What is a HENRY? The acronym HENRY, "high earner, not rich yet," encapsulates a demographic segment often associated with millennials residing in metropolitan areas. These individuals, typically in their early thirties, earn six-figure salaries but frequently grapple with feelings of financial insecurity. Despite their substantial incomes, HENRYs encounter challenges in accumulating wealth and achieving a sense of financial stability.   The Struggle One defining characteristic of HENRYs is their struggle to balance their current lifestyle with long-term financial goals. While they earn comfortable incomes, they often find it challenging to save and invest adequately for the future. This struggle can be attributed, in part, to their tendency to elevate their standard of living in tandem with rising incomes, a phenomenon referred to as "lifestyle creep." As their incomes grow, HENRYs may find themselves spending more on housing, travel, dining, and other discretionary expenses, leaving less disposable income available for savings and investments.   The Debt Adding to their financial strain, HENRYs often carry substantial student loan debt, averaging around $80,000. This debt burden, significantly higher than the national average, can impede their ability to accumulate savings and make significant financial strides. Furthermore, HENRYs residing in expensive metropolitan areas face high housing costs, further limiting their saving capacity. These factors contribute to a sense of financial vulnerability despite their above-average incomes. Sources emphasize that HENRYs often grapple with a lack of concrete financial planning. Without a well-defined roadmap outlining their financial goals and strategies to achieve them, HENRYs may find themselves saving and investing inconsistently. This lack of direction can lead to missed opportunities for wealth accumulation and exacerbate feelings of financial insecurity. Seeking professional financial guidance can be instrumental in helping HENRYs develop a comprehensive financial plan tailored to their individual circumstances and goals.   The best way forward! The current economic climate, characterized by factors like slower wage growth for high earners and potential layoffs in high-paying industries, poses unique challenges for HENRYs. While we acknowledge these difficulties, we would also like to highlight the importance of adopting prudent financial habits , such as consistent saving, investing, and resisting lifestyle inflation, to navigate these challenges effectively. Our team at Whitaker-Myers Wealth Managers can help navigate any investor’s complexity while walking with you with the heart of a teacher . If you’re in baby steps 1-3   and need guidance with your monthly expenses, reach out to our Financial Coaches  to show you the most effective methods to get out of debt. If you have questions about creating a financial plan, contact one of our Financial Advisors to put a plan in place for you.

What does “Portfolio Rebalancing” mean? There are many terms  used in the finance world. You may have heard your financial advisor or someone you work with say they recently “rebalanced” their 401k or investment account. If you are unsure what this means or are wondering if this is something you should be doing, I hope that after reading this article, you will feel more confident in understanding this phrase and its importance.   A Simplistic Scenario Example Suppose you have half of your retirement account in bonds (slow and steady) and half in stocks; you continually put money into your account and forget about it for three years. You open a statement and see the allocation is now 65% stock and 35% bonds. Without your knowing or doing so, the percent of your portfolio allocated to stocks is now 15% higher than you had three years ago. This is most likely due to the difference in performance in the two investments; stocks did very well, bonds did ok, and the stock portion outgrew the bond side, and you now have a higher percentage in stocks. A portfolio rebalance   would then be appropriate for you, and it would be done by selling 15% of the stock portion and putting that in bonds. It is straightforward and done for several reasons, which I will go into.   The Reasons First The first reason is to ensure that your portfolio's risk is being managed. In the above example, if you are a conservative investor and don’t want to have too much of your portfolio in stocks, then it is important to monitor your allocation to ensure that you don’t have more stock expenses than you are comfortable with.   Second The second reason, which I believe is just as important, is to take advantage of the ebbs and flows of the market. In the Dave Ramsey  vernacular, we believe that a diversified stock portfolio comprises growth stocks, growth and income stocks, aggressive growth stocks, and international stocks.     A Realistic Example A perfect example of using the difference in performance of these different types of stocks to your advantage was 2022 and 2023. If you started 2022 with a 25% allocation to each of these four categories, you saw a significant difference in returns throughout the year. Most notably, growth stocks were down 29%, while growth and income were down only 7.5%. By the end of the year, you had much more money in growth and income than in growth.   So, it's time for a rebalance. This would mean selling some growth and income relatively high and buying growth stocks relatively low. This was the best possible action to take as 2023 was an excellent year for growth stock, up 42%, and a decent year for growth and income, up 11%.   The Benefits By systematically performing a rebalance, you can take advantage of the opportunities the stock market gives you by buying low and selling high. This is one of the advantages of professional management. It can also be implemented in many 401k by signing up for an annual rebalance or a rebalance notification that the 401k provider will send out annually.   If you have any questions about your portfolio, be sure to reach out to your financial advisor . If you do not have an advisor but have questions or want to start investing, we have a team of financial advisors  at Whitaker-Myers Wealth Managers  with the heart of a teacher who is happy to help walk you through the process.

