

Remaining Disciplined During Market Downturns

We as investors have recently had the luxury of taking part in one of the longest sustained bull markets in history. With the exception of a few short periods, equity markets have consistently trended up since early 2009. Simply participating in the equity market has been enough to deliver returns in the mid-teens, on average, per year for investors.

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Don't Panic: Corrections are Normal

Fear knocked on the door. Faith answered. No one was there. 
-English proverb 

Imagine you bought a stock back in 2009 at $7 a share. It had dropped from a high of $15 in 2007. But, the 22 cent dividend gave you a 3.1% yield and the prospects of the price staying so low for long were historically improbable.

The trade worked well. By 2011 your $7 stock had recovered to $12 and the dividend had increased by 18% to just over 26 cents per share. In 2013 it was at $17 surpassing the previous $15 high. By 2015 it was trading between $19 and $21, with a dividend of over 43 cents a share, almost double the amount from where you bought in back in 2009. And, earlier this year it ran to a high of $29 ½. Recently it has backed off to $26 ½. Would you consider it time to sell?

Consider the following: from a valuation standpoint, it sells at 15x next year’s earnings – not that expensive in a 3%, 10-year Treasury world. The cash on cash dividend off your original $7 purchase point is now 7.5%. That would be lost if you sold. Granted, the yield at the current $26 ½ price is just 2%, but your dividend has been compounding at about 9% per annum for the past 10 years. The dividend is expected to continue to grow. And, if you sell now, the after tax proceeds to reinvest would only be about $21 per share* if you sold it in a taxable account.

Of course with the market shaky at the moment, and possibly going lower, you’ll be able to buy your gem of a stock back below $21, right, even though that’s 20% below where it trades at the moment? You’ve always been a great market timer, right? On the other hand, and thinking long-term, over the next year or so there may be a time to add to this great investment at slightly lower prices than $26 1/2.

This anecdote describes the movement of the S&P 500 over the last decade if it were a stock. Serious, long-term investors would no sooner sell this kind of investment—one that has tripled in price—because of a 10% correction, than they would decide to trade bitcoin or dabble in penny stocks.

The message of this story: don’t panic and cave on this market. Corrections are normal. What’s not been normal over the last 10 years is how few corrections of 10% or better we’ve had.

In all likelihood your $26 ½ stock will not triple again in the next ten years. But, the dividends will continue to grow and the appreciation potential will almost certainly beat the 3%, before taxes and inflation, that you can earn on so called “safe” money.

*Assumes a 30% combined top marginal capital gain inclusive of federal capital gains tax, net investment income tax and state capital gain tax.

This note by the President of Janney’s Private Client Group was published on November 21st, 2018.

Janney Montgomery Scott LLC Financial Advisors are available to discuss the suitability and risks involved with various products and strategies presented. We will be happy to provide a prospectus, when available, and other information upon request. Please note that the information provided includes reference to concepts that have legal, accounting, and tax implications. It is not to be construed as legal, accounting, or tax advice and is provided as general information to you to assist in understanding the issues discussed. Neither Janney Montgomery Scott LLC nor its Financial Advisors (in their capacity as Financial Advisors) give tax, legal, or accounting advice. We would urge you to consult with your own attorney and/or accountant regarding the application of the information contained in this letter to the facts and circumstances of your particular situation. Janney Montgomery Scott LLC is a full-service investment firm that is a member of the NYSE, FINRA, and SIPC.

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Three Questions You Should Ask Your Tax Preparer This Year

The Tax Cuts and Jobs Act (TCJA) was signed into law on December 22, 2017, introducing fundamental changes to the Federal tax landscape for both individuals and businesses.

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Could You Live on $16,848 a Year?

Your Social Security benefit may not be enough for you to live on in retirement.

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Tips on How Women Can Overcome Investing Challenges

Welcome to Janney's newest podcast, Personal Finance and Investing, a podcast series addressing common financial questions related to a variety of personal life events and financial planning topics. In episode one of this podcast, we explore the unique financial challenges facing women investors.

Please listen and subscribe to Janney Personal Finance and Investing on Apple Podcasts, Stitcher, Google Play or wherever you stream podcasts.