Great Reads If you get to know me personally, you’ll learn that I love to read. I frequently share interesting reads and books with our team, and today, I’d like to do the same with this audience. Today, I want to share insights on financial strength vs. emotional strength in taking risks. Our team at Whitaker-Myers Wealth Managers is constantly producing great quick reads that I have always found insightful. We typically have at least two new weekly articles covering industry news, financial strategies, and budget-friendly tips. All of these can be found on our blog page. But for today’s purpose, here are a few written by some of our team members that are great reads on this topic: MEASURING YOUR RISK BEFORE INVESTING  – Financial Advisor Nick Allen RISK ASSETS  - Financial Advisor Jake Buckwalter HOW RISK TOLERANCE AFFECTS YOUR FUTURE – Certified Financial Planner® Professional Drew Hodgson What I truly appreciate from our team is their wealth of knowledge and their ability to simplify complicated strategies and concepts for those who may be unfamiliar with these topics and industry language. This is no easy task, and it highlights the team's dedication to one of our core values of always having a heart of a teacher. If you’d like to schedule some time with any of our advisors or the specific advisors above, click on their respective hyperlinks to schedule. They can help you apply these concepts to your own financial situation. Now, on to today’s topic. Risk Tolerance Drew threw a touchdown in his article above (FYI – Drew was a quarterback for his college football team). I highly recommend reading it.  Risk tolerance is an investor’s mentality when taking risks. What I mean by that is how comfortable the investor is with taking risks with all factors considered. This includes family, investment time horizon, future plans, understanding of the economy, geopolitical risks, asset class, location risks, systematic and unsystematic risks, and anything that could potentially impact the portfolio. Wow, yes, that is a lot to consider, and unfortunately, that list is incomplete. I would argue that, other than the behavioral finance aspect of risk tolerance, the most important factor is the investor's phase of life. “It's the phaaaaassssseee of life” (the highly awarded Circle of Life remake, releasing with Drew, Nick, and Jake as lead singers Q4 2024). Depending on where the investor is in the phase of life, their investing strategies and asset allocations to risky or riskless assets can vary.  Early in our careers, most investors may be more willing to invest in risky assets to help grow their portfolio with a long-term horizon. This is commonly referred to as the wealth-building/growth phase. Compound interest and steady investing can be your best friend early on. On the other hand, the investor may decide to move into less risky assets towards retirement. During these years, the investor may try to preserve their portfolio. Thus, this is commonly referred to as the preservation phase. Risk tolerance – the emotional ability to take risks. Ability to Take Risk Depending on the investor’s risk tolerance, they may decide to take some risks in their portfolio. The question, however, is, does the investor have the financial ability/flexibility to assume the risk? In my experience, investors are eager to build wealth early on and want to invest aggressively. Depending on their risk tolerance, this may be appropriate, but they may be on baby steps 1-3, and it may not be in their best interest to invest aggressively.  Or even more importantly, they don’t have the money to invest aggressively. It may be in their best interest to pick a money market fund or treasury that will provide the security they need. Each investor is different The investor’s style, investment philosophy, risk tolerance, ability to take risk, knowledge, and many other factors come together to determine the right portfolio fit. Understanding the holistic picture and aligning the investor's strategic goals with their investments is the best service a financial advisor can provide. Our Whitaker-Myers Wealth Managers team ensures you have all the tools you need to succeed. Our group of teachers is always willing to have a deep-dive analytical discussion or can help break down the process and answer questions so you feel comfortable. If you would like to talk to a financial advisor about your investments and future goals, let’s chat! Contact one of our advisors to schedule a meeting today.

A week like this, where the S&P 500 (Growth and Growth & Income) will most likely fall 3% and the Russell 2000 (Aggressive Growth) will probably fall close to 6%, gives us an excellent chance to remind ourselves that there are other structures of investments available to the consumer, beyond just the stock market and at times there may be reasons, why someone should consider an investment that provides non-correlation benefits, or said another way, adding an investment that does different things, at different times, to stocks. To be clear, the principal investment most of us will have will be stocks, which is more than likely ideal - but as this week helps us to see - as your wealth grows - perhaps your investment universe should grow as well. And of course, as we've written many times, the retiree has a significant risk of the sequence of return risk with stocks, which can be learned more about in my article: Bear Markets, Normal Not Fun. Commercial real estate has long been a cornerstone of wealth creation for investors. Unlike residential real estate, which is driven largely by individual homeownership and rental demand, commercial real estate encompasses office buildings, retail spaces, industrial properties, and multifamily housing complexes. Over the decades, this sector has consistently offered robust returns, diversified income streams, and tangible asset value appreciation. Many of the private real estate strategies we pursue for our clients combine the best of both worlds: commercial real estate and residential real estate. For the purposes of this article I’m going to focus on commercial real estate to help you try and understand it just a little better. Of course, your mind, when thinking about commercial real estate, is instantly thinking: office buildings! What a terrible investment idea, right now! Yes, we would agree, but commercial real estate is so much more than that – it’s industrial buildings that have high demand right now because of online retailing. Its data centers also have high demand currently because, in the last three years, we have created more data than the entire history of the country before that. It’s student housing – because does anyone see college demand decreasing? Can you say, captive audience, when you own housing on or near a campus? We agree that the office commercial building market in 2024 faces significant challenges and transitions. The most prominent trend is the persistent high vacancy rates across many major markets, driven by the continued effects of hybrid and remote work arrangements. The overall vacancy rate in U.S. office spaces is nearing record highs, with some markets experiencing particularly acute vacancies, like San Francisco and Philadelphia. See the picture below from Kastle Data Systems, which tracks office vacancies in more than 2,600 buildings across 138 cities. The commercial office market is expected to remain challenging for the foreseeable future, with high vacancies and subdued rent growth likely persisting. However, there are areas of optimism, particularly in regions with strong tech sector demand and ongoing urban development projects. Investors and stakeholders are closely watching these trends, adapting strategies to navigate the evolving landscape of the office commercial real estate market. However, let’s explore some reasons why you might want to pursue some of those other areas in the commercial real estate market that we discussed above. Steady Cash Flow and Income Stability One of the primary attractions of commercial real estate is the potential for steady cash flow. Commercial properties, such as office buildings and shopping centers, typically have long-term lease agreements with businesses and retail tenants. These leases can range from several years to over a decade, providing investors with a reliable income stream. This stability is further enhanced by commercial tenants often being responsible for many property-related expenses, including maintenance and taxes, through triple-net leases. Additionally, many leases have inflation riders built into them, so you won’t be stuck with a lease paying a below-market rate because inflation raised its ugly head (2022, anyone?). Appreciation and Value Addition Commercial real estate has historically shown significant appreciation in value over time. Several factors, including economic growth, urbanization, and inflation drive this appreciation. As cities expand and economies grow, the demand for commercial spaces increases, driving up property values. Investors can also add value to their properties through strategic renovations, improved management practices, and adaptive reuse projects, all of which can lead to substantial increases in property value. Inflation Hedge Commercial real estate has proven to be an effective hedge against inflation. As inflation rises, the cost of goods and services increases, leading to higher rents for commercial properties. Many commercial leases include provisions for rent escalations tied to inflation, ensuring that rental income keeps pace with rising costs. This ability to adjust rents makes commercial real estate a valuable asset during inflationary periods, protecting investors' purchasing power. Diversification Benefits Investing in commercial real estate provides diversification benefits to an investment portfolio. Real estate often exhibits a low correlation with other asset classes, such as stocks and bonds. This means that commercial real estate can help reduce overall portfolio volatility and enhance returns, particularly during periods of market turbulence. Additionally, the diversity within the commercial real estate sector itself—from office buildings to industrial warehouses—allows investors to spread risk across different types of properties and tenant bases. According to one of our real estate partners, INREIT (Invesco Real Estate), for the period ending September 30, 2021, the correlation to the stock market, of private real estate (using the NCREIF Property Index) has been 0.12 and the correlation of private real estate to US Fixed Income (bonds) has been -0.15. Historical Performance and Tax Benefits The historical performance of commercial real estate has been strong, often outperforming other asset classes. According to the National Council of Real Estate Investment Fiduciaries (NCREIF) Property Index, commercial real estate has delivered annualized returns of around 9% over the past 30 years. This performance is comparable to, and in some cases better than, the returns of the stock market over the same period. Furthermore, commercial real estate has shown resilience during economic downturns, recovering value more quickly than other investment types after recessions. Additionally, while not available to investors of public REITS (see something VNQ: Vanguard Real Estate Fund as an example of a public REIT), private real estate investors are able to reap some tax benefits at times when investing in in real estate. This is because of depreciation and other expenses that can be written off against the income your real estate is providing. This makes real estate a more attractive option for investors who have higher incomes and/or invest non-retirement dollars. Please consult your tax professional for actual tax advice and to learn if these benefits may be of interest to you. Institutional and International Interest The attractiveness of commercial real estate has not gone unnoticed by institutional investors and international buyers. Pension funds, insurance companies, and sovereign wealth funds have increasingly allocated significant portions of their portfolios to commercial real estate. This institutional interest has provided additional liquidity and stability to the market. Additionally, international investors view commercial real estate in stable economies as a safe haven, further driving demand and supporting property values. Conclusion Investing in commercial real estate has historically been profitable for many investors. The sector offers stable income streams, significant appreciation potential, and effective inflation hedging. Its diversification benefits and historical solid performance make it an attractive addition to any investment portfolio. As urbanization continues and economies grow, the demand for commercial properties will likely remain robust, ensuring that commercial real estate remains a cornerstone of wealth creation for investors. You can contact your Whitaker-Myers Wealth Managers Financial Advisor today to learn about our real estate investment strategies available to our clients.

Globalization In our interconnected global world, computer dysfunction can greatly disrupt our daily lives. Our lives are connected through nearly every device we use, and even more so through voice commands or gestures! In a previous post, I mentioned that using voice commands for timers or hand gestures to control the TV has become the norm for many at home. Even our fridges can automatically order more groceries when we’re low. So, what happens when the computers we interact with daily and depend on stop working? Real Life Example We saw this in real time recently. A global IT outage on July 19, 2024, caused by a faulty update from cybersecurity firm CrowdStrike, resulted in widespread disruptions across various sectors. The outage impacted Microsoft platforms, particularly its Azure cloud computing service, which is used by a vast number of businesses and organizations worldwide, including 95% of Fortune 500 companies. The disruptions affected airlines, banks, media outlets, government agencies, and healthcare facilities, among many others. The outage led to grounded flights, delays in financial transactions, and the cancellation of appointments. When we can’t conduct our normal activities/work while that ‘blue screen of death’ is still visible, what do we do? In the hospital setting, we had pop-up command centers, backup on backup, and downtime procedures in place that would jump into action, allowing for minimal disruption. This was the vendor’s view. What about the consumer’s view? If this impact puts a hold on your investments or prevents you from accessing your bank accounts for an important transaction, it could place you in a precarious situation. In most cases, investors or consumers don’t have a backup plan for this type of impact, hence the risk. Systematic Risk In investing talk, Systematic risk is the inherent risk that an investor takes by investing in the market. This could be the impact of the failure of a global security update, internet failure, NYSE crash, or power disruption, along with any factor that can be linked to the broad market over any individual investment. Systematic risk, in a nutshell, is the risk of investing in the market as a whole. This can be internal or externally linked. Another name for systematic risk, and likely easier to remember, is Market risk. Calculating Systematic risk can be done by taking the portfolio standard deviation and subtracting the portfolio unsystematic risk (wait, that’s a number?!- Yup, Read on!). Unsystematic Risk On the other hand, unsystematic risk is the risk associated with the individual security or investment. This is the risk that most investors think of when putting their money in the market. “How will a security/investment perform?” is always a great question, but remember, risk is defined as a range. It is always +/- (Plus or minus) a value. Though it’s almost comical to consider positive risk, we almost inherently consider risk negative. If you’d like a further description of this, read this article I wrote: It’s a Risky Business, or is it?. Unsystematic risk can be calculated by taking the Standard deviation of the portfolio minus the portfolio beta. High Yield take away – the elusive alpha, is found within the unsystematic risk (we’ll discuss this in-depth on a later day) ‘Smart beta’ strategies – leverage ‘styles or factors’ to find alpha in the unsystematic risk (more on this as well, in a future post) of a portfolio Total Risk As mentioned in the post linked above, total risk is the summation of systematic risk and unsystematic risk. It is also the portfolio's standard deviation. Total risk = standard deviation of the portfolio (all subsequent equations are assumed at the portfolio) Standard deviation = Unsystematic risk + Systematic risk Systematic risk = Standard deviation - unsystematic risk Unsystematic risk = Standard Deviation – systematic risk Why is it so complicated? Well, it is risky business, isn’t it?! All great puns aside, understanding risk is complicated. The varying degree of risk tolerance, ability to take risk, along with the understanding of risk makes for a story with many twists and turns. This is precisely why I always recommend having a teacher at your side. Our team of financial advisors at Whitaker Myers Wealth Managers knows and understands all aspects of risk. Even more so, our team will walk with you through each phase of your journey to align your investments with your risk tolerance at that phase. Schedule time to chat with one of our advisors to learn more!