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Best States to Retire…From a Tax Perspective

You spend your life working hard to build a nest egg, saving toward retirement in hopes of maintaining a comfortable lifestyle and enjoying the fruits of your labor. There are a number of things that could compromise your retirement income—some that you can control and some you cannot. One aspect of managing expenses in retirement that could impact your finances is the tax environment in the state which you will reside.

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Optimizing Tax Strategy and Charitable Giving with a Donor Advised Fund

One of the benefits of employing the use of a Donor Advised Fund (DAF) in your charitable giving strategy is that, in certain scenarios, it can be utilized to separate your tax strategy from your charitable giving strategy.

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Buying a Home Checklist

A checklist for first-time home buyers.

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Merging Your Money When You Marry

Getting married is exciting, but it brings many challenges.

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Take Charge of Your Future: A Primer for Women Investors

Today’s female population is more educated and accomplished than ever before. By 2020, women are expected to control 2/3 of private wealth.¹ That being said, when it comes to long-term, personal financial planning, women are often still giving up their seat at the table.

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Living in the Sandwich Generation

At a time when your career is reaching a peak and you are looking ahead to your own retirement, you may find yourself in the position of having to help your children with college expenses or the financial challenges of young adulthood while at the same time looking after the needs of your aging parents. Squeezed in the middle, you're in the "sandwich generation" — a group loosely defined as people in their 40s to 60s who are "sandwiched" between caring for children and aging parents.

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Moving Forward Financially after the Loss of a Spouse

The loss of a spouse can be a devastating, life-changing event. Due to longer life expectancies, women are more likely to face this situation.

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Why Women Need Life Insurance

Today, women have more financial responsibilities than ever before. How will your family or loved ones manage financially should you pass away?

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Planning for the Financial Impact of Children

Children are a special blessing and their arrival brings boundless love and joy into our lives that you can't put a price on. But adding a child to the household impacts the family budget--and women especially--in very measurable ways. Whether this is your first child or your fourth, here are some financial matters to think about and plan for before and after baby arrives.

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Women and Money: Taking Control of Your Finances

As a woman, you have financial needs that are unique to your situation in life. Perhaps you would like to buy your first home. Maybe you need to start saving for your child's college education. Or you might be concerned about planning for retirement. Whatever your circumstances may be, it's important to have a clear understanding of your overall financial position.

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Understanding Social Security

Approximately 66 million people today receive some form of Social Security benefits, including retirement, disability, survivor, and family benefits. (Source: Fast Facts & Figures About Social Security, 2017) Although most people receiving Social Security are retired, you and your family members may be eligible for benefits at any age, depending on your circumstances.

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10 Years and Counting: Points to Consider as You Approach Retirement

If you're a decade or so away from retirement, you've probably spent at least some time thinking about this major life change. How will you manage the transition?

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Reaching Retirement: Now What?

You've worked hard your whole life anticipating the day you could finally retire. Well, that day has arrived! But with it comes the realization that you'll need to carefully manage your assets to give them lasting potential.

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How Grandparents Can Help Grandchildren with College Costs

As the cost of a college education continues to climb, many grandparents are stepping in to help. This trend is expected to accelerate as baby boomers, many of whom went to college, become grandparents and start gifting what's predicted to be trillions of dollars over the coming decades. 

Helping to pay for a grandchild's college education can bring great personal satisfaction and is a smart way for grandparents to pass on wealth without having to pay gift and estate taxes. So what are some ways to accomplish this goal?

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Changing Market: Municipal Bonds After Tax Reform

January is typically a strong month for the municipal bond market, but 2018 began with the worst January performance since 1981, driven by rising interest rates and uncertainty over changes in the Tax Cuts and Jobs Act (TCJA).¹ The muni market stabilized through April 2018, but uncertainty remains.² The tax law changed the playing field for these investments, which could affect supply and demand.

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Members of the Military: Planning for Retirement

Planning for retirement is an important and sometimes difficult endeavor. As a member of the military, you may have some special opportunities and challenges when preparing financially for retirement. Often, retiring from the military leads to a second civilian career--and a second retirement.

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Retirement Plans for Small Businesses

If you're self-employed or own a small business and you haven't established a retirement savings plan, what are you waiting for? A retirement plan can help you and your employees save for the future.