President and Chief Investment Officer John-Mark Young has been named to AdvisorHub's list of the top Financial Advisors for a third year. Two years ago, he was listed as an Advisor to Watch, and last year, he was named one of the Top 200 Fastest Growing Advisors. In contrast, this year, he was awarded a top two hundred RIA (Registered Investment Advisory), specifically earning a ranking of 96. The award measures the firm and John-Mark in tangible ways, such as the assets they help clients manage and the level of service they provide, such as their financial planning offering. To be considered for the top two hundred RIA award, the Advisor must have year-over-year growth, and finally, AdvisorHub reviews the Advisor for their regulatory record, community service, and team diversity. When asked about the award, John-Mark was reminded of Joseph - "It's our job to try and understand what might happen, give guidance, and plan accordingly. Just like Joseph, if God doesn't bless us by putting us in front of the right people (clients), just as Joseph was put in front of Pharoh, then no value is created. However, He has seen fit to bless our efforts; I'm thankful and blessed for that. We have an incredible team at Whitaker-Myers Wealth Managers, from our back-office compliance team led by Chief Compliance Officer Kelly Taylor, our Financial Advisor Team, our Tax Team led by Kage Rush, and our Financial Coaching Team led by Lindsey Curry. I couldn't be more thankful for a team that makes our service to clients possible. In addition, I've sacrificed so much time with my family to serve our clients, so I'm eternally grateful for my beautiful wife, Megan, who is the definition of a Proverbs 31 woman. She is far more precious than jewels. The heart of her husband trusts in her, and he will have no lack of gain. And of course, I would be remiss if I didn't thank my friend Dave Ramsey and the team at Ramsey Solutions, such as Scott & Ben, who support our efforts as Smartvestor Pros. We serve clients with the heart of a teacher because that's what Dave demands and clients deserve." CEO Emeritus at the Whitaker-Myers Group, Scott Allen, added, "AdvisorHub is presumably looking at things we do that make us different and unique to create the kind of growth that would lead to admission to this list. Investments we have made in our business, such as our new client portal that allows a client to see their financial plan and projections in real-time every single day, is an example of that commitment they would say leads to continued growth. When clients are better informed, they make better decisions, and when they make better decisions, their assets typically reflect that, and as we always say, our compensation is designed in such a manner that we do better when our clients do better. Our new client's portal helps us live out one of our Core Values of having the Heart of a Teacher." Kevin Hewitt, President and CEO of The Chrisitan Children's Home of Ohio, agrees with AdvisorHub's analysis of both Whitaker-Myers Wealth Managers and John-Mark's commitment to serving their community. "We are beyond thankful for our relationship with Whitaker-Myers Group and John-Mark. Specifically, their desire to make an impact for the Kingdom of Christ through their professional work and individual service to our organization and the families and children we serve at The Christian Children's Home of Ohio is greatly appreciated. Just a few weeks ago, the team at Whitaker-Myers Wealth Managers graciously gave of their time and talents to help us set up for and prepare one of our largest fundraisers of the year, The Great Grill-Off. We're grateful for our relationship and can't wait to serve Christ together for many years to come." John-Mark will accept the award at a ceremony on October 10th, 2024, at The University Club in New York City. You can read more here about the AdvisorHub awards given to the Financial Planning community. In addition, you can see the entire list of the Top 200 Registered Investment Advisory Firms in the country here.

I don’t think I’ve ever met anyone who enjoys paying their taxes. However, there is probably someone out there that does. From my experience, most individuals try to limit their tax liabilities. When investing, they create strategies that allow for the most efficient net returns (less taxes, fees, and any additional costs). I discussed this in a previous post about Asset Location vs. Asset Allocation.  Asset location strategies allow for tax-efficient placement (types of accounts) of your investments, and asset allocation focuses on the types of investments. For more information about these strategies and how they could fit your goals, consult one of our advisors. In today’s discussion, we’ll explore two strategies that expand on asset location to mitigate the tax liability within an investor’s portfolio. Tax Loss Harvesting For this section, I’ll direct you to a blog post by John-Mark Young.  In this article, he breaks down tax loss harvesting and provides a great example of how this can impact investors. Take a few minutes to read here and take notes on Suzie’s steps to accomplish this task: BEAR MARKET STRATEGY: TAX LOSS HARVESTING (whitakerwealth.com) Tax Gain Harvesting On the other hand, tax gain harvesting is another tactical tool investors can employ to limit the tax liabilities from gains. Tax-gain harvesting occurs when an asset is sold, but the sale is specifically for tax purposes. The question is, how is this different from the sale of any asset? The focus here is when the asset is being sold to limit potential higher tax implications in the future. Factors to consider when conducting tax gain harvesting: Harvest during ‘lean years’  Years where the investor is between jobs or a smaller bonus, essentially when the investor is in a lower income tax bracket Long-term capital gains vs short-term capital gains  Understanding what category the investment lands in impacts the amount of tax paid Net Investment Income Tax (NIIT) Depending on filing status and adjusted income, the investor may be charged an additional 3.8% in tax Reset the basis by rebuying the same security This option is not available when you’re harvesting losses - Wash rule (see John-Mark’s blog post above) Only on taxable accounts Does not include pre-tax retirement accounts To harvest or not, it’s not always a farming question! At the end of the day, managing your tax liabilities efficiently needs to be a part of your wealth-building and investment planning. Our team of financial advisors at Whitaker-Myers Wealth Managers has the tools needed to align your strategic goals with your desired outcome. If you don’t have a financial advisor, reach out to ask questions and schedule a meeting today.

Tis the Season! BBQs, pool parties, camping, lightning bugs, and running through the sprinkler are all classic signs that Christmas is upon us, right? Maybe I have mixed up my seasons, but I promise my thought process is spot on. In this article, I hope to show you how thinking about Christmas in July can save you money for Christmas in December and avoid the Christmas Debt. Holiday Prep This means more than writing out the menu and blocking off a Saturday morning to wrap presents. This means sitting down with pen and paper (or the Notes section of your phone) and listing everyone you need/want to purchase holiday gifts for this coming year. Think through family, friends, co-workers, holiday parties, or your kid’s classroom (possible) needs. After you have the list of who, pencil out a dollar amount associated with each person next to the name you wish to spend on them, total that number up, and either cry because it’s larger than you anticipated or smile because you have set yourself up to have a Very Merry Christmas with your family and friends, but also feel accomplished for being so proactive and comfortable with your goal number for the holidays. If you are crying because the number is more significant than you anticipated, you may need to adjust the numbers associated with each person to get the desired total number you have written down. Or, do some quick math and divide the total number by the year's remaining months (6 months, counting July through December). This new number is the amount you need to save each month to cover the costs for those anticipated gifts. Hmmm…that sounds a bit like a sinking fund to me! Define the plan of attack You can take two routes with this now. Spread out the spending You can take the allotted amount each month and start to tackle your shopping list now, a little at a time. Find items that may be on sale, bargain end-of-season deals, or just take advantage of having more time and focus on a few people each month to shop for instead of all at once. One large shopping spree Or you can take the all-at-once approach. Whether you love to shop on Black Friday or seek the thrill of shopping up to the last minute before the holidays, you can shop worry-free, knowing you have previously saved for this shopping spree. Whatever direction you take, make sure you spend the dollar amount you have planned and saved for, and don’t go overboard to blow your Christmas Budget. Avoiding Christmas Debt If you have found you tend to overspend on the holidays, are always shocked at the amount left in the bank account after you total up all your holiday spending, and feel overwhelmed with the thoughts of spending money during the holidays, reach out to our financial coach to discuss setting up a sinking fund, and what a realistic budget could be for you.

As a prelude to this discussion, I wrote about intrinsic and market value last week in the Investment Corner. This is a rare instance, so I recommend reading this post on fundamental and technical analyses and then further exploring intrinsic and market value with this post (Intrinsic vs. Market Price/Value). Whatever path you’ve taken to understand security evaluation, hopefully, you will walk away with more information to guide your investment decisions. Fundamental Analyses vs. Technical Analysis Fundamental analyses evaluate a security by attempting to measure the intrinsic value (see the above post for more detail on intrinsic value). On the other hand, technical analysis focuses on statistical trends to find pattern recognition against moving day averages (time series dependent). Both analyses are valuable tools professional data nerds—I mean, investment professionals—use to determine investment selection. Our research team at Whitaker-Myers Wealth Managers spends countless hours conducting the necessary research to provide our clients with the best portfolio options. To understand these methodologies further, let’s explore each one at a high level. Fundamental Analyses Fundamental Analyses are the primary tools business owners use to determine what a company is worth. This is where accountants and finance leaders review the organization's books with a fine-toothed comb. Reviewing balance sheets, statements of cash flows, and many other documents provide the necessary detail to determine ‘value.’ Value is a broad classification, but those combing through this data traditionally look for these key metrics (we’ll explore each of these in detail in future posts): Price to earnings ratio (P/E) Earnings per share (EPS) Projected growth rate (PEGR) or Projected growth (PEG) Free Cash flow (FCF) Price to book ratio (P/B) Dividend Payout ratio (DPR) Price to sales (P/S) Debt to equity ratio (D/E) Return on equity (ROE) Return on Assets (ROA) Qualitative metrics Macroeconomic and microeconomic variable Company sentiment (influenced by news as well) You may be familiar with many of these, but some you may not be familiar with. Don’t worry; we’ll have deep dives into each of these soon.  As you can imagine, in our current technologically connected lives, there are components of the fundamental analysis metrics that have value but do not appear in the abovementioned metrics. Think about a business with goodwill or intellectual property; how do we value those? Goodwill and Intellectual property are difficult to quantify since they are intangible in terms of assets or liabilities. However, these are essential variables when considering the value of a company. Technical Analysis A technical analysis uses mathematical calculations against time variables and other factors to create averages and trends. If you’ve ever heard an advisor talk about day-moving averages, this is part of a technical analysis. Different technical analysis components include historical data to support pricing trends and patterns, volume analyses, momentum tracking, support and resistance analysis, defined relative strength, and many other stratified calculations providing varying levels of granularity. This is an in-depth analysis looking at the correlation between historical events and security price fluctuations. This data is used to predict where the security may move in the near future. Many complicated mathematical and graphical models are combined to create these charts. The traditional ‘candle stick’ graph (shown below in Figure 1) is frequently used in these analyses. These analysts use various candle stick patterns as they formulate their projections. Figure 1 Source: Investopedia.com What is right for you? Depending on where you are in your baby steps or investment journey, your financial advisor may recommend utilizing some of these tools to align your strategic goals. Our team at Whitaker-Myers Wealth Managers has the tools and knowledge to walk with you on your journey.