In general, the amount of employee compensation that can be taken into account when determining employer and employee contributions is limited to $275,000 in 2018.

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How to Protect Your Small Business from Cyber Threats

Risk management is a key component in any successful business plan. In today’s world—where data breaches are common occurrences—it’s especially important for business owners to understand the digital risks they face. Are you doing all you can to mitigate the risk of a cyberattack?

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Deciding When to Retire: When Timing Becomes Critical

Deciding when to retire may not be one decision but a series of decisions and calculations.

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Understanding IRAs

An individual retirement arrangement (IRA) is a personal savings plan that offers specific tax benefits. IRAs are one of the most powerful retirement savings tools available to you. Even if you're contributing to a 401(k) or other plan at work, you should also consider investing in an IRA.

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Estimating Your Retirement Income Needs

You know how important it is to plan for your retirement, but where do you begin?

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Teach Your Children Well: Basic Financial Education

As soon as your children begin to handle money, start teaching them how to handle it wisely.

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Repaying Student Loans

Learn about student loans, repayment options, what happens if you can't pay, and student loan interest deduction.

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Financial Planning: Helping You See the Big Picture

Do you picture yourself owning a new home, starting a business, or retiring comfortably? These are a few of the financial goals that may be important to you, and each comes with a price tag attached. That's where financial planning comes in.

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There's Still Time to Contribute to an IRA for 2017

There's still time to make a regular IRA contribution for 2017! You have until your tax return due date (not including extensions) to contribute up to $5,500 for 2017 ($6,500 if you were age 50 by December 31, 2017). For most taxpayers, the contribution deadline for 2017 is April 17, 2018.

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Correction Time: The Market Takes A Hit

After reaching all-time highs on January 26, 2018, the Dow Jones Industrial Average and the S&P 500 went into a two-week slide that saw both stock indexes drop by more than 10%, a decline that is typically considered a market correction.¹

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Investing in Volatile Times

Janney's Investment Strategy Group provides insight on investing and market volatility.

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Handling Market Volatility

Conventional wisdom says that what goes up must come down. But even if you view market volatility as a normal occurrence, it can be tough to handle when your money is at stake. Though there's no foolproof way to handle the ups and downs of the stock market, the following common-sense tips can help.

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Eleven Ways to Help Yourself Stay Sane in a Crazy Market

Keeping your cool can be hard to do when the market goes on one of its periodic roller-coaster rides. It's useful to have strategies in place that prepare you both financially and psychologically to handle market volatility. Here are 11 ways to help keep yourself from making hasty decisions that could have a long-term impact on your ability to achieve your financial goals.

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Tax Cuts and Jobs Act: 529 Plans Expanded

In December 2017, the Tax Cuts and Jobs Act, a sweeping $1.5 trillion tax-cut package, became law. College students and their parents dodged a major bullet with the legislation, as initial drafts of the bill included the elimination of Coverdell Education Savings Accounts, the Lifetime Learning Credit, and the student loan interest deduction. Also on the table in early drafts of the bill was the taxation of tuition waivers, which are used primarily by graduate students and employees of higher-education institutions. In the end, none of these provisions made it into the final legislation. What did make the final cut was the expanded use of 529 plans.

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Tax Cuts and Jobs Act: Tax Break for Real Estate Investment Trust Investors

Senior Estate Planner Mike Repak explains some of the implications of certain aspects of the new tax law.

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Tax Cuts and Jobs Act: Impact on Businesses

The Tax Cuts and Jobs Act, a $1.5 trillion tax cut package, was signed into law on December 22, 2017. The centerpiece of the legislation is a permanent reduction of the corporate income tax rate. The corporate rate change and some of the other major provisions that affect businesses and business income are summarized below. Provisions take effect in tax year 2018 unless otherwise stated.

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Tax Cuts and Jobs Act: Impact on Individuals

On December 22, 2017, President Trump signed into law the Tax Cuts and Jobs Act, a sweeping $1.5 trillion tax-cut package that fundamentally changes the individual and business tax landscape. While many of the provisions in the new legislation are permanent, others (including most of the tax cuts that apply to individuals) will expire in eight years. Some of the major changes included in the legislation that affect individuals are summarized below; unless otherwise noted, the provisions are effective for tax years 2018 through 2025.

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