You just bought a home, congratulations! With most people, buying a home means having a mortgage. And for homeowners who didn’t put down a down payment of generally 20% on a conventional loan, you will need to pay what’s called Private Mortgage Insurance or PMI.  However, some lenders may offer options to avoid PMI with a smaller down payment, such as lender-paid mortgage insurance (LPMI) or piggyback loans. FHA (Federal Housing Administration) loans, which are more common for 1st time homeowners, only need a down payment of at least 3.5% of the purchase price. However, FHA loans require mortgage insurance premiums (MIP) regardless of the down payment amount. For conventional loans, you typically need to have a 20% equity or loan-to-value (LTV) ratio falling below 80% of the original or appraised value at the time of purchase.  For example, a home worth $300,000 would need to have a mortgage value at or below $240,000. Eligibility to remove PMI If you’ve made improvements to your home or property values have increased as they have in the last several years, you should contact your lender/mortgage servicer to find out if they will remove PMI. You should also see if they require an appraisal or if they have another method of reviewing the value. For example, let’s say you purchase your home for $300,000, but you only put 15% down, or $45,000. You’ve lived in the house for three years, and $10,000 of your payments have gone towards the principal, while your property has appreciated 3% to $309,000. That would make your mortgage balance $245,000, or 82% of the original value and 79% of the increased value. Either way, I would call the servicer for an evaluation. How PMI is removed Your PMI will automatically be removed when you hit loan-to-value (LTV) of 78% of the original value (22% equity).  You must not have any secondary liens (2nd mortgage, unpaid property taxes, federal taxes, or unpaid contract work).  Some services may require a minimum payment history of 1 or 2 years before it will be removed. You may be required to have an appraisal done to prove the update/increase property value.  You may 1st ask your loan servicer if they can do a free analysis with any market data they can access.  If they can’t, you can have an appraisal done that could cost between $400-$600 (depending on where you live).   You will want to consider how close you are to the 80% and what your savings would be.  If your monthly PMI is $40 and your appraisal would cost $500, you wouldn’t want to have an appraisal done if you hit 80% LTV in the next 12 months. If you have any questions about your mortgage, paying it down early, or whether to remove PMI or pay it off completely, you should discuss a strategy discussing them with your financial advisor at Whitaker-Myers Wealth Managers. Also, take a look at a recent video from our President and Chief Investment Officer, John-Mark Young, where he talks about how to remove PMI from your mortgage.

Taxes can be a frustrating and challenging topic to keep straight. Knowing what taxes come into play in various situations, with such a wide variety of taxes that most Americans encounter, can confuse investors. In this article, we will discuss Capital Gains. So, let’s begin with what a Capital Gains tax is, which is simply paying a tax on the increase in value of an investment. Although this applies to any investment type, most people encounter this tax through investing in stocks and real estate. Most people will sell at least one home they own during their lifetime, so it may sound “unfair” to some to pay a hefty tax on a move from their home. However, some good news on this topic is that a single person can exclude $250,000 of capital gains and a married couple $500,000 of gains on the sale of their home. The only qualification on this exemption is that it must be your personal residence for at least 2 out of the last 5 years. Does everyone pay the same rate on capital gains? The answer is no, but it is less complicated than income taxes. Capital gains taxes have only three brackets versus 7 for income tax. Generally, most Americans will pay at a 15% rate, lower-income taxpayers may not pay any capital gains, and the top 3-4% of earners will pay 20%. The chart below lays out this year’s rate. In addition, for any capital gains on investments paid at these rates, single filers making over $200,000 and joint filers making over $250,000 will pay an additional net investment income tax (NIIT) of 3.8%. The chart shows long-term capital gains, which are the most common with investment gains. In some instances, investors may be forced into selling in less than one year, or an unexpected huge jump in value almost forces investors to sell and pay short-term capital gains. So, any investment held for less than one year is paid at the taxpayer's income bracket. Regardless of what income level you pay tax at, the long-term rate will always be lower than the short-term level, so if you are close to the 12-month period and don’t have to sell, waiting a month or so usually will make sense to pay less tax. A few examples where paying short-term rates is inevitable and may make sense is a day trader of stocks purposely looking for very short-term stock gains or a house flipper that wants to buy and sell within a few months. Can I avoid paying any capital gains on my investment? In some instances, yes. The IRS doesn’t want to make this too easy, but some smart ways exist to realize gains and avoid capital gains tax. In real estate, you can sell a house for a gain, and as long as you close on another form of real estate investment (they don’t have to be the same form of real estate) within 180 days, then all of your gains get rolled into the new property, and you owe no tax. This is called a 1031 exchange. A similar but much more accessible form of exchange is an annuity with an increased value you want to trade in for something better without triggering a tax, called a 1035 exchange. A hybrid approach between real estate and paper investments is to sell a physical property, do a 1031 into a Delaware Statutory Trust (DST), and pay no capital gains tax. Then, you would own a passive investment that pays you real income and not have to physically do any time-consuming and specialized work required to be a real estate owner. One way to avoid paying capital gains is to do all your investment trading inside an IRA or a qualified account. This may seem obvious, but step back and look at properly structuring what you buy in what account. If you are going to do a lot of trading, then qualified accounts will make sense as you only pay income tax whenever you withdraw, or in the case of a Roth account, all of your gains are tax-free. Sometimes, size or access in various accounts may force someone to do stock trading in a brokerage or taxable account, so let’s explore making that the most tax-efficient. Another way to avoid capital gains tax is to hang onto that investment property or huge stock gain until you die. The reason to never sell is that your heirs, usually your children, will receive a step up in basis, meaning that all the gains realized by the decedent are reset at the value as of the original owner’s death date. This can be a win/win for an owner and their beneficiaries and allow them to retain more of their wealth. How can I be the most tax-efficient if I can’t entirely avoid capital gains? Investors with brokerage accounts that make sense to trade investments in can use a few strategies that may dampen the capital gains hit. If the investor is going to hold primarily mutual funds and not individual stocks, then utilizing Exchange Traded Funds or ETFs makes more sense, as they are still diversified in holdings, sectors, and strategies, like mutual funds. Still, they trade like stocks, which do not trigger capital gains unless you sell. In most years, mutual funds will pass on capital gains tax, whether you sell any of your holdings or not, so you likely will end up paying more in gains over the fund's life. Regardless of what investment you hold, selling early in the year rather than at year-end, you can defer satisfying the tax for up to 16 months or more if you file an extension. Back to the short or long-term gain differences, especially if it is a mutual fund or an ETF, wait until you have passed the 12-month threshold before you sell to reduce your taxes. Again, for stocks that can be more volatile, you may be further ahead to lock in a high gain and pay the higher rate, but waiting a month or 2 in a diversified investment vehicle likely won’t dramatically affect your gain. Tax Loss Harvesting Strategies This falls under the idea of being more tax efficient, but more specifically, offsetting your gains with losses is a way to take a bite out of the tax bill you are dreading paying your winners. The IRS will only let you take a tax deduction of up to $3,000 in losses; however, if you have $20,000 of capital gains and $23,000 in losses, then you will not only not owe capital gains taxes but actually be able to receive a tax deduction for the additional $3,000 of losses that exceeded your gains. Using the same example, if your losses happened to be $27,500 in the same calendar year as the $20,000 gains, then you could only write off the maximum of $3,000 of losses this year but would have to wait to take the rest of your deductions over the next two calendar years. This strategy should be used to sell the stocks or ETFs/funds that make sense to get in and out of. So, selling a stock that is likely to keep running higher or one that you are down in but would seem likely to turn around, then missing the market gains, could be a more considerable detriment than getting to write-off losses or offset gains. On the other hand, being mindful of the tax loss harvesting strategy can motivate you to lock in strong gains and be willing to cut your losses before they fall further. Let’s Summarize Capital gains can be a love/hate topic because, if you are realizing them, it is because you have made a good investment that has increased in value. On the other hand, it can lessen the excitement of your “smart move” when you use already taxed money, then spend a fair amount of effort and take risks, and the IRS wants a cut. In most cases, investors still clear 85% of your gains (if in the 15% bracket). This makes the time and risk worth it in many cases, but much more of an increase will reduce total investments, as it may not be worth the risk for more investors. Also, remember the entire sale of stock, real estate, ETF, etc., is not taxed; only the gain is. If you are thoughtful and do your homework, you can reduce and sometimes eliminate capital gains tax. If you have questions about capital gains taxes or anything related to saving for your future, contact one of the Financial Advisors at Whitaker-Myers Wealth Managers.

We did this to start the year; therefore, it seems applicable to think about the five things we should consider as we enter the second half of 2024. As we enter the second half of the year, it’s important for long-term investors to maintain perspective on the major events that have driven markets. Despite ongoing economic uncertainty, the stock market has experienced a strong rally as investors anticipate the first Fed rate cut, and the rally in artificial intelligence stocks continues. During the first six months of the year, the S&P 500 gained 15.3% with dividends, and in our Dave Ramsey language, this is your growth stock category and growth & income category combined. Additionally, the Russell 2000, which tracks small and mid-sized companies or aggressive growth in our Dave Ramsey vernacular, gained 1.6%, the worst of the four Ramsey categories. The 10-year Treasury yield declined from its April peak of 4.7% to 4.4%, allowing the overall bond market to be roughly flat on the year. International stocks have also performed better, with developed markets generating 5.7% and emerging markets 7.7%. Emerging markets are getting a strong boost thanks to an expanding Indian economy. The MSCI India gained 17.10% to start the first half of the year, even outpacing the US stock market gains. This strong performance may have caught some investors off guard, while others may not have been properly positioned to take advantage of the upswing across many asset classes. This is because market sentiment can often turn on a dime, especially when there is so much investor and media focus on short-term events. For example, the recession that was anticipated at the beginning of the year has not yet occurred and there are signs that inflation, which ran hotter than expected for a few months, is beginning to improve. Of course, the market’s focus will now shift toward major events in the second half of the year. Perhaps the most notable is the upcoming presidential election. As investors prepare to cast their ballots in November, they will also wonder what each political party could mean for their portfolios and financial plans. Investors will also watch the timing and number of Fed rate cuts closely since lower rates are generally positive for both stocks and bonds. While the outcome of these events is uncertain and introduces new risks, the first half of the year is a reminder that overreacting to day-to-day headlines, at the expense of long-term underlying trends, can often result in poor investment decisions. History shows that it’s important to separate our personal feelings around politics from our financial decisions in order to stay invested, diversified, and disciplined. Below are five key facts all investors should keep in mind to stay levelheaded through the rest of 2024 and beyond. And of course to follow the markets and economy, join our weekly video series, "What We Learned in the Markets" 1. The market continues to reach new all-time highs On its way to a 15.3% gain in the first half of the year, the S&P 500 has achieved over 30 new all-time highs. While this is positive, it can also make many investors nervous. When the market is in uncharted territory, it’s easy to worry that it may be “due for a pullback.” The reality is that price swings are an unavoidable part of investing and the market will certainly pull back at some point. However, the timing of these declines is difficult if not impossible to predict. At the same time, major stock market indices will naturally spend a significant amount of time near record levels during bull markets, as shown in the accompanying chart. Trying to time the market tends to be counterproductive for this reason. Another thing I should note is that the S&P 500 is only half of the equity allocation within a Dave Ramsey listener's allocation (growth and growth & income). The Russell 2000 and the MSCI EAFE, which are the other half of the Ramsey (and quite frankly, almost every diversified equity investor) portfolio, are still not trading at all-time highs. The Russell 2000 (small and mid-sized companies) started to crack at the end of 2021 and have never gotten back to those values, and the MSCI EAFE, while closer than the Russell 2000, is still trading below their all-time highs. This year, artificial intelligence stocks – particularly Nvidia – have contributed greatly to market returns with the Information Technology and Communication Services sectors gaining 28.2% and 26.7%, respectively. However, other sectors have more recently begun to benefit as well with Energy, Financials, Utilities, and Consumer Staples all experiencing rallies of around 10%. All told, 10 of the 11 sectors are positive on the year. While it’s unclear where large-cap technology stocks may go from here, staying diversified allows investors to benefit from a wide variety of sectors. 2. With inflation cooling, the Fed is on track to cut rates later this year Investors have been anticipating the first rate cut of the cycle since the beginning of the year. This has not only driven returns, but is one reason markets have swung so much when new economic data has caused expectations to shift. The accompanying chart shows the possible path of the federal funds rate based on the Fed’s latest projections. At its last meeting, the Fed cited strong job gains and low unemployment as indicators of solid economic activity but emphasized that “inflation has eased over the past year but remains elevated.” Fortunately, the latest inflation data in May showed a significant deceleration that has preserved the possibility of a rate cut this year. The CME Group's FedWatch Tool is currently projecting (as of 7/5) a 0.25% reduction in interest rates at the September 18th meeting and the current probabilities favor another 0.25% rate cut at the December 18th meeting. These numbers do fluctuate qutie a bit as economic data is released so it's important to check in on these numbers regularly. Many of the additional rate cuts that investors previously expected have simply been pushed into next year and will depend on the economic data over the next six months. Regardless of the exact timing and path of Fed rate cuts, these projections represent a reversal of the emergency monetary policy actions that began in early 2022. 3. Steadier rates support the bond market The path of interest rates has been highly uncertain over the past few years due to inflation, economic growth, and the Fed. Higher rates have defied the expectations of investors and economists, creating a challenging environment for the bond market, since rising rates push down bond prices. After hotter-than-expected readings in the first quarter of the year, the latest Consumer Price Index data showed no change in overall prices in May for the first time in almost two years. Core CPI rose 0.2% in May, or 3.4% year-over-year, a healthy deceleration from the previous month’s 3.6% pace. Other data, such as the Personal Consumption Expenditures index that the Fed favors, and the Producer Price Index, have shown similar patterns. These developments, along with new Fed guidance, have pushed rates lower in recent days, supporting bond prices. The Bloomberg U.S. Aggregate Bond Index, a measure of the overall bond market, is nearly flat on the year after declining as much as 4% in April. This is in sharp contrast to 2022 when bonds fell into a bear market during the historic jump in interest rates, before stabilizing and rebounding in 2023. According to the Wall Street Journal, bonds experienced their worst year in 2022, since 1842. In mid to late 2022, Whitaker-Myers Wealth Managers Investment Committee advised a potential allocation to US Treasury Bonds with maturities in the 3 months to 24-month range, which all currently pay in the 4.60% - 5.30% range, with no interest rate, credit, or market risk, if held to maturity. 4. Many investors remain on the sidelines in cash In times of market uncertainty, investors often seek the safety of cash. This has been true over the past several years as markets have swung due to the pandemic, geopolitical events, Fed rate hikes, inflation, gridlock in Washington, technology trends, and more. Additionally, interest rates on cash are at their highest levels in decades, making it appear that there are attractive “risk-free” returns. While cash is important, it can become problematic when investors hold too much cash. This is because cash is not truly risk-free for two important reasons. First, inflation quietly erodes the purchasing power of cash over time. So even if yields appear to be high, the real value of your money could decline. Second, the prospects for cash will only worsen if and when the Fed does begin to cut rates. Investors would be forced to reinvest their cash either at lower interest rates or in stocks and bonds whose prices would most likely have already risen. 5. The presidential election is heating up Coverage of the presidential election is heating up. While elections are an essential way for Americans to help shape the direction of the country as citizens, voters and taxpayers, it’s important to vote at the ballot box and not with investment portfolios. History shows that markets can perform well under both major political parties. As the accompanying chart shows, the economy and stock market have grown over decades regardless of who was in the White House. What mattered more across these periods were the ups and downs of the business cycle. Of course, politics can impact taxes, trade, industrial activity, regulations, and more. However, not only do policy changes tend to be incremental, but also the exact timing and effects are often overestimated. Thus, it’s important to focus less on day-to-day election poll results and more on the long-term economic and market trends. Ideally, investors concerned about the impact of specific policies on their financial plans should speak with a trusted financial advisor. The bottom line? Investors should keep these five factors in mind as we head into summer. As always, it’s important to maintain a long-term perspective to achieve investing goals. Working with a trusted financial advisor can help you navigate through an uncertain future and be prepared for changes in the economy and stock market through the rest of 2024. Should you need to speak with a Financial Advisor or Planner on the Whitaker-Myers Wealth Managers Team, please click here.